Full Year 2026 Magellan Financial Group Ltd Earnings Call
Speaker #1: Partially offsetting this is $5 million of after-tax expense savings, largely from a smaller portfolio management team. Secondly, as I've just mentioned, in order to reduce risk, we have made changes to how capital is managed.
Speaker #1: With less risk, there will be lower operating earnings contribution than in the past. We expect this to be about a $17 million after-tax impact, relative to FY26.
Speaker #1: Good morning, everyone. I'm Stu Kingham, Head of Investor Relations, and thank you for joining us today. We're delighted to present the results of Magellan Financial Group for the 2026 year.
Speaker #1: It is important to note that, while these decisions have a short-term financial impact, they have been taken to strengthen and make our company more resilient for the longer term.
Speaker #1: It's been a significant period for both MFG and Barron-Joey. Today we've released financial information for MFG and Barron-Joey, and provided a pro forma combined view.
Speaker #1: Finally, the Board has resolved to pay a fully franked second-half dividend of 25.5 cents per share. This is based on MSG's and Barrenjoey's combined second-half operating profit after tax, and represents a payout ratio of 80%.
Speaker #1: Today you'll hear from Brian Benari, MFG Chief Executive Officer, and Gavin Buchanan, Chief Financial Officer. This will be followed by a question-and-answer session. With that, let me hand over to Brian.
Speaker #2: Thanks very much, Stuart, and good morning. Thank you all for joining us. I'm delighted to be the new CEO of MFG and to take you through our FY26 results, our first results since the merger.
Speaker #2: I'm joined today by Gavin Buchanan, Chief Financial Officer. Gavin has a background in financial markets and brings extensive experience in funds management and financial control, making him the ideal CFO for the merged group.
Speaker #2: Today's presentation will walk through the 30 June results for MFG in isolation, and it will also build a full picture of performance for the year for both MFG and Barron Joey, and show what the combined group looks like.
Speaker #2: Firstly, I'll provide an update on the business today before handing over to Gavin to cover the financial performance. After that, I will share our plans for what's ahead, including our near-term priorities.
Speaker #2: But before we get into the group update, I want to take a moment to recall the rationale for the merger. We have brought together two highly complementary Australian businesses.
Speaker #2: Combined, they will deliver an enhanced client proposition, a more diversified and resilient business, and a strong balance sheet, providing capacity for growth. We have also taken decisive actions to lay the groundwork for our next phase of growth.
Speaker #2: Integration is on track. The restructure of the heritage global equity funds was completed in June, providing investors with a lower-cost offering backed by a strong track record of performance.
Speaker #2: Consolidation and de-risking of invested capital has been completed, which will reduce profit and loss volatility. And finally, growth opportunities have been identified for each business, and we will prioritize and execute these in a structured and disciplined way.
Speaker #2: Let me turn now to what the group looks like today. From 1 July, we operate across three distinct business lines: financial markets; our fixed income and equity sales, trading and financing business; and our market-leading research capability.
Speaker #2: Corporate finance, M&A strategic and debt advisory, and equity and debt capital markets. And investment management—our public and private markets investment capability. The FY26 revenue split shows a three-way balanced business; no single pillar dominates.
Speaker #2: We've previously announced that, subject to shareholder approval at our AGM in October, MFG will formally become Barron-Joey Group Limited. It's more than a name change.
Speaker #2: It reflects the scale and ambition of the combined business, and the reality of what we've built: a staff-aligned, client-focused financial services group. This slide tells the story of how we got here.
Speaker #2: Barron-Joey has scaled from a startup into a key player across all of its businesses. Note the half-on-half trends for Corporate Finance and Financial Markets since establishment.
Speaker #2: Five years of consistent compounding growth across differing market conditions. And importantly, that growth hasn't been lumpy. We see very little evidence of half-on-half seasonality, which speaks to the durability of the franchise we've built.
Speaker #2: Investment management, which is now hitting 20 years in the market, has in recent years had revenues impacted principally by the unwind of the global equity fund.
Speaker #2: The core business remains resilient and cash-generative, with a strong distribution platform, which speaks to one of the key rationales for our merger. Diversified revenues across complementary capabilities smooth the combined group's earnings profile through the cycle.
Speaker #2: On a pro forma basis, in the FY26 year, the combined group generated $778 million of revenue and $215 million of operating earnings after tax.
Speaker #2: Turning to where we are today, less than two months post-completion. The majority of our people are now in the same building, with the remaining team relocating within two weeks.
Speaker #2: We expect to have migrated onto Common Core Systems by 31 December and to complete integration by 30 June 2027. Synergies will be progressively realized across the year.
Speaker #2: We're already seeing identified merger benefits. Our expanded portfolio of alternative asset products is gaining traction. The newly established Barron-Joey Asset-Backed Income Fund has increased AUM by 42% in just three months, and the first ag credit fund by 15%.
Speaker #2: This underscores that combining Barron Joey's origination capability with MFG's distribution reach works in practice. We're also making targeted moves. Now, with that, let me hand over to Gavin, who will take you through how MFG and Barron Joey each performed over the year, and how the two come together in the combined Group result.
Speaker #2: Gavin, over to you.
Speaker #3: Barron.
Fair value movements on funding investments have historically been volatile, with a $38 million after-tax adverse impact on net profit for this period.
Moving this capital to cash and high-quality liquid fixed income will reduce this volatility.
Equity ownership has been central to Baron's philosophy: everyone is an owner. We facilitated this by granting shares to employees when they started.
The majority of these were granted when Baron Joi was established, and the bulk of the employees were hired.
Speaker #1: Consistent with current MSG policy, as part of the merger, the Board has considered this dividend policy for the combined group and has settled on one which seeks to balance the capital needs of the group with shareholder dividends.
Speaker #1: From FY27, and subject to board discretion, the target payout ratio will be between 60 and 90 percent of the combined group’s profit. We expect this will be towards the top end of this range.
Speaker #1: So, in summary, I want to leave you with three points. First, MSG took action to reposition the global equity funds with clients and to de-risk its capital.
Speaker #1: Second, Baron Joey brings a demonstrated growth track record. Finally, these two businesses are powerful—earnings from which build the future. I will now hand back to Brian.
Speaker #2: Thanks very much.
Speaker #1: I want to return to the diversification and resilience theme I opened with and be clear on the revenue drivers. It's helpful for how you should think about our earnings going forward.
Speaker #1: So, starting with Corporate Finance, you will have noted the year-to-year growth achieved by the business through differing market cycles. Our breadth of sector coverage and client relationships provides diversification.
Speaker #1: That breadth is key to our earnings resilience—deals ebb and flow by sector and by client—and a broad base smooths that out over the cycle.
Speaker #1: But implicit within the business is a range of repeatable revenues. An example of this is the debt and capital advisory side. We assist our clients with financing and refinancing year in, year out.
Speaker #1: Another good example is debt capital markets, where we are averaging two deals a week, many of which are from repeat issuers. Now, bringing this together, while corporate finance revenues may be transactional in nature, they are diversified across a breadth of sectors and relationships, and can be repeatable.
Speaker #1: This continues to smooth the revenue and has provided growth since inception. Turning to financial markets, the fixed income business is worth a special note of explanation.
Speaker #1: This is a client-led flow business. Clients come to us to trade in and out of bonds and interest rate swaps. Our role is as an intermediary: we make the market, and we capture a spread when matching our buyer and seller clients.
Speaker #1: Our in-house rate strategy and economics research sharpen our read on the rate cycle, credit conditions, and issuer positioning. This intelligence and deep market understanding attract client flow, broadening our client base.
Speaker #1: Finally, this business benefits from higher market volatility, as it drives client portfolio repositioning. Investment management sits firmly at the annuity end of the revenue spectrum.
Speaker #1: AUM is driven by quality, relevant client offerings, and investment performance. The scale along the bottom of this slide shows the spectrum from more diversified, transaction-based revenue through to durable and annuity-style income.
Speaker #1: What the merger gives us is exposure across that very spectrum simultaneously. Our annuity-style investment management revenue provides ballast, with financial markets having delivered durable earnings across varying market conditions.
Speaker #1: The balance that we talk about sits at the heart of the investment case for the combined group. This slide seeks to bring to life our approach and track record of building and growing Baron Joey.
Speaker #1: Evidence that when we say structured and disciplined growth, we mean something very specific. It's not just a tagline. Since the commencement of each Baron Joey business, we have incrementally expanded client offerings and our client base.
Speaker #1: We have done this in a very programmatic way to deliver sustainable business growth. From our first M&A mandate in December 2020 and first cash equities trade through to today, ranking number one in M&A, equities sales and research, and one of Australia's leading fixed income franchises.
Speaker #1: Our research covers around 250 listed companies, in addition to sectors and economics. It's not just breadth; it's quality. Baron Joey has more number one-rated research analysts than the entire rest of the market.
Speaker #1: More recently, we've been expanding our client base through geographic reach. Building on our Barclays strategic alliance, we established a presence in Abu Dhabi Global Market in 2024 to support our Northern Hemisphere fixed income clients.
Speaker #1: In 2025, we opened our Hong Kong office to grow our equities franchise. The point of showing this is simple: we see a range of opportunities and are continuing to invest for the future, and we will take the same disciplined approach to executing on these new opportunities.
Speaker #1: Our team is aligned with shareholders and is here for the long term. This creates a continual focus on investing with a long-term mindset. FY27 will be a year of transition for Baron Joey as we move through integration.
Speaker #1: Our priorities are clear. First, we are focused on completing and capturing the benefits of the merger. This is a top priority. We expect to start to extract the merger benefits that will arise over the integration.
Speaker #1: Second, we're extending our offerings and client reach. We have built a strong reputation for our deep, continued focus on Australian and New Zealand products.
Speaker #1: The opportunity is to extend and strengthen client reach into international jurisdictions. A good example is the establishment of the US swap dealer license, positioning ourselves with US-nexus clients as a preeminent global provider of Aussie and Kiwi dollar fixed income product.
Speaker #1: With a license now granted, we executed our first U.S. trades a few weeks ago. We are also adding to our Abu Dhabi Global Market team to continue the success we've had in servicing the European and Middle East markets, and strengthening the New York presence for our equities business.
Speaker #1: Third, investment management opportunities. We have a great platform for growth, including strong distribution, and it’s critical that we seed and develop more investment opportunities to meet client demand.
Speaker #1: In recent years, there's been a material shift in investor appetite, particularly toward private market opportunities. We're in a good position to capitalize on this changing landscape.
Speaker #1: To this end, we're in the process of adding new offerings in both our private capital and listed equities businesses. Importantly, we recognize that we invest and build today for the benefit of years to come.
Speaker #1: Finally, Baron Joey New Zealand. Baron Joey New Zealand is an investment for the future where we're excited about the opportunity set, and we've hired some exceptional talent into that business, which will be locally managed.
Speaker #1: We think of it in three phases. 2027 will be the year of build and establishment; 2028 is commencement, and 2029 is when we start to see the benefits come through.
Speaker #1: So, to bring it together: firstly, this has been a landmark year, having completed a merger of two complementary companies. Secondly, our group today is genuinely diversified across revenue and clients, with all the right foundations in place for our next phase of growth.
Speaker #1: Finally, we'll continue to grow each business and deliver with the same structured and disciplined approach that has been a hallmark of Barrenjoey since inception.
Speaker #1: I want to take this opportunity to thank our exceptional team and our shareholders for their continued support. And with that, Gavin and I are happy to take your questions.
Speaker #2: Thank you, Brian. We'll now turn to the Q&A session. Can I please remind you to state your name and the company you represent when asking a question?
Speaker #2: Thank you, operator.
Speaker #3: Thank you. And as a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced.
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Speaker #3: Today's first question comes from Elizabeth Miliotis with Macquarie. Please go ahead.
Speaker #4: Good morning, gents, and thanks for taking my questions. My first one is on the financial markets business. Particularly, if we look at the first half and second half revenue numbers in your presentation pack, we're obviously just seeing for seasonality.
Speaker #4: It seems to sort of slowed a little bit in the first and from the first to the second half. How should we think about the outlook over the next few years?
Speaker #4: And particularly, if you could make specific comments on what you're excited about from the fixed income business, and do you expect revenue to accelerate from here?
Speaker #4: Noting that you've had a very good period over the last 12 months or so there.
Speaker #1: Yeah, Elizabeth, Brian, Ben-Ari—maybe I'll have a go at that one, and then Gavin can add as required. So, the way we think about the financial markets business—it's split pretty broadly between equities and the fixed income business.
Speaker #1: Obviously, you're very comfortable with the equity side. Both of these businesses are activity driven. It's fair to say that the fixed income business certainly benefits from volatility.
Speaker #1: And indeed, actually, that can act as quite a good buffer for us. So when you see that volatility, sometimes equity markets slow somewhat, but we get the benefit of the fixed income business on the other side, as people look to rebalance their bond portfolios.
Speaker #1: The interplay between the two of those has meant that we've seen what we would term pretty durable income. And if you actually look at that business over a series of cycles, since commencing those businesses, when they really were in earnest both up and running from 2023, we've seen that growth half to half coming through.
Speaker #1: Inevitably, differing market conditions serve up differing levels of activity. But as I said, there's somewhat of a buffering impact that happens with the interplay between fixed income and equities.
Speaker #1: We'll continue to build those businesses out. What we see is that the growth today, and the continuing growth, has all been about expanding our product offering as well as broadening our client base.
Speaker #1: I've talked about our client base already. We see opportunities around more the low-touch side. On the equity side, we see opportunities with respect to building out our financing offering as well.
Speaker #1: So we're very confident with respect to the future of the business, but obviously, there are always market impacts.
Speaker #2: Yeah, and I'll just—Liz, I'll just add to that, what Brian's saying, just to deal with your question around the actual half-and-half split.
Speaker #2: And just to give you some flavor there, I think it speaks to the diversified nature of the business that we've got. I think you would probably acknowledge that it was a very active first half in equities.
Speaker #2: But a much quieter second half in equities as a result, principally of the conflict in the Middle East. Conversely, fixed income picked up in the second half, principally because of the conflict in the second half.
Speaker #2: And as Brian said, as a client-led flow business, as conditions warrant, clients were a little bit more active in the second half on the fixed income side.
Speaker #2: And you can see the balance of those two things coming through in the first half and the second half.
Speaker #4: Okay, got it. And maybe just a follow-up question. I think that fixed income business is a bit newer versus the equities business. Do you expect that there will be continued sort of market share gains in that particular segment?
Speaker #1: Yeah, we would hope so. I think both of these—I'd say both of the businesses demonstrated good growth over this last period, or over each of the periods.
Speaker #1: So we're seeing growth across both of them, but we would hopefully continue to, and expect to, grow out each of them.
Speaker #4: Okay, got it. And then just a second question, on the private markets business. I mean, you alluded to expanding your product offering there.
Speaker #4: But I’d just be curious to get a bit more color—what does that look like? I think at the moment you’re more single-asset-type funds.
Speaker #4: Are you looking to expand into multi-asset funds or particular asset classes? I presume, obviously, just still in Australia. But, yeah, is there any more color on what that actually looks like going forward?
Speaker #1: Yeah, certainly. Liz, you're exactly right. When we started this business—and it's the newest of our businesses—we started off with single assets, typically around private equity positions and opportunities.
Speaker #1: Single asset funds, with clear exit strategies for each of those. The performance—and that was across all sorts of different underlyings—and the performance to date has been very, very good.
Speaker #1: And I think we've started to build a track record in that regard. And we've also seen exits, like, for instance, the GYG one, where investors have done very well.
Speaker #1: The next stage is setting up open-ended funds, as you said. And there's two of those—two new funds that have been established. One is the Barron Joey Agricultural Fund, which is a credit fund.
Speaker #1: And the second one is the Asset-Backed Income Fund. Both of those are open-ended. Both of those are the ones where we've turned the Magellan distribution firehose towards.
Speaker #1: In order to start to build that out—it's early days—but we're certainly, if you're starting, if you can see the picture arising here, we're starting to develop the business. Not necessarily that we won't still have single asset funds, but we're starting to open it up more to have open-ended funds as well.
Speaker #1: It's early days, though, Liz. I'll make that point. It's very much early days.
Speaker #4: Yep, got it. And maybe if I can sneak one third question in as well. Just on the investment management business, particularly with the transition to Vimber for global equities money.
Speaker #4: I think, on our numbers, the business is probably not making a decent, or much, profit in that—maybe about 12 months' time. How are you thinking about the broader cost base?
Speaker #4: Not perhaps specifically in the investment teams, but more broadly in Magellan. Will there be more synergies to flow through as you work through that cost base from a sort of back-office perspective and distribution team?
Speaker #1: Yeah, Liz, good question. What I'd say is that we've moved the funds across to Vimver. The way I think about it is, we had a fixed cost base of the people managing those funds.
Speaker #1: We've moved it across to Vimver. That means it's now a variable cost base. So whether it scales up or scales down from where we are today, the cost base, in respect to managing those assets, will follow that.
Speaker #1: So I think what was really key, and it was great that Sophia and the team got that restructure completed in June, is that what they've effectively done is moved what I'd say is a very old structure and offering into a much more contemporary offering.
Speaker #1: I think the offering through Vimver, who's got a great track record there, is really beneficial for the ultimate investor, and obviously they've also seen that reduction in fees.
Speaker #1: That they're paying. So, I think that means that product is now much more contemporary in nature. It's now for us to watch and see what actions any of the investors will take, and monitor that.
Speaker #1: I note that, and Gav mentioned this, if you were to look at all the offerings at Magellan, the one that had the sustained reduction was the global offering.
Speaker #1: It peaked at $88 billion. Today it's in the fours. We would hope that that runoff abates, but that's not going to be up to us.
Speaker #1: That will be up to the investors.
Speaker #2: And Liz, I might just address your question around synergies as well, and what you can expect from there. We called out as part of the merger that we would deliver $6 million pre-tax of synergies.
Speaker #2: We're on track to do that. They are principally focused around technology and supplier harmonization between the two businesses. This merger wasn't about trying to harvest synergies.
Speaker #2: They're two complementary businesses rather than overlapping businesses. And as you can imagine, pulling the two teams together—we've only just done that, so we're working through that with both businesses.
Speaker #2: But we're confident that we'll be able to deliver that synergies number.
Speaker #4: Okay, thanks for taking my questions.
Speaker #3: Your next question comes from Sidharth Parameswaran with JP Morgan. Please go ahead.
Speaker #5: Good morning, and thank you for taking my questions. I had two. One was just on thinking about FY27. You give us a good slide there on slide 17, just on the expected impacts of the management actions you're taking.
Speaker #5: I'd just like to clarify what is and isn't included in those numbers, as we should think about forecasting our FY27 numbers. So, it appears—can you just clarify firstly that the FY26 number includes the pro forma numbers for Barron Joey, including that step up for the restructuring costs—sorry, the restructured arrangements that you had with Barclays?
Speaker #5: And then there's no synergies. I take it they're still to come. And there's no impact of the in that reduction that you have there on the global equities repricing, the 21 million dollars, there's no nothing included there for the lower average fund as well, right?
Speaker #5: So those are the things that, if you're on our side of the fence, those are the additional things we should be allowing for.
Speaker #5: Would that be right in terms of thinking about FY27?
Speaker #1: Yeah, thanks, Sid, for your question. Let's run through the slide, and hopefully we can tick off all of those items that you raised there.
Speaker #1: First and foremost, no, it doesn't take into consideration the AUM change. So that's something that you will need to think about as you work through it.
Speaker #1: Clearly, average AUM last year was $39.1 billion, and we exited FY26 at $36.7 billion. So that definitely needs to be taken into consideration. We called out as part of the merger that there would be some legacy arrangements that would fall away as a result of the merger.
Speaker #1: They are in the FY26 result, so that is something that you need to take into consideration. And really, all we are trying to do in the slide is point out that there were two key management actions that were taken in the year that do have an impact on the earnings.
Speaker #1: But there are a whole host of other things that you need to think about, not least of which is what you are going to do from a financial markets and corporate finance perspective as well.
Speaker #1: Because that will also, obviously, impact the earnings going forward.
Speaker #5: Okay, I think that does address those questions. I'm going to ask a second one then, just relating to some of the actions you're taking in '27, '28.
Speaker #5: You said that you're investing, I think, in the Signature, expanding New Zealand in particular. Maybe if you could just comment—we've had a lot of investment in the business.
Speaker #5: It's been matched by revenues. But just your expectation on this investment—are we likely to see a drag on earnings into '27 from the pro forma numbers that we've seen from the investments that you're making?
Speaker #5: Or will the growth from the other divisions offset?
Speaker #1: Yeah, hi Sid. Brian Ben-Ari. So let me say, in respect to new—or first of all, in respect to investing, we continue to invest across all of our different businesses with a whole series of different initiatives, in order to broaden our product and our base of clients.
Speaker #1: And I made reference to that today. A great example of that is the US swap dealer. All the work that's been done on that over the last one and a half years has already been expensed and is in our numbers.
Speaker #1: As opposed to the revenues, we should start to get some of the benefits of that coming through this year. It will be gradual because we've got to onboard the clients, etc.
Speaker #1: When you go to New Zealand, as I said earlier, we sort of see it in three phases: FY27 is establishment, FY28 is up and running, and FY29 is benefits arising.
Speaker #1: Once we get up and running, we'll obviously benefit from the arrangement with Craigs, whereby we'll provide them execution and research services, from which we'll get revenue.
Speaker #1: To try and size that maybe is really helpful. So, the way to think about it is, in the next year, FY27, maybe the way to think about it is that we expect the total costs, in respect that we'll run through the P&L on that, will be in the vicinity of 1% to 2% of the total cost base.
Speaker #1: $5 to $10 million. That's what you should expect to come through in the 2027 year, Sid.
Speaker #5: Oh, that's super helpful. Okay, thank you. And the revenues come later, so okay, that's super helpful. And then just the last question, just on capital.
Speaker #5: So, I mean, you gave us a very helpful slide there, showing us the capital you have—on slide 16, I think—$611 million.
Speaker #5: Is that—I mean, can we take that as effectively your net tangible assets? And if I could just ask, how should we think of capital requirements for the go-forward business?
Speaker #5: How much is surplus? What do you need for some of the initiatives you're taking?
Speaker #1: Yeah, thanks, Sid. Dealing with your first question—is it the NTA of the business? No, it isn't. I think one of the things which is a little bit difficult, obviously, not having a balance sheet to put in front of you today is to give you that sense.
Speaker #1: But I can give you a sense of where the net asset position is going to be for the organization. If you look at either the MFG financial statements or the Barrenjoey financial statements and go to the subsequent event note, you can see some detail around this.
Speaker #1: And there is a figure of $872 million that you add to the existing net asset position of Barron Joey, and you'll get yourself to about $1.1 billion of net assets.
Speaker #1: There is some work to be done, obviously, in the valuation process that will then determine how much of that will be goodwill. But we're not expecting that to be a material number in the process.
Speaker #1: The second part of your question was capital requirements going forward, and also, just to kind of speak to some of that $611 million we see there.
Speaker #1: The Barron Joey number that you see on the slide is really working capital that's in circulation for our business on an ongoing basis. And that's a spot number, obviously, at 30 June.
Speaker #1: But that is used to support all of our businesses at varying points in time. And so it's important to think about that as well when you do your numbers.
Speaker #1: From a go-forward perspective, as Brian has mentioned, we're focused on predominantly organic growth in all of our businesses. We're not going to rule out looking at things, but I think we're very focused on adjacent opportunities in all of our businesses. Swap dealer is a good example; New Zealand's a good example.
Speaker #1: They're not material investments per se, at least initially. But we do expect them to deliver revenue in the future.
Speaker #5: Okay, thank you.
Speaker #3: The next question comes from Julian Briganza with Goldman Sachs. Please go ahead.
Speaker #6: Good morning, guys. Just for initial clarification, in terms of the impact of the legacy arrangements coming to the FY26 numbers, is that still post-tax, circa $12 million?
Speaker #6: I just want to confirm that point.
Speaker #1: Yeah, that's correct, Julian. It's $12 million.
Speaker #6: Okay, great. And then, just with the legacy employee share plan amortization, can— The footnotes say that it's expected to increase to $20 million in FY27.
Speaker #6: I just want to understand what's driving that and also the profile in terms of the reduction expected into RTS. Thanks.
Speaker #1: Sure, thanks, Julian. What we did call out in the presentation and in the numbers is that it's a legacy share plan now. So, going forward, this plan will not be used.
Speaker #1: And so there won't be new issuances into it or out of it. And so we can be relatively confident around what the numbers are going to look like going forward.
Speaker #1: And what we have said in the presentation, in the footnote, is that it will go from about $18 million after tax this year.
Speaker #1: We expect that to be around $20 million after tax next year, before falling to around $4 million per annum. The increase into next year really comes about as a result of the staggered vesting structure in the scheme.
Speaker #1: Nothing more than that.
Speaker #6: Okay, got it. And that line eventually goes down to zero, is that right? Or in five years?
Speaker #1: Correct. Within about five years, you should see that down to zero.
Speaker #6: Okay, awesome. And then just on the $250 million reallocation of fund investments to cash and fixed income, can you clarify how that $17 million headwind is calculated? Because the footnote seems to suggest it's relative to FY25.
Speaker #6: If I can bring that in correctly. So I just want to understand, one, how they calculated it, and two, what is the return differential that they're assuming versus the 10% pre-tax hurdle for that portfolio historically?
Speaker #6: And so, what are you kind of expecting going forward as an average return? Thanks.
Speaker #1: Yeah, sure. So what we've done there is, it's really the difference between FY26, which was, in round numbers, $40 million, and then what we have done and said in the footnote is assume an average cash balance of $350 million.
Speaker #1: And that we would be generating circa 4.5% on current rates. Obviously, rates are going to move up and down, but on current rates, you're going to generate about 4.5% on that, which is, round numbers, $16-17 million.
Speaker #1: Tax affect that, and you'll get your $17 million difference.
Speaker #6: Okay, got it. So it's relative to FY26 total fund investment returns. Is that right there?
Speaker #1: That's correct.
Speaker #6: Okay, awesome. And then just a final question from me, maybe just in terms of the outlook on the corporate finance side of the business.
Speaker #6: Can you maybe just talk at a high level in terms of the pipeline for activities you've seen across both M&A and ECM, and how we should be thinking about that given where we sit today, going into the first half of '27, and any visibility into the second half as well?
Speaker #6: Thanks.
Speaker #1: Yeah, thanks, Julian. Brian, I'll take that question. Look, we're seeing a good, solid pipeline—a very encouraging pipeline. In respect to that, as I said, we have all sorts of different—there's an amalgam of different types of things that we're providing. Could be IPOs, ECM, DCM, etc.
Speaker #1: So the pipeline's encouraging, but it's always subject to market conditions. You'd know that better than anyone, coming out of GS. So, yeah, encouraging as it stands, but always subject to market conditions.
Speaker #6: Okay, got it. And sorry, just one last, final question from me. The 50% to 90% dividend payout ratio—how is that calibrated in terms of your view on what needs to be retained in the business for growth?
Speaker #6: In terms of capital requirements, funding for organic growth versus what you're paying out—do we take it as, I think, the midpoint of the $60 to $90 is what you've got, and the inverse is what's funding kind of organic growth?
Speaker #6: And then also, just your kind of medium-term view—you kind of looked to stick towards the top end over the short term.
Speaker #6: Before I imagine drifting lower to the midpoint, I just want to understand what's driving that.
Speaker #1: Yeah, okay. So, look, good question. There are a few things that I think about. What are we taking into account here? We take the support of shareholders.
Speaker #1: We think about the existing capital availability, we think about available franking credits, and also—behind that—is obviously the scalable nature of the group, which you've seen in our ROEs and what's been able to be generated out of the Barrenjoey business, particularly.
Speaker #1: The dividend today is obviously in line with the MFG payout ratio that was proposed. Going for the 60% to 90%, we expect it to be at the upper end of the range, I would say, over the short to medium term.
Speaker #1: With only just candidly that's a broad. Range and that's why we're saying we're guiding to say it's at the upper end. With only just brought these two companies together, we're looking at what are the opportunity set for us as Gavin said.
Speaker #1: Historically, what we've found is that the best ROEs have been off the back of us building stuff ourselves, and we've got a build capability that's obviously well entrenched here at Barrenjoey.
Speaker #1: In saying that, no doubt there will be, from time to time, inorganic opportunities that come up, and we'll consider those in line with what all the other organic opportunities are.
Speaker #1: So, I think what we're saying on this is, let's start off—let's start it with a 60 to 90. We respect the fact that it's a broad range.
Speaker #1: But then, provide assistance to shareholders and analysts by being able to say that it's at the upper end of the range, and we will be able to reassess that as required as time moves on.
Speaker #6: Awesome, thanks for answering my questions. Much appreciated.
Speaker #1: Thank you.
Speaker #6: Once again, if you do have a question, please press star one on your telephone and wait for your name to be announced. And your next question is from Andre Stadnik with RBC.
Speaker #6: Please go ahead.
Speaker #7: Good morning. Can I ask my first question just around the growth opportunities you've seen outside of Australia and New Zealand? I think there's been some comments and some press around Asia and the Middle East.
Speaker #7: So, how are you thinking about growth outside of Australia and New Zealand?
Speaker #1: Okay, that's a great question, and I think I really want to anchor that too, because the way we think about Barrenjoey and the broader MFG is that our business—and let me particularly talk about Barrenjoey for just one moment.
Speaker #1: But the business is an Aussie dollar product business. So, equities, fixed income, advising Australian clients around corporate finance, Aussie IPOs, etc. Any actions that we've taken—and this covers off as well on the investment management side, the MFG—any actions that we've taken where we have people in Abu Dhabi, or we have people in Hong Kong, or we have people in New York, it's all about supporting distribution of those Aussie dollar products.
Speaker #1: So this is not about flag planting to start going into whole lots of different other currencies and other business lines. This is actually acting as a conduit for us to be able to access international clients and opportunities.
Speaker #1: So that's the way we think about it. As we said, we've got the team over in Abu Dhabi—that was 2024; 2025 was Hong Kong, and...
Speaker #1: We'll have some people over in New York as well, but it's very much a facilitation of the Aussie dollar business that we've got here. On the Magellan side, it's similar.
Speaker #1: You've got people in the UK, and you've got people in the US supporting the distribution of the Magellan products manufactured here into those offshore jurisdictions.
Speaker #6: Thank you. And for my second question, can I ask about the expanded investment management business? You bring in some of the products that Magellan used to have, combining that with some products Barrenjoey has, and you talk about ambition for more private capital products down the track.
Speaker #6: How are you thinking about that in terms of the build-out and just the expanded opportunities that you're going to be bringing to clients?
Speaker #1: Yeah, I'll take that one. Look, I think we're super excited. If I think about the opportunity set here, if I think about the—first of all, the private capital business that we built.
Speaker #1: It's quite nascent. We've been able to build out about $5 billion worth of assets under management. Initially starting with closed-end funds, now starting to move to open-ended funds.
Speaker #1: And we think there are more product and investment opportunities there. If I was to take the Magellan side, I really can't emphasize enough that, if you were to look at the offerings they've got there, the global fund has been the one that has been in runoff.
Speaker #1: All the other funds have actually performed very well and continue with the same level of AUM. Now, combined distribution gives us the capacity to obviously deliver more product out through to clients.
Speaker #1: And we see growth opportunities on both sides, both on the equity listed style products as well as private capital products. But the most important thing, the most underlying feature, is that we are absolutely focused on whatever product that we elect, or fund, or offerings that we do have, have got to be really good for the ultimate investor.
Speaker #1: And fair to say that if I was to look at what has been delivered in more recent times or what's been built on the Barrenjoey side, performance has been very, very good.
Speaker #1: And so we will continue to grow this out on the basis of offerings that we personally are more than happy to put money into as well.
Speaker #1: So, we are all very much aligned to ensuring that we give investors good returns. So we'll grow it out as the opportunities come around.
Speaker #1: We do see—I mentioned that we do see—something in the pipeline right at the moment on the listed side, and we also have an opportunity coming down the pipeline right at the moment on the private capital side, which I can't go into detail on today, but hopefully we'll have those out in the next few months.
Speaker #6: Thank you.
Speaker #8: There are no further phone questions at this time. I will now hand the call back to Stu Kingham for any closing remarks.
Speaker #9: Thank you, operator. There have been no further questions. I will actually hand the call over to Brian to close. Thank you.
Speaker #1: Okay, thanks Stu, and thanks, operator. Look, if I was to wrap it up, it has been a transformational year, 2026. We've completed the merger.
Speaker #1: We've restructured the heritage Magellan Global Equity Funds, and we've materially de-risked the balance sheet. Underlying momentum is strong, with the group genuinely diversified across revenue and clients.
Speaker #1: And we'll continue to execute on our growth plans with structure and discipline. We really thank you for your interest, and thanks for joining us here today.
