Macquarie Group Ltd S/Adr

Thank you very much and good morning everyone. Welcome to Macquarie's 2023 full year results presentation. Before we begin, I would like to on the line, we also have our group heads. At the end of today's presentation, as the operator mentioned, we'll have a Q&A session and we're looking to conclude by about 11.15. So with that, I'll hand over to Shamara. Thank you.

Thanks very much Sam and welcome and good morning everyone from me as well. So as usual we'll start this presentation by looking at the footprint of our business across our four operating groups and those are as long-term investors will know our Australian digital banking business BFS, our global asset manager Macquarie Asset Management, our global commodities and financial markets business, and our global Macquarie Capital business that is a specialist advisory in capital solutions and balance sheet investment business in our areas of expertise. Across those four businesses, we get very good diversification, not just by geography, but also by product exposure. And they all respond differently in different markets. So we get a lot of resilience in our earnings through cycles as a result. And in this most recent cycle, which was conducive for particularly the commodities and global markets business with the market facing businesses to an extent in general, we had 59% contribution from the market facing businesses and 41% from the annuity style. Now, supporting those four operating groups are four very important central service groups that ensure, again, that we deliver strong results through cycles. And those are our legal and governance group and our risk management group that give us very strong second line review and also assist in executing in terms of initiatives we take and then our financial management group which is responsible not just for our financial and regulatory reporting and our engagement with external stakeholders but also our funding and capital through cycles and then lastly our corporate operations group that delivers our entire platform across technology, HR, premises, strategy etc. Now, all those eight areas together in this last financial year delivered, as you saw, a record result of $5.182 billion, and that was up 10% on the previous financial year. The return on equity at 16.9%, was down a bit on the 18.7% last year, but that was principally due to much increased capital position with our capital surplus now materially higher than it was at the end of last year. And we'll touch on that as we go through the presentation. I won't dwell on the half on half changes, but year on year, the contribution from our operating groups was also up nearly 10%. It was up 9% on the previous financial year and that was made up of the annuity style businesses being down 17% principally due to some large one-off items last financial year. In Macquarie Asset Management we had the Macquarie Infrastructure Company contribution and large realisation of green energy assets and in commodities and global markets we had the realisation of our industrial and commercial meter business in the UK last year. The market facing businesses were up 38% on the last year and that was principally driven by the contribution from commodities and global markets where we had elevated volatility and market price movements in commodities. Now, overall, we, as I said, on net profit were up 10%, our operating income was also up 10% and our earnings per share were up 6%. The dividend per share is up 21% at the $7.50 approved by our board. Our assets under management are also up 10% at $870.8 billion and I'd note that we're now including our dry powder in assets under management for previous years as well as the current year to be consistent now with global peers. The big drivers of that increase were investments made in the private markets managed funds and foreign exchange movements and that was partially offset by market movements impacting the public investments business. In terms of the geographic diversification of our income, Australia contributed 29%, so we had 71% coming from outside Australia, with the Americas being the largest contributor again at 38% this year. I'd also note in terms of our now 20,500 plus headcount, more than 51% of that is also outside Australia. In terms of the trends of growth in income in all of our regions, you can see on this slide The underlying trend is increase in all of our four regions. The Americas last year, as you will probably know, had a very large contribution from realisations in the green investment group and some commodities and global markets income. So turning then to look at each of the four operating groups and their contribution over the last year, starting with Macquarie Asset Management. Macquarie Asset Management contributed 23% and that was down 23% on the previous year at just over $2.3 billion. And as I mentioned, the reason for that drop is principally because last financial year we had the Macquarie Infrastructure Company and the large green investment group realisation contributions, which didn't repeat. Despite that, the underlying franchise is growing very well. So in the private market side we have record equity under management over $200 billion and we had record raisings of over $38 billion compared to the record last year of $27 billion. And we have dry powder of nearly $35 billion to invest as we potentially go into what could be a better investing environment. On the public investment side, the assets under management are down slightly, and that's mostly driven by market movements, plus the rotation from equities to fixed income that we've seen happen over this last year, partially offset by foreign exchange. That business franchise has also stepped up a lot with the acquisitions made over the last financial year. And I'd note that 70% of its assets are beating their benchmark on a three-year basis. Then turning to banking and financial services, it contributed 12% over this last year of the net profit, and it was up 20% on the previous year to just over $1.2 billion earnings. That was driven by strong growth across the entire platform. So the home loans were up by 21%, the business banking up by 13%, the funds on platform up by 4%. And importantly, our deposit book growing by about 30% to support all of that. A couple of things I'd note is that in our growth in our books, not just home loans, but all of them, we're very focused on high quality growth in terms of good credits and good returns. and the average LVR at origination remained around 65% and the average dynamic LVR as about 55% for home loans. I'd also note with the deposits the diversity of the sources from which we have our deposits. Turning then to commodities and global markets, this was the largest contributor to net profit contribution at 57% this year. That was up 54% from last year at just over $6 billion of contribution. And we had solid contribution consistent again from the asset finance business and also the financial markets business that grew their contribution. And that was in areas like foreign exchange and interest rates where we benefited from volatility and from client engagement and in the futures business a strong step up from significantly higher interest and commission revenues. But the biggest contributor was the commodities business where we had both strong risk management income across areas like gas and power, global oil and resources and substantially increased contribution from inventory management and trading, particularly given demand supply dynamics impacting North American gas and power opportunities. And then Macquarie Capital contributed 8% of our net profit contribution. That was down 47% at just over $800 million. And the main drivers there were that we had weaker market activity compared to a very strong prior year, which impacted fee revenue and capital solutions advisory and capital raising revenue. On the principal slide, we had slightly lower investment income. But we continued very good investing across particularly private credit and also across equity and had stronger private credit income underneath that. The private credit book is now at, I think, $18 billion. We invested about $7 billion over the year. We saw a slowing in deployment in the second half, so probably about three and a half in the first half, two and a half in the second half as the environment was tighter. And I should have mentioned in relation to BFS as well, Alex will give more detail, but the growth in our home loan book also we saw slower in the second half than the first half. So those results from the four operating groups are supported by a very conservative and strong funding and capital position. And in relation to our funded balance sheet, that remains strong with our term funding continuing to comfortably exceed our term assets. And over this last year, deposits across the group grew 33% to $134.5 billion. And we also issued another $23.3 billion of term lending, coupled with the $48 billion plus that we did last financial year, we've done over $70 billion of funding in the last couple of years and again as Alex will elaborate we're very strongly positioned now not to need to go to markets for some time if that were the case in terms of meeting our funding needs. On the capital front our apribal tree capital surplus has increased from the half-year 12.2 billion to 12.6 billion at the end of the full year. that's after absorbing the 2.4 billion of capital requirement due to the APRA unquestionably strong reforms and I particularly note that our capital surplus at the end of last financial year was at 10.7 billion we're now at 12.6 after absorbing 2.4 billion of regulatory capital requirements. Now the drivers in this half in terms of increase in the capital have been clearly the earnings net of the dividend but we also had a billion dollars of capital released from the business requirements and there's more detail of that you can see here where the biggest contributor was the 1.7 billion of release we had from the commodities and global markets as we had a reduction in credit risk capital due to lower commodity prices and exposures. That 1.7 billion release was absorbed to some extent by the other businesses so Macquarie Asset Management absorbed about a half a billion in terms of co-investments and seed investments to grow our offerings and our franchise and that was offset slightly by realizations in the green energy green investment group area. In BFS, we absorbed about another $300 million of capital in growing our home loans and our business banking books, partially offset by runoff in the vehicle leasing. And then in Macquarie Capital, we absorbed about $500 or $600 million in investment, as I said, in the private credit lending activity, but also in some targeted equity investments in our areas of expertise and focus in that business. And with that, we are ending the year with very strong regulatory ratios, well above the APRA BAL 3 minimums. And I'd particularly note our liquidity coverage ratio at the moment is sitting at 214%. Those ratios ordinarily, of course, run off unless there's issuance as the funding runs down, the liquid funding. And I would also note in terms of dividends, as I said, that the board has approved a dividend of $4.50, 40% franked for the year end dividend. And that results in a full year dividend of $7.50, 40% franked. which is up from the $6.22 declared for the last financial year. And the last thing before I hand over to Alex is just updating on some of the board changes that we've had recently. First of all, Sue Lloyd Hurwitz, who will be well known to investors as the CEO, retiring CEO of Mervac, will be joining our board effective the 1st of June onto the group board and then following approval at the AGM will also become a director of the bank board. And then Nicola Wakefield Evans, who has been our longest serving director, has also confirmed that she will seek re-election at the AGM, which will happen in July. So with that, and I think she's expected to continue on our board in 2024. So with that, I'll hand over to Alex to take you through the results in more detail.

Thanks, Shamara, and good morning from me as well. As Shamara said, I'll now take you through some more of the detail of the financial results for March 23 and also some of the other aspects of financial management across the group. So starting with the income statement, and I thought I'd start by looking at the second half in comparison with the first half and then move on to the full year. So from a second half viewpoint, if you look at net operating income, it was up 21% for the second half in comparison with the first half. The key drivers of that were a 50% increase in net interest and trading income, a $506 million increase in fees and commission income, partly offset by a reduction in investment income, and we talked about this at the half in terms of those realisations that were skewed to the first half of the year. In combination with that, expenses for the half were up 16%. Tax rate was slightly up based on the composition of income. And as a result, the group delivered a profit of $2.877 billion for the second half, which of course is a record half. Turning now to the full year result and bringing together the first and the second half, you can see operating income for the year was up 10%. That was driven by a 53% increase in net interest and trading income. offset by a 5% reduction in fee and commission income, a reduction in the investment related disposal proceeds during the year and a lower contribution from joint ventures and associates coming through the group in the full year. Expenses were up 12% for the period. The key driver there is really employment expenses and there's a few things happening there. We saw an average increase in headcount of 12% across the group skewed toward the central service areas and to the banking and financial services group. We also saw wage increases coming through the group and the other thing we see is an increased profit share and share based payments expense coming through consistent with the underlying performance of the group. Effective tax rate up slightly from where we were at the full year FY22. So bring that all together, an underlying net profit across the group of $5.182 billion up 10% on where we were this time last year. I'll now turn to each of the operating groups and give you a little more detail about the performance over the course of the year. So starting with the asset management business, you can see the net profit contribution at $2.342 billion down 23% from where we were in FY22. And the key drivers there are lower proceeds associated with realisations across the group, particularly realisations through our green energy portfolio, so fewer material realisations. The other thing we saw, obviously, is the non-repeat of the gains from the disposition of MIC in the US, which came through on FY22. up in operating expenses associated with the platform. Those reductions were offset by a 75% increase in performance fees, largely coming out of MIP4 in Europe and MIP3 in the United States. And we also saw the non-repeat of acquisition related expenses associated with Waddell and Reid, AMP and CPG through FY22. We've also set out the split from a base fee viewpoint. So base fees in the private market business, up 14%, up $164 million. And that really reflects the strong period of investing, $27.2 billion worth of investment made through the year. And that was almost offset by the reduction in base fees coming through our public investments business that relate to market movements. And as Shamara said, the switching of portfolios away from equity investment portfolios toward fixed interest. In terms of the underlying drivers, the asset under management up nearly $871 billion at March 23. And as we said before, that now includes the dry powder which makes it consistent from a comparability viewpoint with where other firms are around the world. Turning now to the second of our annuity-style businesses, the banking and financial services business, a really pleasing result, up 20% from where we were this time last year. And you can see the drivers of that from a personal banking viewpoint, a $206 million increased contribution. That really was driven by a 31% average growth in mortgage volumes over the course of the year, albeit slowing in the second half of the year as we foreshadowed at the half-year results. We saw an increased contribution from our business bank, $184 million. That reflects a growth in loan volumes. It also reflects a growth in deposit volumes and improving margins in that business. And an increase of $191 million in terms of the contribution from the wealth channel in that business, reflecting a growth of 13% in terms of average volumes, improved margins associated with those deposits, and an improvement in average funds on the platform through the year. You can see a step up in the credit and other impairment charges. And there's a couple of things happening there. Firstly, the macroeconomic outlook has deteriorated relative to where we were. The other thing is we've weighted slightly more to the downside scenarios. And we also had, you might recall in the FY22 year, the release of provisions associated with the sale of the dealer finance business and the reduction in the car loan portfolio. So that didn't come through in FY23. And you can also see the step up in expenses through the year, 21% step up in expenses, really expenses associated with driving the growth of the business with the investment that the team is making in the data capabilities and the technology platform that supports the business both in terms of front office customer experience together with the capabilities necessary to meet the obligations that we have in that business. And we've also seen a step up in regulatory and compliance spend through the course of the year. But a really pleasing result, up 20% from this time last year. In terms of the drivers, with the exception of the motor vehicle business, everything moving in the right direction in terms of growth in both loan assets, deposits to support the business, and also funds on the platform. Now turning to the first of our market-facing businesses, the commodities and global markets business, obviously a tremendous result, up 54% from FY22. Really reflective of the opportunities that business saw through the year to grow the customer franchise, and I'll talk a bit more about that in a moment, to provide solutions to those customers. Obviously the market conditions provided opportunity to manage those customer positions on balance sheet and generate trading income for the group. So really a tremendous result. We have seen those conditions taper off a little bit in the fourth quarter, or our fourth quarter, the first quarter of calendar 23. In terms of the components of the movement, you can see commodities up 82%, risk management income for the year up 50%, and that really reflects the work that the team is doing with customers, particularly in the global gas, power and emissions business, in the global oil business and the global resources business. We also saw a step up of $1.6 billion in inventory management and trading coming through there, reflecting those demand and supply imbalances that we've talked about, particularly in the North American market now for many results. Financial markets up $114 million, a little under 10%, a really strong contribution from financial markets, particularly in the first half coming through as we saw lots of volatility in interest rates and FX markets, but there were opportunities to extend credit in that business, which we were very pleased to provide and provided opportunities to grow the revenue base. We didn't have the repeat of the gain on the disposal of the commercial and industrial meters business in the UK. And we also had a step up in expenses coming through the group, about 22% step up in expenses, really associated with the investment they were making in the platform to support the growth of that business and to support the obligations that that business has around the world in relation to regulatory compliance data and so on. So a really pleasing result for the group. Just as we've done in the past, just looking at some of the, hopefully the slides that help to contextualise some of the result over the period, and starting with the chart that's on the screen now, which is obviously indicative of some of the volatility we saw through the year. So this is the volatility we saw in European gas prices and in US gas prices. And you can see from about the middle of FY22 all the way through until the end of calendar 22, we saw a very volatile period. That provided opportunities for us to grow our customer base and provide solutions to those customers to help manage that volatility. It also provided good opportunities from a trading perspective for the group. And as we talked about at the operational briefing, the third quarter in particular, exceptional trading results through CGM. And those have normalised, if you like, in the first quarter of 23, back towards where we saw prior to the first half of 22. In terms of a chart that will be familiar to people, obviously on the right hand side you can see the growth in customer numbers across CGM. Really pleasing to see that underlying customer franchise continue to grow. And where the team's seen opportunities, particularly is in the European gas power and emissions market, in our agricultural sector, as well as our resources, upstream resources. So there's been good growth in the customer numbers there. And on the left-hand side, obviously that's reflected, continued to be reflected in the operating income of the group, which is very much skewed towards income associated with our underlying client franchise. So that growing client franchise deal with the clients more often in more locations, really driving the opportunities for the group. And then finally in terms of the capital position for CGM, on the left hand side you can see the capital position over the last few periods. You can see the reduction in credit capital from March 22 all the way to March 23, reflective of prices coming down and volumes coming down over the course of that period. Market risk, as we've talked about through the year, stepped up a little bit as the size of the opportunity and the size of the business increased. So you can see market risk capital a little higher than what it was back in March 21 and previous periods. And you can see the impact of those trading opportunities on the daily P&L chart on the right-hand side of this page, which is a reasonably familiar shape to what we've had in the last couple of years, albeit flatter and slightly more skewed further to the right of the y-axis. but still very much skewed to the positive, which is reflective of the focus that the group has around client activity and slightly higher in terms of the average daily P&L, which really relates to the opportunities the team saw during the course of the year. Now in terms of Macquarie Capital, the last of our business units, so Macquarie Capital, a more challenging period, down 47% for the year, just over $800 million worth of contribution. And you can see where the drivers are there. The fee and commissioning come down 27%. over the period, investment-related income, lower contribution than the prior year and obviously skewed to the first half of the year, and operating expenses up both in terms of continuing to invest in those sectors where we have really deep capability across the world, so great opportunity I think for us to grow there, but also increased investment in the platform to support the business activity. Partially offset by an increase in the contribution from the private credit portfolio, In average terms, the private credit portfolio is up just over $5 billion, consistent sort of margin profile through that business. That increase in contribution is partly offset by an increase in the ECL contribution. both reflective of the macro environment and the slightly higher weighting to the downside scenarios, but also reflective of a couple of specific provisions in the private credit portfolio where we've made specific provision against the performance of those credits. terms of the underlying drivers macquarie capital capital alongside its clients grew over the period you can see where the growth is it's really around the private credit portfolio the dark green at the bottom the team also saw opportunities in the digital infrastructure space together with the infrastructure space more uh more generally to uh to deploy capital we hope that uh those investments pay off into future periods. And on the right hand side, we gave you a composition of the private credit portfolio in terms of the sector exposures that the private credit portfolio has. And as we've said in the past, very consistent with sectors where we think we have deep global expertise, which allows us to generate transactions on a bilateral basis and at good risk adjusted returns. Now turning to some of the other aspects of the group, the regulatory compliance and technology spend a feature of the results over the last few years and it continues to be so for FY23. So from a regulatory compliance viewpoint, you can see up 33% on where we were for the full year 22. That really reflects the growth in the regulatory change. There is a lot of change going on across the regulatory landscape around the world. that occasion spend on new projects and of course some of that's flowing through into the BAU compliance spend as we continue to invest and improve the platform around the world and ensure we meet our obligations. And on the technology side, up 26% in terms of annual expenditure on technology. Just to give you a breakdown, about a quarter of that relates to changing the group and about three quarters of that relates to running the group. And just by way of comparison, when Nicole Sabara presented a few years ago at the operational briefing, you'll recall that at that time we talked about 19% of the spend coming through for change to group activities with the balance on run the group. So of course that change activity is a feature of what we're doing with our technology investment. Our balance sheet, as Shamara mentioned, another strong period of fundraising in terms of term funding, just over $23 billion of term funding, split reasonably evenly between the bank and the non-group, and coupled with last year's 48, over $70 billion worth of raising over the last couple of years. We continue to work on diversifying the funding sources for the group and this year we're delighted to welcome another 200 investors who own debt exposures to the group and really pleased to say that the term funding from our point of view, weighted average term funding, still out at 4.9 years. Our deposit story is a familiar one I'm sure to everyone. It's been another strong year for Greg and the team in BFS with a growth of up to $135 billion and we continue to diversify the customers that we're serving and improve the product offering to those customers across all of our deposit products and in particular our transaction and savings deposits and add our term deposits over the course of this year. The loan and lease portfolio up 18%, largely reflecting the growth in the home loan portfolio, the business loan portfolio and at the bottom of the page there you can see the growth in Macquarie Capital's private credit portfolio. Equity investments at $9.6 billion. The key drivers here really are investments where we're using the balance sheet to seed future strategies for the private markets business in MAM. The other thing you've seen is increased contributions across investments across transport in the in the aviation space. And of course, that digital infrastructure and infrastructure story I talked about with within Macquarie Capital. From a regulatory viewpoint, as I mentioned before, a lot going on. I guess most significantly over the course of the last 12 months, we've had the implementation of the Basel III unquestionably strong reforms coming through that were implemented on the 1st of January 2023, which is great to have a long project actually come to conclusion. The second thing is just in relation to the German dividend trading matter investigations. Authorities continue with their investigations in Germany in relation to the dividend trading matter. Whilst nothing particularly material from a Macquarie Group perspective has happened over the course of the last period of time, we did take the opportunity to update our disclosure just to note that some of our former and current employees have, we've been notified that they'll be interviewed in relation to that matter. We continue to provide for that matter. and we'll monitor those provisions going forward. In terms of the Basel III CT1 ratio for the bank, really strong, 13.7% and 18.4% on a harmonised basis. As Shamara mentioned, the cash and liquidity position on the balance sheet continues to be very strong. The LCR at very elevated levels, consistent with the fact that we've been raising funding ahead of the obligations to repay things like the term funding facility for the sake of the example. and so on. So we'll see over time whilst that elevated level exists today that that level will come down as we come to a more normalised level going forward. And then from a capital management viewpoint, the only thing to note really on this page is that in addition to the declaration of the dividend today, the board has also enacted the DRP at a zero discount and we'll be buying shares on market to satisfy any applications under the DRP. And in relation to the MIREP, we will also be buying shares on market in relation to the MIREP grants. There will be a share sale facility available for staff who have stock invested in their hands at the end of this period. And so with that, I'll hand back to Shamara. Thank you.

Thanks very much, Alex. So I now will take you through the outlook, starting with the short-term outlook for the period ahead. And as usual, we'll look at this based on each of our four operating groups. So starting again with Macquarie Asset Management, our expectation is that base fees will be broadly in line with FY23 and investment-related income will be significantly down, principally due to the large gains we had in FY23 on green energy asset realisations. In banking and financial services, we expect growth across the platform in the loan portfolio, in the deposits and the platform volumes. But of course, Market dynamics will continue to drive margins and we also expect to keep investing in terms of volume growth, in terms of technology and also in terms of regulatory requirements. And finally, we will continue to monitor provisioning in terms of expected credit losses, etc. Macquarie Capital, subject of course to market conditions, we expect transaction activity to be up on what was a challenging year in FY23 and we're expecting investment related income to be significantly up, principally due to the growth in the private credit book, partially offset by the timing of realisations in terms of investments that we have. But we are committed to continuing to deploy capital in both equity and credit across the areas of Macquarie Capital's deep expertise. And with commodities and global markets, we are expecting a continued consistent contribution from the asset finance business and the financial markets business. In relation to the commodities business, we obviously benefited from exceptionally strong trading conditions during FY23. So for FY24, what we're saying is we expect commodities income to be up on FY22, subject of course to any volatility that we see during the year. And then in terms of central for both compensation ratio and effective tax rate, we expect it to be in line with historical levels. Now that is as ever subject to a range of factors, which include market conditions, global economic conditions like inflation, interest rates, volatility events and the impact of geopolitical events, completion of period and reviews and completion rate of transactions, the geographic composition of our income and the impact of foreign exchange, and potential tax or regulatory changes and tax uncertainties. So given all that, we continue to maintain a cautious stance with a conservative approach, as you've seen, to capital funding and liquidity that we think positions us to respond in the current environment. then turning to the medium term as we said we remain of the view that we are well positioned to deliver superior performance over the medium term given the diversification we have across our four operating business lines which are exposed to different thematics and are also very complementary to each other in terms of how they respond to underlying economic conditions as we saw during FY23 with different businesses responding differently and are also very well positioned for growth, structurally well positioned over the medium term. And those four businesses of course are our Australian very customer experience focused digital banking offering in BFS, which still has small market share in all its business lines in Australia, where its focus is. And then our three global businesses, which also are still small in terms of the size of the markets, they're addressing and servicing on a global basis, being our asset management business with a focus on private markets, real asset, but also a good public investments footprint, the commodities and global markets business, and our Macquarie Capital business focusing on areas of specialist expertise in the main regions in which it operates around the world. Now, that is of course supported by our ongoing investment in our platform in terms of technology and regulatory spend to support the group's delivery over the medium term, our independent proven risk management framework and culture, and our strong and conservative balance sheet. And that has helped us over the medium term deliver strong results. So if we look at the 17 year average, the annuity style businesses have delivered 22%. In this last year, they delivered 18%, principally due to the extra capital absorbed currently in Macquarie Asset Management, both in particular seed and co-investment positions and also the recent acquisitions that are coming through. And then in the market-facing businesses, we've delivered a 17% return on equity average over the last 17 years, and in this last year delivered 28%, particularly due to the strong contribution from the commodities lines in the commodity and global markets business. The whole group together has delivered on average 14% ROE over the last 17 years. This year delivered 16.9% after, as Alex and I have mentioned, taking into account the $12.6 billion of surplus capital that we're holding. So higher contributions obviously from the operating groups at the 18% and 28% and 16.9% net. So with that, I will hand back to Sam to take your questions. Thanks.

Thanks, Jamara. I'll now hand over to the operator for Q&A. Thank you very much.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from John Story with UBS. Please go ahead.

Thanks so much. And thank you, Shamara, for giving us the opportunity to ask a few questions. My first question is just on the dividend of $4.50 in the second half of the year. How should the market be reading into this just in terms of potential inorganic growth opportunities?

Thanks, John, for that question. So the dividend basically is in the middle of the range that the board has for its dividend payment of 50% to 70% at 60%. And I think what we're saying is that we had a very good year and we want to share that with our shareholders. So we're paying 60%, which is up from the ratio we were paying last year. And equally in terms of how we're responding with the MIRIP and the DRP as well, we're saying we're comfortable with capital to take actions that show that we have ample capital. But at the same time, the environment we're going into is a particularly uncertain one, we think. And so we've made a judgment that it behoves us to be holding a very strong capital position going into this with the 12.6 billion surplus we have and as I said that's after the 2.4 Bill. unquestionably strong amounts. So it's gone basically from 10.7 to 15 billion over the last year, excluding that. And so we think we're very comfortably capitalised, yes, for inorganic opportunities if we see them in this current environment, but also in terms of being defensively positioned, not just with capital, but not needing to go to the markets for funding, et cetera. I don't know, Alex, if you want to add anything.

No, I think that covers it.

Thanks, John.

Just my second question is, you've called out low levels of volatility in Q4 in global gas markets. I just want to get a sense of how material this is in terms of the revenue outlook for the commodities business. And then what's the timing impact of this in terms of how it could potentially flow through to revenue? And so you have mentioned, you've called out that commodities revenue is going to be roughly in line with FY22. What's ultimately in the pipeline and what gives you confidence in these revenue numbers?

Yeah, I think what we said, John, is that it would be up on FY22 and basically our commodities business, like all of the financial markets and asset finance businesses as well in commodities and global markets, are customer service based businesses. So ultimately what we are doing to drive earnings is growing our franchise. going into new geographies, going into new products as well and commodities, but also upselling what we do with existing customers is a big driver. So the underlying growth in CGM, and you saw that in one of Alex's slides, is driven a lot by those base businesses we provide in terms of financing, risk management, storage, transportation, etc. And then the trading revenue is on top of that, you know, the thing that could fluctuate depending on what volatility we see in markets. Now we're in so many different markets geographically and commodities-wise that we could experience volatility in any one of those. Last year it was in a sub-area of North American gas and power that we had particular volatility, but there was also volatility, Alex showed the graphs in European gas and power as well as North American. So the volatility could occur in many areas. The thing that gives us basis to give guidance on the earnings is what we're seeing in the underlying franchise growth in terms of those non-trading items and then assuming some level of trading. But the trading really comes from being in market, serving customers. It gives us very deep insight so that if we do see particular dislocation, we're able to do some trading around that. Hopefully that answers it, John.

Yeah, that's great. Thanks so much.

Thank you. Your next question comes from Matt Dunger with Bank of America. Please go ahead.

Yes, thank you for taking my questions. If I could just ask you to remind us on potential asset realisations, you're looking into FY24 and how we should think about potential performance fees in private markets, businesses you're moving into.

Yeah, thanks for that, Matt. So in the private market, because we have balance sheet assets as well, but I'll focus on the asset managers, private market businesses. What we typically have is performance fees that we'd guided some years ago, sit at about 50 basis points of equity under management. In this last year, they were at 45. So it can bounce up and down depending on timing of realisations. We also are growing our equity under management a bit into non-performance fee businesses to some extent private credit and to some extent real estate as well. But in terms of the timing of assets we've got a large European fund and a large North American fund that are reaching the end of their life and realising assets and those are The fourth in the series of the European funds meet four and the third in the series of the US meet three. They have a number of assets where we've seen very good growth in the underlying asset performance. So we take some recognition of the performance fees before the assets are realised because the accounting standards require us to recognise those fees as we form a view that there is a highly improbable risk of reversal in terms of the fees being generated. So we've already recognised some of the fees in the revaluation of the assets in the funds but typically we have been able to realise at a premium. it really depends on market conditions. So we're pretty disciplined in what we recognise so far being what we think is highly improbable risk of reversal. And then as we realise about half a dozen assets across those two funds and a few others, hopefully we will generate performance fees into next year. As we guided, the main reason we see net other income down in the asset manager is because the one-off gains in the green energy assets were

pretty strong last year and that's why we think we won't have as high net other income does that cover it matt that's that's perfect thank you shamara and and just if i could ask on macquarie capital uh private credit 26 of those exposures in software and technology um particular deployment into debt can you just talk to us about how you're getting comfortable with uh credit risk management

yes yes um basically we've been investing in private credit in that through that team now for um i don't know it's probably at least 12 years actually going back just since the time of the gfc so we have a very good experience in terms of our team and their investing experience and their credit losses, it's less than 1%, in fact less than half a percent in our credit loss experience, basically because we're using very, very deep expertise in sub-sectors. We see a massive pipeline of opportunities and we sift down and sift down and only do very few investments each year. based on confidence in the underlying, not just the business we're investing in, but the partners we invest with. So our loss experience has historically been low. We're very disciplined about putting money out of the door. Our expected credit loss provisioning is running at about 3-4% compared to the experience that we've had. And I think that's what gives us confidence. Often we're going in again with partners that we've worked with before as well. So it's really the deep expertise of the teams in their sub-sectors that gives us confidence.

Maybe just to add to that, the technology exposures of the group and software exposures of the group have mainly taken are to cash flow generating businesses, typically government business services type businesses with an established and growing platform rather than I guess the more publicly talked about technology story which tends to be obviously loss making. the activities in those sectors where we have real expertise cash flow and more defensive elements associated with government and business services which again i think underscores the point that that shamara is making around the uh the performance over time that we've seen about that through that book yeah that that's actually a very good point because in private credit we're investing in more mature software and technology businesses cash flow runs whereas in our venture um

Macquarie Capital Venture Capital Business, MCVC, we invest in early stage things like say PEXA here is an example where we'll put small checks in early on and then help grow those businesses over years to a larger equity realisation.

Brilliant, thank you very much.

Thank you. Your next question comes from Jonathan Mott with Baron Joey. Please go ahead.

Thank you. Two questions, if I could. I'll break them up. The first one, around the world, if you look at Macquarie over an extended period of time, you've seen an ongoing movement since the GFC into unlisted assets. And people have really liked that because it avoids the volatility and you can get stable long-term returns. But at the same time, there's a push overseas in the US and around the world that maybe these assets, especially commercial property, haven't been marked properly and there's a liquidity issue at the same time. And this is getting a lot of regulators to focus on this issue. Do you think this is a potential risk that over the next five, 10 years, maybe even a shorter timeframe, that there's going to be a regulatory push back into more liquid, more marked assets? that could potentially make unlisted assets less attractive?

Potentially, I would start by saying the unlisted assets where they're not commercial property, they're typically operating businesses, where we are driving the bulk of our superior return by actively managing those assets, whether it be in our asset management, in our deep areas of expertise across infrastructure, etc. or on the balance sheet where we invest in tech and infrastructure and government services, as Alex said, growth businesses, etc. So I think for us, where it's balance sheet, we're making sure that the funding for those is termed out for the life of our expectation of holding those assets. So we're not expecting regulation to hurt our sources of funding and liquidity for staying in those businesses and we think we have delivered superior return through our human capital capabilities and can continue to. In the asset manager in terms of allocation to unlisted assets and whether regulators will ask our institutional investors to allocate more to liquid assets because there isn't transparency and visibility of price. That may be a factor, but the allocation at the moment to the asset classes we're focusing on like infrastructure are very, very small globally relative to the size of the class. And there is a very good liability match in terms of the long duration liabilities a lot of these investors have. So even though there might be regulation and it goes to more transparency of marking, we think we will still see good flows to our asset classes and good growth in terms of our share of those flows as well. And we think we'll continue to be able to, even if we're constantly marking the assets, show investors, because as you know, I just mentioned earlier, we are very disciplined about marking those assets. If they need to be marked down, we would mark them down. But typically, as we mark them up, as the operating performance grows in terms of our active management of them, we're very disciplined about marking them up as required under accounting standards.

Thank you. And a second question, if I could. When you look at this result, we've never seen a result by Macquarie, which is so heavily skewed into one division, with CGM making 58% of the contribution. It's also the most capital-intensive of the divisions. The other divisions did OK. Obviously, the Banking and Financial Services was growing. The others were pretty soft. When you see a year like this, which is so heavily skewed, how do you manage the staff compensation ratio? And when it is a year like this where some of the divisions haven't performed well and a more capital-intensive division is really driving the result... Shouldn't shareholders receive a larger proportion of those returns? So how do you manage this? And I know you'll say that the profit shares work well for many, many years. We've never seen a year as skewed as this.

Yeah, well, John, just like in your business, we're ultimately a human capital business and it is talent that drives the earnings for shareholders. So basically we work off market compensation rates for each different business and they are very different depending on what the underlying business is. And so the compensation ratio can vary depending on which of the businesses contributes the most in a year, but that's just a number that falls out. of making sure we pay market rates to attract talent. We try to pay the lower end of market rates and have a broader offering than just money to our talent. But we need to make sure we maintain that talent and that is aligned with shareholder interest because without them, the earnings are not there. So this year, CGM delivered $6 billion of earnings, as you say, 57% of the group's earnings. The rates at which people in CGM get paid are determined by the markets they operate in, and there's different rates for some businesses within CGM as well, and we honour those arrangements to make sure we keep attracting talent in the other groups as well they're paid based on the market for those businesses which does take into account the return on equity as well you saw that the capital markets businesses this year delivered a return of 28 percent so when you say they're capital intensive we can still deliver very very high ROEs in CGM with um depending how that money is made in areas where the human capital is driving much more of the return, we can deliver very high ROEs. And as you can see in that 28%, Macquarie Capital had a much more challenging year down 47% at 800 million. So the CGM number would have been pulling that average up. So I think we certainly take into account the interests of shareholders and our view is it's smart for the shareholders to be compensating top, top global talent at market competitive rates, at the low end of market competitive rates, but giving them an offering where they stay with us long term and we can grow businesses behind them.

Maybe, John, just maybe just a couple of points for me. I mean, obviously the businesses, the market facing businesses are set up and delivered this year in a way that you'd expect them to. When conditions are conducive, then we would expect those market facing businesses to perform really well. And over the course of the year, from a CGM viewpoint, you obviously saw significant volatility. I put up the charts around around gas in Europe and the US, but you saw volatility across global markets more generally and across commodities more generally. And in that environment, you know, I think the team was able to step up, grow their customer franchise, obviously help those customers manage that volatility, which provided opportunity for us on the trading side. So I think the business actually did exactly what we wanted it to do. And if you think about it, the combination of the portfolio, obviously you've got these, you know, stabler type of businesses in the annuity stream, and then you've got these businesses that perform better when the conditions are actually conducive to them doing so. So I think the business performed as we sort of expected it to, and we talked about it through the course of the year. So that's one thing I think that is relevant to think about. I think the other thing which is interesting from a capital perspective in terms of the heavy use of capital is it is a relatively short-dated capital business as well, which I think is a positive in the sense that A, capital comes back quite quickly and over the course of the year, as Shamara showed in her slide, We had $1.7 billion worth of capital come back to the group, which is really consistent with the way that CGM business is set up. It also enables us to respond quickly to market conditions. So the capacity to turn that capital where the conditions are conducive to doing so, I think is a really strong element of the way the CGM business is operated and the type of business it's involved with.

And I might just briefly mention as well that actually, ironically, the profit sharing rate for the group was down this year on last year because of the mix of not just CGM but the divisions and lines from where we generated earnings. The compensation ratio was up a bit. That's not to do with profit sharing rates. It's to do with the investment we're having to make in headcount, and hence the base comp numbers being up a lot as we have to invest in our operating platform to respond to regulatory requirements, technology, et cetera. Again, aligned with shareholder interest, I think. And you had a second question, John? That was it. Oh, right. OK.

Thank you. Your next question comes from Andrew Triggs with JP Morgan. Please go ahead.

Thank you. Good morning, Shamara. First question, please, just around the commodity guidance. So you provided for FY24 the reference to the FY22 as the baseline for growth off that level. I'm just wondering whether, if you look more into the medium term, whether you think that's a reasonable baseline for us to think about the commodities performance of the business

yeah i think subject to volatility that we experience in terms of market conditions i think we're saying our franchise is growing year on year on year and we're at a point now where we think hopefully subject to market conditions we can keep growing from those fy 22 levels we've got um nico kane here i don't know if you need to add anything to that nick or you're happy with that answer

Thank you, Shemar. I think you've answered very comprehensively. Perhaps just to add one thing that we're tailoring our services to our clients around the demands that things like the energy transition are coming through. And that's how we're thinking about servicing the client base. So our expectation is those demands will increase over time, giving us the opportunity to continue to grow the franchise.

Yeah, that's a good observation.

Thank you, Nick. I'm giving you an answer to that question. That slide on slide 31 around, I guess, benchmark prices on European and US gas prices, obviously probably relate a little bit more to risk management revenues. But in terms of the inventory management and storage business, can you talk a little bit about what's happened in more recent months around dislocation in physical markets within the North American market, please?

Sure. As we've tried to demonstrate here on that slide is we've seen, compared with the conditions that we saw in calendar year 22, slightly more subdued trading opportunities. However, in terms of the demand for the underlying services that the clients require or that the business actually supplies to our clients, we're still seeing pleasing amounts of underlying client activity. So yes, there has been a little bit of a reduction in the volatility from what we've seen as extreme markets over the previous periods. But the underlying demand for our services still remains quite strong.

Thank you. And just the second question, please, around the deposit strategy, perhaps for Alex. Interested in seeing the extent of growth in deposits within the BFS division as has more than matched. In fact, I think in the half probably doubled the growth in the loan portfolio. And that book now looks to be fully funded by deposit. So just keen to understand the strategy there. Maybe any comments around the cost of that relative to wholesale funding and whether that's being used to fund growth elsewhere within the banking group.

Yep. Thanks, Andrew. Yeah, a couple of things, and Greg's on the line as well, so you might want to add something here. But the whole funding story across the group is a liability-led story, Andrew, as you know. So we raise funding and then we deploy funding into the assets. For some time now, we've been talking about within the BFS business, what we'd like to do basically is fund the growth in their loan portfolio. uh through deposits and you can see that as you as you said the the vast majority of that portfolio is now funded through the deposits and that that continues uh continues to be the the case obviously the deposit story is not a not a new one if you look at that growth over time what the team's been doing there's a really nicely established base of deposit customers that that is very long-standing across the business products across the cma and over the course of the last uh you know um several years or so, the product set that the team has been developing for those deposit customers has expanded into more digital products, into transaction accounts, into savings accounts, and more recently to term deposits. I think there's been a very concerted effort to, one, make sure we're liability-led in terms of funding, and, B, be very deliberate about the suite of product offering we have out there to be able to service the customer base that BFS is working with. So that's coming together nicely for us. I mean, obviously, from a cost-of-funding viewpoint, we feel like the returns we're able to achieve on the BFS business are very strong returns, and they continue to be strong returns. We've been, I think, on the asset side, we've been very disciplined around the growth. And as I said in my comments earlier, you can see the tapering of the growth over the course of the year. And the market's obviously incredibly competitive, which is appropriate, but I think the team's been really disciplined in the way they've actually grown those deposits. now i would guess that uh you know peak margins like others are saying peak margins are probably you know six months in uh in the past and so we uh you know we'd expect to see you know some margin uh pressure going forward um particularly whether it be the cost of deposits and deposits are obviously becoming more competitive as people look to uh to refinance the cff and and so forth and we would be expecting to uh to see that uh to see that as well deposits have plainly been um you know have moved there's been a gap from a cost of funding viewpoint between deposits and wholesale, but that gap is closing. I don't know, Greg, whether you want to add anything to that?

Not much at all. I think it's a comprehensive answer, Alex. As you say, there's an expanding suite of products available here. We have the advantage, I think, that we don't have a branch network and that the newer products we have are Digital on new platforms, and the opportunity for us, I think, is in the market. There are still a lot of customers on very old products with rates that could be improved if they shopped around, and that's what we're benefiting from.

I hope that answers that, Andrew. Thank you. Yep, that's great. Thank you.

Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from Andre Stadnik with Morgan Stanley. Please go ahead.

Good morning. Thank you for taking my questions. My first question, I just want to ask around the outlook for MAM investment income to be down. That seems quite conservative in the sense that how would you reconcile that with Me5 recently selling a stake in eight offshore wind farms that have broadly $10 billion worth at 100% stake. And also, the slide that shows the $9.6 billion vacant investments highlights that the reduction in green energy investments was actually very modest and there's still quite a substantial amount of green energy investments in the balance sheet. So how do you kind of reconcile the average investment income to be down versus some of the early sales we've already seen in FY24 in particular?

Yeah, there are two things driving that. One is that it's not the performance fees principally. We said the main reason we expect net other income to be down is the investment realisations. And in terms of the investment realisations, the assets that we have, the green energy assets from the green investment group, will be realised at the time that's most conducive to getting the best return on those assets. So it can be lumpy from year to year. And as it turned out last year, even though the amount that came off the balance sheet doesn't look huge on that page you pointed to, the realisations we made from those particular assets was material. And as we look at this financial year, we don't have as large expectations from the gains of the assets we would realise this year. There's still a few years left as we run off those green investment group legacy balance sheet assets. And this is not one where we expect as high realisations as we had last financial year. So that's the main contributor.

Thank you. And my second question, can I ask around the outlook on private markets fund raisings? Because we have some volatility and some divergence that your global peers say, thinking about private market funds raisings, and within that particularly for your green funds.

Yeah, look, a couple of things. First of all, there could be lower allocations to private markets. because of some of the liquidity issues that John Mott was referring to as well, where we've seen the value of public assets come off. And so that creates asset allocation potential challenges for investors. And they may have to, unless they have a lot of inflows coming in, slow their private market allocations for a bit. lower allocations to private markets within that we think we should continue to be well positioned as you've seen the raisings we're doing are going up and up from 27 bill the year before to about 38 billion this year so we are getting in the franchise we have more and more doubling up and newer investors coming in because we have good track record and a broader offering of funds On the green investment side particularly, we're raising for two strategies. One is an energy transition strategy, which is going well and has good momentum. The other is more mature green assets, where we already have had two funds in the asset management business before the green investment group came across. And so we're out raising those. It's been a sector where there has been a lot of allocation by investors. But I think one of the challenges in that sector is that the returns on the operating assets are coming down as so much money is keen to get invested there. So we think hopefully we'll have better offering now for investors with the green investment group team coming across because it positions us to let those funds also go further up the risk curve, if I can call it that, more into late stage construction or construction assets where we can bring expertise. So we're hoping, even though the pool of money allocating to private markets may contract, that our share, which is a small share within it, will continue to attract interest. And we have some seed assets as well that hopefully will help investors allocate to us. So we'll see how we go during the year. It could be a tougher year generally, but hopefully we will do reasonably within the context of that environment.

Thank you.

Thank you. Your next question comes from Brendan Sprouse with Citi. Please go ahead.

Good morning, team. Look, my question is just on the outlook for operating expenses just broadly across the group. Obviously, you've had 16% growth half on half and there's a number of key drivers here around regulatory in the bank and obviously rebuilding or expanding the platform in CGM. How easy is it to slow growth in expenses as the revenue environment changes as you've sort of provided us in your guidance today?

Yeah, thanks, Brendan. We have had big step up in operating expenses, some of it revenue driven. So obviously, as Greg just mentioned in BFS, the way we compete is through this digital bank offering. And we're constantly investing to keep that at the forefront, but also to keep delivering other offerings and rolling out the digital offering. In Macquarie Asset Management, we've invested because we've bought a couple of external platforms and been able to take costs out of that. But we've also been doing a lot of investment, not just in CGM, but more generally across our operating platform in areas like liquidity reporting for regulatory requirements. We're needing to invest a lot in data and also in systems and automation of systems and upgrading manual processes. We've been fortunate that whilst our expenses have gone up materially over the last few years, and Alex has shared the data on that, we've been able to grow revenue faster and still grow bottom line earnings a lot. So since about FY19, I think the investment has really stepped up that our earnings have gone from 2.7 bill to the threes to 4.7 to now five. So the businesses have been able to keep growing their franchises and generate revenue. If the environment were to turn materially, then like anyone, I think we would focus a lot more on discretionary cost spend. But some of it is, as Alex described it, it's run the bank, not change the bank investing. For the medium term, we're committed to the fact that we need to make some of these investments in technology and regulatory response. So it'll be a balance of things on which we have choice. You look like you'd like to add something there, Alex.

No, I was going to say just a couple of, just only two other points, Brendan. One, obviously, profit share is a component of the cost base, and that's obviously variable based on the performance, the bottom line performance of the business. So you get some variability just naturally through the way the profit share and share based payments mechanism works. The other thing, obviously, just to underscore the point that Shamara just made, what we did see was quite an increase in the headcount over the course of FY23. Some of that will obviously pull through into 24. My guess is the headcount growth slows anyway. We've obviously had a big step up in headcount over the last couple of years. There'll be a slowing in growth, so you get a bit of a pull through of what happened in 23, a little bit of headcount growth in 24. Obviously, some wage pressure in certain segments is still there, but who knows in terms of the outlook you're describing what that might do from a wage pressure viewpoint as well. I mean, plainly, if you think about the outlook, the only group where we're calling out expenses is BFS, where, as Shamara said, we continue to invest in in the platform really to support its growth but to support the continued digitization of that financial services offering in here in australia so we called that out specifically deliberate strategy obviously to continue to do that we haven't called out expenses elsewhere which obviously reflects the i guess the point we're making around the uh the significance of the cost increase uh relative to uh to the performance of those other three components but other than that yeah that's a good point thank you

Thank you. And my second question is just on the green energy group within asset management. Obviously, there is a big change in its contribution in investment-related income in this half particularly. And obviously, you've guided that the full year will be lower next year. Is this line now going to be a much more immaterial contribution line to asset management going forward? I guess my first question and then sort of the second part to that is, are we going to see a big pickup in private market space fees as you transition this business to sort of more third party capital?

Yeah, and it's going to be a transition. There'll be some glide path as we run off the principal assets and have gains on those and then build up the asset management earnings. And there could be a gap there because the principal investments are generating us very large amounts because we've held those assets for some time now. Whereas on the asset management side, the base fees are going to be around the one and a quarter percent, say, of equity under management and so to be generating that size of revenue we need very large funds under management and we'll pace ourselves on doing that because we want to make sure we can be delivering really good outcomes for investors. Now happily we have actually been investing in that space for a long time both in the asset manager and on the balance sheet So we should be able to deploy faster than in a new strategy. And so that should allow us to raise larger funds. But I think there'll be a gap. Sam, is Ben Way on the line as well? Ben and Michael Silverton, I think, may be online from New York. Ben, is there anything you want to add on that?

No, Shamara, I think that's the right answer.

OK. All right. Thanks. Thanks, Brenna.

Thank you. Your next question comes from Ed Henning with CLSA. Please go ahead.

Thank you for taking my questions. Just going back to the profit skew to CGM this year and I understand the volatility that drove that, but do you see a need to put greater diversity in your business or if you do see more growth in CGM over time and more opportunities there, are you happy to be a much bigger commodities business than an asset manager?

Yeah, thanks for that, Ed. I guess this year was a particularly large ZGM contribution, so we had quite a large weighting to it. But in previous years, Macquarie Asset Management has dominated, or Macquarie Capital has dominated, where we've had very large raising. So this can vary. And the guidance we've given for CGM next year is more in line with the other groups. But we tend not to try to force the business mix. It takes us a long, long time to build this deep human capability expertise that allows us to earn superior return for the risk in each of the lines we're in. And it's not easy to say, all right, we want to double our earnings from BFS, say. What we need to do is what we call patient adjacent growth, which is back Greg and the BFS team to be looking at how they can, in a disciplined way, grow in banking in Australia. Now, there may be inorganic opportunities that they bring to us as part of that. But we tend not to, from the center, go and say, Greg, we need you to double banking earnings. So the mix really is a product of what opportunities the businesses are seeing. Now, having said that, we are sitting with a very, very large capital surplus, so that is available not just to support CGM if they see market risk capital they want or credit risk capital because of dislocations that may play out or volatility, but also if they see inorganic opportunities to bring more teams on in a certain area, And each of our other three operating groups as well know we're there to support them with ample capital in the cycle that may play out to help grow. But the growth will really be a product of where they see opportunity for disciplined investment and compelling return on the risk and the capital we put in versus us from the centre targeting a certain mix and telling one part of the business to grow or not. Hopefully that makes sense. Alex, I don't know if you want to add anything to that. That's a broad approach. Did you have another question as well?

Yeah, yeah, I do. Thank you. Thank you for that. Just going to the ma'am and the broadly inline base fees, is that public markets dragging it down because you continue to see a shift to fixed income from equities? And then just thinking about your dry powder, do you need or want more scale in that business so we should expect more acquisitions coming through to grow that business?

Yeah, first of all, in terms of the base fees broadly in line, as you know, there's a range up or down in what we articulate as broadly in line. So I think we're saying we could see it up a little bit. And that will be through deployment of the private markets capital. But there'll also be realizations in the private markets business offsetting that. So each year, we're net putting money to work, but taking out as we put in. In the public investment side, we tend not to factor in a market growth number on the base fees. So there we may have issues coming from what we are seeing and what we could factor in is the rotation from equities to fixed income, so from higher fee businesses to lower fee ones. So putting all that together, our assessment is it's broadly in line. I'll let Alex if he wants to elaborate on that.

I think you've covered it, Jim.

OK. Thanks.

And what about the deployment of capital in that business? Do you need more scale?

Yeah, no apologies for that. We think we have enough scale to deploy in private markets, the 35 bill nearly of dry powder that we have, because it's basically fund by fund. So We've just raised the next in the series of the European funds and the North American fund also is also just in its latest raising. The teams that are investing those funds raise what they think they can deploy in the next period. Now those amounts have become larger and larger as we've become more and more established in the market so I think the first European fund we may have raised one and a half billion euro now we'll be raising seven eight billion euro but the teams are able to source much more investments but particularly larger investments. So I think we've got the resource to invest the capital that we have now. If we were to do acquisitions it would be in things like Waddle and Read where we can get either much greater scale on the operating platform or go into a new area where we don't have the expertise.

Yeah, I think maybe just to add, Ed, from me, on the scale point, I mean, we obviously talked about Waddell & Reid through the year, and the reality is that what we've been able to do there, I think, is grow the public investment side to a point where we largely were able to take almost all the costs of that business out. So to the scale point you're making, obviously, we feel like we've got to scale public investments business, but on the one hand, on the other hand, where you're doing those sort of acquisitions, the opportunity to bring the revenue on the P&L, but to be able to take out the cost, we think is an interesting opportunity. And obviously we saw that play through in Waddell and Reid. But the bit that obviously we don't try and forecast is what happens to markets. And plainly over the course of the last 12 months, you saw a big downdraft in markets across both fixed income and equities. And obviously our business on the public investment side suffered from that as well.

Great. Thank you.

Thank you. There are no further questions at this time. I'll now hand back to Mr Dobson.

Great. Well, thank you all for your support, for your ongoing support and your interest, and we look forward to catching up with you over the coming weeks.