Half Year 2026 GQG Partners Inc Earnings Call

August 21, 2026

Speaker #2: Thank you for standing by, and welcome to the GQG Partners, Inc. 2026 half-year earnings release conference call. All participants are in listen-only mode.

Operator 2: Thank you for standing by, and welcome to the GQG Partners Inc. 2026 half year earnings release conference call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. This call will contain forward-looking statements, including statements of current intention, opinion, and predictions regarding the company's present and future operations, possible future events, and future financial prospects. While these statements reflect expectations at the date of this call, they are, by their nature, not certain and are susceptible to change.

Operator: Thank you for standing by, and welcome to the GQG Partners Inc. 2026 half year earnings release conference call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad.

Speaker #2: There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone. Forward-looking statements, including statements of current intention, opinion, and predictions regarding the company's present and future operations.

Operator: This call will contain forward-looking statements, including statements of current intention, opinion, and predictions regarding the company's present and future operations, possible future events, and future financial prospects. While these statements reflect expectations at the date of this call, they are, by their nature, not certain and are susceptible to change.

Speaker #2: Possible future events and future financial prospects. While these statements reflect expectations as of the date of this call, they are by their nature not certain and are susceptible to change.

Speaker #2: The company makes no representation, assurance, or guarantee as to the accuracy of, or the likelihood of fulfilling, any such forward-looking statements, whether express or implied, and, except as required by applicable law or the ASX Listing Rules, disclaims any obligation or undertaking to publicly update such forward-looking statements.

Operator 2: The company makes no representation, assurance, or guarantee as to the accuracy of or the likelihood of fulfilling any such forward-looking statements, whether expressed or implied, and except as required by applicable law or the ASX Listing Rules, disclaims any obligation or undertaking to publicly update such forward-looking statements. Participants recording this call may use such recordings for their internal business purposes only and are prohibited from making any part of such recordings available to the public without the prior written permission of the company. I would now like to hand the conference over to Mr. Tim Carver, CEO. Please go ahead.

Operator: The company makes no representation, assurance, or guarantee as to the accuracy of or the likelihood of fulfilling any such forward-looking statements, whether expressed or implied, and except as required by applicable law or the ASX Listing Rules, disclaims any obligation or undertaking to publicly update such forward-looking statements. Participants recording this call may use such recordings for their internal business purposes only and are prohibited from making any part of such recordings available to the public without the prior written permission of the company.

Speaker #2: Participants recording this call may use such recordings for their internal business purposes only and are prohibited from making any part of such recordings available to the public without the prior written permission of the company.

Speaker #2: I would now like to hand the conference over to Mr. Tim Carver, CEO. Please go ahead.

Operator: I would now like to hand the conference over to Mr. Tim Carver, CEO. Please go ahead.

Speaker #3: Thank you, and thank you, everyone, for joining us for our half-yearly results. We are joined here by my partner and our Chairman, Rajiv Jain.

Tim Carver: Thank you, and thank you everyone for joining us for our half yearly results. We are joined here by my partner and our Chairman, Rajiv Jain, our CFO, Charles Falck, and our Head of Distribution, Steve Ford. Let's dive right in, and if we can go to slide 3, please. Provide the financial highlights for the period. We ended the period with FUM of $156 billion, that is US dollars. We had net outflows of the period of $15.1 billion. That was offset by about $7.2 billion in returns on our portfolios. We had net revenue of $397.2 million for the period, and net operating income of $301.8 million, each roughly 1.5% lower than the same period in the prior year.

Speaker #3: Our CFO, Charles Falk, and our Head of Distribution, Steve Ford. So let's dive right in, and if we can go to slide 3, please.

Speaker #3: Provide the financial highlights for the period. We ended the period with funds of $156 billion US dollars. We had net outflows for the period of $15.1 billion.

Speaker #3: That was offset by about $7.2 billion in returns on our portfolios. We had net revenue of $397.2 million for the period and net operating income of $301.8 million, each roughly 1.5% lower than the same period in the prior year.

Tim Carver: We had net revenue of $397.2 million for the period, and net operating income of $301.8 million, each roughly 1.5% lower than the same period in the prior year. Our board has declared a Q2 dividend of AUD 0.0362 per share, a 90% payout ratio of our distributable earnings, and a slight increase over our Q1 dividend. If we go to slide four, for anyone on this call who doesn't know who we are, we're a global equity boutique.

Speaker #3: Our board has declared a second quarter dividend of 3.62 cents per share, representing a 90% payout ratio of our distributable earnings and a slight increase over our Q1 dividend.

Tim Carver: Our board has declared a Q2 dividend of AUD 0.0362 per share, a 90% payout ratio of our distributable earnings, and a slight increase over our Q1 dividend. If we go to slide four, for anyone on this call who doesn't know who we are, we're a global equity boutique. We've been around for about 10 years, and we've raised about $150 billion in that period. We tend to run concentrated, highly active portfolios. Our business is defined by a well-diversified distribution capability, well-diversified client assets by geography, client type, vehicle type, and strategy. If you look at the pie chart on the right-hand side here, you can see that we have a highly diversified book of business across four core strategies, where our international equity strategy represents just under 50% of the business, or of our assets, I should say.

Speaker #3: If we go to slide 4, for anyone on this call who doesn't know who we are, we're a global equity boutique. We've been around for about 10 years, and we've raised about $150 billion in that period.

Tim Carver: We've been around for about 10 years, and we've raised about $150 billion in that period. We tend to run concentrated, highly active portfolios. Our business is defined by a well-diversified distribution capability, well-diversified client assets by geography, client type, vehicle type, and strategy. If you look at the pie chart on the right-hand side here, you can see that we have a highly diversified book of business across four core strategies, where our international equity strategy represents just under 50% of the business, or of our assets, I should say.

Speaker #3: We tend to run concentrated, highly active portfolios, and our business is defined by a well-diversified distribution capability and well-diversified client assets by geography, client type, vehicle type, and strategy.

Speaker #3: And if you look at the pie chart on the right-hand side here, you can see that we have a highly diversified book of business across four core strategies.

Speaker #3: Where our international equity strategy represents just under 50% of the business—or of our assets, I should say—our emerging markets and global equity strategies each represent just under 25%, and our US equity strategy represents just under 10%.

Tim Carver: Our emerging markets and global equity strategies, each just under 25%, and our US equity strategy just under 10%. Our investment approach is to target high single digit to low double digit rates of return over a full market cycle with significant downside protection and lower volatility. We have historically been successful in delivering against this, and this is what our clients expect of us. Now, for those of you who have been on calls with me before, you know that I say that this business begins and ends with performance. If we go to slide five, I think it's no surprise to anyone that in the short term, our one-year performance has lagged the index. That's in a market where we've seen sort of historically extreme market returns that is not atypical for the way we manage money.

Speaker #3: Our investment approach is to target high single-digit to low double-digit rates of return over a full market cycle, with significant downside protection and lower volatility.

Speaker #3: We have historically been successful in delivering against this, and this is what our clients expect of us. Now, for those of you who have been on calls with me before, you know that I say this business begins and ends with performance.

Speaker #3: And if we go to slide 5, I think it's no surprise to anyone that, in the short term, our one-year performance has lagged the index.

Tim Carver: If we go to slide five, I think it's no surprise to anyone that in the short term, our one-year performance has lagged the index. That's in a market where we've seen sort of historically extreme market returns that is not atypical for the way we manage money. In other words, when markets run like this, we oftentimes will underperform on a relative basis.

Speaker #3: And that's in a market where we've seen sort of historically extreme market returns. That is not typical for the way we manage money.

Speaker #3: In other words, when markets run like this, we oftentimes will underperform on a relative basis. But I think that also defines the primary driver of why we've had net outflows for the period—because we have had, clearly, some investors who have chased performance coming in, and now are reversing that as our relative performance has lagged over the one-year basis.

Tim Carver: In other words, when markets run like this, we oftentimes will underperform on a relative basis. I think that that also defines the primary driver of why we've had net outflows for the period, because we have had clearly some investors who have chased performance coming in, and now are reversing that as our relative performance has lagged over the one-year basis. But I think it's very important to understand this contextually. If we go to slide six, what you see is that our three-year returns across all strategies have compounded at double digit rates of return. So right in line with what clients would expect of us, and frankly, maybe slightly better than we would expect of ourselves. We've done this with substantially lower volatility.

Tim Carver: I think that that also defines the primary driver of why we've had net outflows for the period, because we have had clearly some investors who have chased performance coming in, and now are reversing that as our relative performance has lagged over the one-year basis. But I think it's very important to understand this contextually. If we go to slide six, what you see is that our three-year returns across all strategies have compounded at double digit rates of return.

Speaker #3: But I think it's very important to understand this contextually. So, if we go to slide 6, what you see is that our three-year returns across all strategies have compounded at double-digit rates of return.

Speaker #3: So, right in line with what clients would expect of us—and, frankly, maybe slightly better than we would expect of ourselves. And we've done this with substantially lower volatility.

Tim Carver: So right in line with what clients would expect of us, and frankly, maybe slightly better than we would expect of ourselves. We've done this with substantially lower volatility. If you go to the next slide, you'll see that our downside capture ratio is significantly better than our peer group, and we have lower volatility than the market. What this means is that for our core client base over the past three years, they are experiencing exactly what we have set out to do, what our goals are, and what they would expect of us.

Speaker #3: If you go to the next slide, you'll see that our downside capture ratio is significantly better than our peer group, and we have lower volatility than the market.

Tim Carver: If you go to the next slide, you'll see that our downside capture ratio is significantly better than our peer group, and we have lower volatility than the market. What this means is that for our core client base over the past three years, they are experiencing exactly what we have set out to do, what our goals are, and what they would expect of us. Now, that doesn't mean that we won't continue to have outflows by more short-term oriented investors, but it does mean, I believe, that our core client base, our core consultants that support us, our core institutional clients, our core platforms, all recognize what we set out to do over the long run and are satisfied that we are accomplishing that goal.

Speaker #3: And so, what this means is that for our core client base, over the past three years, they are experiencing exactly what we have set out to do, what our goals are, and what they would expect of us.

Speaker #3: Now, that doesn’t mean that we won’t continue to have outflows by more short-term-oriented investors, but it does mean, I believe, that our core client base—our core consultants that support us, core institutional clients, and our core platforms—all recognize what we set out to do over the long run and are satisfied that we are accomplishing that goal.

Tim Carver: Now, that doesn't mean that we won't continue to have outflows by more short-term oriented investors, but it does mean, I believe, that our core client base, our core consultants that support us, our core institutional clients, our core platforms, all recognize what we set out to do over the long run and are satisfied that we are accomplishing that goal.

Speaker #3: Now, if we go to the next slide, you can see what this means to the business over the past three years. What we've tried to do here is show a bridge from where our assets were three years ago, adding or subtracting net flows, and then adding the total returns from our various portfolios.

Tim Carver: Now, if we go to the next slide, you can see what this means to the business over the past three years. What we have tried to do here is show a bridge from where our assets were three years ago, adding or subtracting net flows, and then adding the total returns from our various portfolios. As you can see, that has led to a very robust, very resilient, very stable business. We will get into a little bit more details on this throughout the presentation. But before we go into any more depth on this, I want to hand over to Charles and ask him to go into detail on the financial results.

Speaker #3: And as you can see, that's led to a very robust, very resilient, very stable business. We'll get into a little bit more detail on this throughout the presentation, but before we go into any more depth, I want to hand over to Charles and ask him to go into detail on the financial results.

Speaker #4: Thanks, Tim. I'll start on page 10 with the highlights. As Tim mentioned, we closed the half-year at $156 billion average, which actually increased a little bit for the first half over last year and was at $164.5 billion.

Charles Falck: Thanks, Tim. I will start on page 10 with the highlights. As Tim mentioned, we closed the H1 at USD 156 billion. Average FUM actually increased a little bit for the H1 over last year and was at USD 164.5 billion. I will touch on how that drives management fees and overall revenues on the next page as we get into a little bit more of the details. USD 397.2 million in net revenue resulted in net operating income of USD 301.8 million. You see the strong operating margin in the chart on the bottom left, the line indicating 76% profit margin for the H1. This resulted in USD 228.4 million net income to shareholders. We adjust net income for non-cash items when determining the dividend. You will see at the top right, distributable earnings was USD 234.9 million, resulting in a dividend declared for the H1 of USD 211.8 million.

Speaker #4: I'll touch on how that drives management fees and overall revenues on the next page, as we get into a little bit more of the details.

Speaker #4: $397.2 million in net revenue resulted in net operating income of $301.8 million, and you can see this strong operating margin in the chart on the bottom left.

Charles Falck: You see the strong operating margin in the chart on the bottom left, the line indicating 76% profit margin for the H1. This resulted in USD 228.4 million net income to shareholders. We adjust net income for non-cash items when determining the dividend. You will see at the top right, distributable earnings was USD 234.9 million, resulting in a dividend declared for the H1 of USD 211.8 million. On a per share basis, that equates to AUD 0.0716 per share or AUD 0.08 of earnings per share.

Speaker #4: The line indicates a 76% profit margin for the first half. This resulted in $228.0 million of net income to shareholders. We adjust net income for non-cash items when determining the dividend, and you'll see at the top right, distributable earnings was $234.9 million, resulting in a dividend declared for the first half of $211.8 million.

Speaker #4: On a per-share basis, that equates to 7.16 cents per share, or 8 cents of earnings per share. With that, I'll move on to the next page, to come down a little bit more into detail on what's driving the income statement.

Charles Falck: On a per share basis, that equates to AUD 0.0716 per share or AUD 0.08 of earnings per share. With that, I will move on to the next page to comment on a little bit more detail on what is driving the income statement. As mentioned, the increase in average fund resulted in higher management fees. Additionally, we were also able to increase fee realization to, excuse me, 48.6 basis points for the H1. Those improvements were, as Tim mentioned, offset by a reduction in performance-based fees, which was lower this year, resulting in USD 397.2 million in net revenues for the H1, a reduction of about USD 5.8 million in revenues or 1.4%. Drilling down on the expenses, there are offsetting trends there. Compensation and benefits, as well as IT and services increased.

Charles Falck: With that, I will move on to the next page to comment on a little bit more detail on what is driving the income statement. As mentioned, the increase in average fund resulted in higher management fees. Additionally, we were also able to increase fee realization to, excuse me, 48.6 basis points for the H1. Those improvements were, as Tim mentioned, offset by a reduction in performance-based fees, which was lower this year, resulting in USD 397.2 million in net revenues for the H1, a reduction of about USD 5.8 million in revenues or 1.4%.

Speaker #4: So, as mentioned, the increase in average fund resulted in higher management fees. Additionally, we were also able to increase fee realization to, excuse me, 48.6 basis points for the first half.

Speaker #4: Those improvements were, as Tim mentioned, offset by a reduction in performance-based fees, which were lower this year, resulting in $397.2 million in net revenues for the first half—a reduction of about $5.8 million in revenues, or 1.4%.

Speaker #4: Drilling down on the expenses, there are offsetting trends there. Compensation and benefits, as well as IT and services, increased. The former is a result of merit increases awarded to the staff, and the latter is due to price increases from some of our data providers, as well as the applications and services that we consume.

Charles Falck: Drilling down on the expenses, there are offsetting trends there. Compensation and benefits, as well as IT and services increased. The former is a result of merit increases awarded to the staff, and the latter of price increases from some of our data providers, as well as the applications and services that we consume.

Charles Falck: The former is a result of merit increases awarded to the staff, and the latter of price increases from some of our data providers, as well as the applications and services that we consume. Those increases in expenses were more than offset by a reduction in third-party distribution fees, as well as a reduction in general and administrative, resulting in total operating expenses of USD 95.4 million, USD 400,000 lower or 0.5% lower than they were for the same period last year. If we go down to the provision for income taxes, you see that that also improved, both on an absolute as well as a relative basis, and that is due to the apportionment methodologies in some of the state and local taxes that we are subject to in the United States. So positive development there that resulted in USD 228.4 million of net income to shareholders for the H1.

Speaker #4: Those increases in expenses were more than offset by a reduction in third-party distribution fees, as well as a reduction in general and administrative expenses, resulting in total operating expenses of $95.4 million, or $400,000.

Charles Falck: Those increases in expenses were more than offset by a reduction in third-party distribution fees, as well as a reduction in general and administrative, resulting in total operating expenses of USD 95.4 million, USD 400,000 lower or 0.5% lower than they were for the same period last year. If we go down to the provision for income taxes, you see that that also improved, both on an absolute as well as a relative basis, and that is due to the apportionment methodologies in some of the state and local taxes that we are subject to in the United States.

Speaker #4: Lower, or half a percent lower, than they were for the same period last year. If we go down to the provision for income taxes, you see that also improved, both on an absolute as well as a relative basis.

Speaker #4: And that is due to the apportionment methodologies in some of the state and local taxes that we are subject to in the United States. So, positive developments there that resulted in $228.4 million of net income to shareholders for the first half.

Charles Falck: So positive development there that resulted in USD 228.4 million of net income to shareholders for the H1. With that, I will move on to the next page. Balance sheet. We continue to have a strong balance sheet, high liquidity with AUD 168.9 million cash as of mid-year and no debt outstanding. Moving on to the cash flow statement on page 13. We continue to have strong cash flow as a result of operations and the predominant use for that cash is dividends paid out as well as working capital.

Speaker #4: With that, I'll move on to the next page. Balance sheet—we continue to have a strong balance sheet, high liquidity, with $168.9 million cash as of mid-year, and no debt outstanding.

Charles Falck: With that, I will move on to the next page. Balance sheet. We continue to have a strong balance sheet, high liquidity with AUD 168.9 million cash as of mid-year and no debt outstanding. Moving on to the cash flow statement on page 13. We continue to have strong cash flow as a result of operations and the predominant use for that cash is dividends paid out as well as working capital. You will note on the bottom right, the board, and Tim mentioned this as well, the board declared a Q2 dividend of AUD 3.62 cents per share or AUD 107.1 million in aggregate. That continues to represent a 90% payout ratio. The dates on that will be ex and record date at the end of August on 26 and 27 August, and then a payment date of 25 September.

Speaker #4: Moving on to the cash flow statement on page 13, we continue to have strong cash flow as a result of operations, and the predominant use for that cash is dividends paid out, as well as working capital.

Speaker #4: You'll note on the bottom right—the board, and Tim mentioned this as well—the board declared a second-quarter dividend of 3.62 cents per share, or $107.1 million in aggregate. That continues to represent the 90% payout ratio.

Charles Falck: You will note on the bottom right, the board, and Tim mentioned this as well, the board declared a Q2 dividend of AUD 3.62 cents per share or AUD 107.1 million in aggregate. That continues to represent a 90% payout ratio. The dates on that will be ex and record date at the end of August on 26 and 27 August, and then a payment date of 25 September.

Speaker #4: And the dates on that will be record date at the end of August, on August 26th and 27th, and then a payment date of September 25th.

Speaker #4: Before I hand it over to Steve, I wanted to just take a minute to zoom out, and if you look at page 14, you see our history this chart illustrates in the blue charts excuse me, in the blue bars, what our funds under management was, starting at the end of 2020, prior to us going public, and ending with the June 30th number that we just reported of $156 billion.

Charles Falck: Before I hand it over to Steve, I wanted to just take a minute to zoom out, and if you look at page 14, you see our history. This chart illustrates in the blue charts, excuse me, in the blue bars, what our FUM was starting at the end of 2020, prior to us going public and ending with the 30 June number that we just reported of AUD 156 billion. I think this further to the point that Tim made on our growth and our compound growth. I think this illustrates how much we have grown over this period of six years and how the flows and market performance have contributed to that growth, and how they also compare in relative size to our overall asset size. At AUD 156 billion, we are within 10% of our maximum fund over the course of our history.

Speaker #4: I think this, further to the point that Tim made on our growth and our compound growth, illustrates how much we've grown over this period of six years, and how the flows and market performance have contributed to that growth, and how they also compare in relative size to our overall asset size.

Charles Falck: I think this illustrates how much we have grown over this period of six years and how the flows and market performance have contributed to that growth, and how they also compare in relative size to our overall asset size. At AUD 156 billion, we are within 10% of our maximum fund over the course of our history. With that, I will hand it over to Steve Ford for comments on our distribution.

Speaker #4: At $156 billion, we are within 10% of our maximum fund over the course of our history. With that, I'll hand it over to Steve Ford for comments on our distribution.

Charles Falck: With that, I will hand it over to Steve Ford for comments on our distribution.

Speaker #2: Thanks, Charles. I appreciate it, and it's good to reconnect with everyone again. I want to spend just a few minutes thinking about our client base and what I believe is part of the underlying resiliency that exists, while fully acknowledging that we've had a challenging short-term period in terms of net flows.

Steve Ford: Thanks, Charles. Appreciate it and good to reconnect with everyone again. I want to spend just a few minutes thinking about our client base and what I believe is part of the underlying resiliency that exists, while fully acknowledging that we have had a challenging short-term rate in terms of net flows. Our team has been very busy being very proactive in engaging our clients all around the world across all channels. You will see that if you follow our written strategies and communications at all. I would have you think about the core clients here, which I think is probably more durable than the market appreciates through the lens of that, a long-term core client. You have to think about a client that has been with us, say, four or five years. If you move to slide 16, I think it is a very interesting way to look at it.

Speaker #2: But our team has been very busy, being very proactive and engaging our clients all around the world across all channels. You'll see that if you follow our written strategies and communications at all.

Speaker #2: But I'd have you think about the core clients here, which I think are probably more durable than the market appreciates, through the lens of that—a long-term core client.

Steve Ford: I would have you think about the core clients here, which I think is probably more durable than the market appreciates through the lens of that, a long-term core client. You have to think about a client that has been with us, say, four or five years. If you move to slide 16, I think it is a very interesting way to look at it. We talk about this usually as basic pure performance, but this is actually client experience because this is rolling through your periods in all of our strategies. Look at the percentage of those experiences that are above the line or below the line.

Speaker #2: And so, you have to think about a client that's been with us, say, four or five years. And if you move to slide 16, I think it's a very interesting way to look at it.

Speaker #2: We talk about this usually as basic peer performance, but this is actually client experience, because this is rolling through periods in all of our strategies.

Steve Ford: We talk about this usually as basic pure performance, but this is actually client experience because this is rolling through your periods in all of our strategies. Look at the percentage of those experiences that are above the line or below the line. There's always going to be variation in performance. As you start to zoom out and think about what's the long-term experience of the core client here, it's actually still quite positive overall. Also, if you move to slide 17, you'll see that we continue to live up to our focus on downside protection, which is a huge element of how we think about compounding capital over time. Tim alluded to it in the downside, or more than alluded to it, showed it in his downside protection numbers, and it's part of that overall 3-year compounded return stream that you see.

Speaker #2: And so, look at the percentage of those experiences that are above the line or below the line. There's always going to be variation in performance, but as you start to zoom out and think about what’s the long-term experience of the core client here, it’s actually still quite positive overall.

Steve Ford: There's always going to be variation in performance. As you start to zoom out and think about what's the long-term experience of the core client here, it's actually still quite positive overall. Also, if you move to slide 17, you'll see that we continue to live up to our focus on downside protection, which is a huge element of how we think about compounding capital over time. Tim alluded to it in the downside, or more than alluded to it, showed it in his downside protection numbers, and it's part of that overall 3-year compounded return stream that you see.

Speaker #2: Also, if you move to slide 17, you'll see that we continue to live up to our focus on downside protection, which is a key element of how we think about compounding capital over time.

Speaker #2: Tim alluded to it in the downside, or more than alluded to it—he showed it in his downside protection numbers, and as part of that overall three-year compounded return stream that you see.

Speaker #2: And then if you move to slide 18, the long-term risk-adjusted return picture remains quite positive. And so you combine that with—also, I think an underappreciated element is that, call it, two-thirds of our assets come through the wholesale channel.

Steve Ford: If you move to slide 18, the long-term risk-adjusted return picture remains quite positive. You combine that with, also, I think an underappreciated element, is that call it two-thirds of our assets come through the wholesale channel. That's through our own efforts and through sub-advised partnership efforts. Within that, there's a large percentage that's actually taxable. When you zoom out and you think about the long-term experience still being generally quite positive, combined with very strong absolute returns, many of those investors also have created a taxable situation. That doesn't mean that we're immune to performance variation. I think it does create an additional stickiness in that part of the client base that's probably underappreciated. If we move to the next slide 19.

Speaker #2: And that's through our own efforts and through sub-advised partnership efforts. And within that, there's a large percentage that's actually taxable. So, when you zoom out and think about the long-term experience still being generally quite positive, combined with very strong absolute returns, many of those investors also have created a taxable situation.

Steve Ford: When you zoom out and you think about the long-term experience still being generally quite positive, combined with very strong absolute returns, many of those investors also have created a taxable situation. That doesn't mean that we're immune to performance variation. I think it does create an additional stickiness in that part of the client base that's probably underappreciated. If we move to the next slide 19.

Speaker #2: And so, that doesn't mean that we're immune to performance variation, but I think it does create an additional stickiness in that part of the client base that's probably underappreciated.

Speaker #2: So if we move to the next slide, slide 19—we've covered this before many times if you've been on with us—but all of what I just said is, in fact, bolstered by the fact that we have a very diverse business for a manager of our type: by strategy, by geography, by client type.

Steve Ford: We've covered this before many times if you've been on with us, but all of what I just said is, in fact, bolstered by the fact that we have a very diverse business, for a manager of our type by strategy, by geography, by client type. There's no meaningful institutional investor concentration to speak of, and there's literally thousands and thousands of clients that make up this overall diversity. Slide 20. If you follow along with our monthly numbers, there's no surprises here. The new data is just how it breaks down by channel. What you see is actually a relatively consistent behavior this year across channel, which I think speaks overall to the type of investors that we approach regardless of channel.

Speaker #2: There's no meaningful institutional investor concentration to speak of, and there's literally thousands and thousands of clients that make up this overall diversity. Slide 20, if you follow along with our monthly numbers, there's no surprises here.

Speaker #2: The new data is just how it breaks down by channel. And what you see is actually a relatively consistent behavior this year across channels, which I think speaks overall to the type of investors that we approach, regardless of channel.

Steve Ford: The new data is just how it breaks down by channel. What you see is actually a relatively consistent behavior this year across channel, which I think speaks overall to the type of investors that we approach regardless of channel.

Speaker #2: And then finally, slide 21. I want to spend just a little bit of time actually looking forward, where I think there are perhaps some green shoots, especially as we expect our performance, hopefully, to mean revert.

Steve Ford: Finally, slide 21, I want to spend just a little bit of time actually forward-looking where I think there are perhaps some green shoots, especially as we expect our performance hopefully to mean revert. This is a view of our growth that we've experienced in retail managed accounts, and also active ETFs. In particular, I want to spend a little bit of time on the active ETF. We launched our first fund in this category in the US roughly a year ago. Despite having the most challenging 1-year performance of our firm's history, we've seen this vehicle grow considerably. What we've done here is, I think, proved our operational capability, which requires an additional level of technical expertise to implement these vehicles in a tax-efficient way. In the US market in particular, there is a strong tailwind to add these vehicles.

Speaker #2: And this is a view of the growth that we've experienced in retail managed accounts and also active ETFs. In particular, I want to spend a little bit of time on the active ETF.

Speaker #2: We launched our first fund in this category in the U.S. roughly a year ago, and despite having the most challenging one-year performance in our firm's history, we've seen this vehicle grow considerably.

Steve Ford: Despite having the most challenging 1-year performance of our firm's history, we've seen this vehicle grow considerably. What we've done here is, I think, proved our operational capability, which requires an additional level of technical expertise to implement these vehicles in a tax-efficient way. In the US market in particular, there is a strong tailwind to add these vehicles.

Speaker #2: And so, what we've done here is, I think, proved our operational capability, which requires an additional level of technical expertise to implement these vehicles in a tax-efficient way. But in the US market in particular, there is a strong tailwind to add these vehicles.

Speaker #2: I think now that we've built a solid operational tool, there is significant opportunity for product development that exists in active ETFs. And we're hopeful to see that as a future growth engine.

Steve Ford: I think now that we've built a solid operational, I think there's significant opportunity for product development that exists in active ETFs, and we're hopeful to see that as a future growth engine. With that, I'm going to turn it over to Rajiv Jain, our Chairman and Chief Investment Officer, let him give you an update on current market outlook and portfolio position.

Speaker #2: With that, I'm going to turn it over to Rajiv Jain, our Chairman and Chief Investment Officer, to give you an update on the current market outlook and our portfolio position.

Speaker #3: Thanks, Steve, and thanks everybody for joining. As you know, we have had challenging performance over the last 18-odd months. I think some of the things we do need to keep in context are that the two types of market conditions that we generally don't tend to do well in are, one, when markets are very cyclically oriented or very frothy, and, two, when they are coming out from a bear market.

Rajiv Jain: Thanks, Steve, and thanks everybody for joining. As you know, we've had challenging performance over the last 18 odd months. I think some of the things we do need to keep in context is that the two types of market conditions that we generally don't tend to do well, one is in markets are very cyclically oriented or very frothy and are coming out from a bear market. This is not atypical. However, I think there have been some things that we have grossly, we've clearly underestimated. One is obviously demand for compute, and the broadening out of industrial growth in almost all the larger countries in the world, maybe to the exception of China. As the earnings estimates continue to come through very robustly, in fact, if you look at last summer, NVIDIA was 35x earnings, now it's 16, 17x earnings.

Speaker #3: So this is not atypical. However, I think there have been some things that we have grossly—clearly underestimated. One is, obviously, the demand for compute.

Rajiv Jain: One is obviously demand for compute, and the broadening out of industrial growth in almost all the larger countries in the world, maybe to the exception of China. As the earnings estimates continue to come through very robustly, in fact, if you look at last summer, NVIDIA was 35x earnings, now it's 16, 17x earnings. I mean, I can go through a list of names which actually are selling at lower multiples today than they were last summer, when we had cut our exposure to these areas in a meaningful manner.

Speaker #3: And the broadening out of industrial growth in almost all the larger countries in the world—maybe with the exception of China. And as the earnings system is continuing to come through very, very robustly—in fact, if you look at last summer, Nvidia was 35 times earnings, now it's 16, 17 times earnings.

Speaker #3: So, I mean, I can go through a list of names which actually are selling at lower multiples today than they were last summer, when we had sort of cut our exposure to these areas in a meaningful manner.

Rajiv Jain: I mean, I can go through a list of names which actually are selling at lower multiples today than they were last summer, when we had cut our exposure to these areas in a meaningful manner. As you know, we do not have any philosophical issue owning these. We have owned some of these in a big way before. We, including deep cyclicals, whether it's coming from energy, as you know, in 2021, 2022. We exited tech in 2021, bought back in 2023. So, we have owned all of these historically. As we reassess our exposure and looking at the demand, some of the data points that began to shift in February, March or thereabout in terms of GPU rentals, in terms of the pricing for compute in general, and some of the other demand indicators that we're looking at.

Speaker #3: As you know, we do not have any philosophical issues owning these. We have owned some of these in a big way before, including deep cyclicals, whether that's coming from energy. As you know, in '21 and '22, we exited tech in '21 and bought back in in '23.

Rajiv Jain: As you know, we do not have any philosophical issue owning these. We have owned some of these in a big way before. We, including deep cyclicals, whether it's coming from energy, as you know, in 2021, 2022. We exited tech in 2021, bought back in 2023. So, we have owned all of these historically. As we reassess our exposure and looking at the demand, some of the data points that began to shift in February, March or thereabout in terms of GPU rentals, in terms of the pricing for compute in general, and some of the other demand indicators that we're looking at.

Speaker #3: So, we do—we have owned all of these historically. Now, as we reassess our exposure and look at the demand, some of the data points began to shift in February, March, or thereabouts, in terms of GPU rentals, in terms of the pricing for compute in general, and some of the other demand indicators that we are looking at.

Speaker #3: So it turned in February, March, and as a consequence of that, we began to sort of change some of the names that we owned and where we are seeing fairly strong outlook on a go-forward basis.

Rajiv Jain: It turned in February, March, and as a consequence of that, we began to change some of the names that we owned, and where we are seeing fairly strong outlook on a go-forward basis. As we speak today, we are actually overweight technology, we are overweight semiconductors. The only portfolio that we are not overweight tech and semiconductors is actually emerging markets, where it is essentially South Korea and Taiwan, which is almost 40% of the index combined in tech. So we are slightly underweight, but all of the other ones we are actually overweight. We cut back quite aggressively utilities, healthcare, staples. Some of them did not do as well as we had thought. The earnings picture had been okay in utilities, et cetera, but clearly could not keep up with the significant increase in earnings estimates you've seen.

Speaker #3: So as we speak today, we are actually already technology, we are already semiconductors. The only portfolio where we are not already tech and semiconductors is actually emerging markets, whereas essentially South Korea and Taiwan, which is almost 40% of the index combined, are in tech.

Speaker #3: So, we are slightly underweight, but for all of the other ones, we have actually already cut back quite aggressively—utilities, health care, staples. Some of them did not do as well as we had thought.

Rajiv Jain: So we are slightly underweight, but all of the other ones we are actually overweight. We cut back quite aggressively utilities, healthcare, staples. Some of them did not do as well as we had thought. The earnings picture had been okay in utilities, et cetera, but clearly could not keep up with the significant increase in earnings estimates you've seen. In fact, it is quite unprecedented the estimates revisions you have seen in some of these areas.

Speaker #3: All the earnings picture has been OK in utilities, et cetera, but clearly could not keep up with the significant increase in estimates you've seen.

Speaker #3: In fact, it's quite unprecedented, the estimate revisions you've seen in some of these areas. And our view is that the valuations today—if you believe these companies have slightly longer duration—I think they could be reasonably attractive.

Rajiv Jain: In fact, it is quite unprecedented the estimates revisions you have seen in some of these areas. Our view is that the valuations today, if you believe these companies have slightly longer duration, I think they could be reasonably attractive. I think the portfolio looks meaningfully different today, and I think that is not atypical of what we have done. This is not the first time I have underperformed this much. In fact, unfortunately or fortunately, I have been here before. I have underperformed far more than this and we recovered. That is part of active management. Our core proposition is being adaptable. We talk about it all the time, but it does mean that from time to time, we will miss some of the trends. But the question is, does the fundamentals have the warrant to come back in those areas or new areas?

Rajiv Jain: Our view is that the valuations today, if you believe these companies have slightly longer duration, I think they could be reasonably attractive. I think the portfolio looks meaningfully different today, and I think that is not atypical of what we have done. This is not the first time I have underperformed this much. In fact, unfortunately or fortunately, I have been here before. I have underperformed far more than this and we recovered. That is part of active management. Our core proposition is being adaptable.

Speaker #3: So I think the portfolio looks meaningfully different today. And I think that's not atypical of what we have done. This is not the first time we've underperformed this much.

Speaker #3: In fact, unfortunately or fortunately, I've been here before. I've underperformed far more than this, and we recovered. That is part of active management. Our core proposition is being adaptable.

Speaker #3: We talk about it all the time, but it does mean that, from time to time, we would miss some of the trends. But the question is: do the fundamentals want to come back in those areas or new areas?

Rajiv Jain: We talk about it all the time, but it does mean that from time to time, we will miss some of the trends. But the question is, does the fundamentals have the warrant to come back in those areas or new areas? I think we feel quite excited in terms of how the portfolio is positioned, and what the demand drivers are. We remain optimistic about our longer-term performance outlook. Tim?

Speaker #3: So, I think we feel quite excited in terms of how the portfolio is positioned and what the demand drivers are. We remain optimistic about our longer-term performance outlook.

Rajiv Jain: I think we feel quite excited in terms of how the portfolio is positioned, and what the demand drivers are. We remain optimistic about our longer-term performance outlook. Tim?

Speaker #3: Tim?

Speaker #1: Thanks, Rajiv. And thanks, everyone. I think we can open it up now for Q&A if anybody has questions.

Tim Carver: Thanks, Rajiv, and thanks, everyone. I think, we can open it up now for Q&A if anybody has questions.

Speaker #4: 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.

Operator 2: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Please limit your questions to two questions at a time. If you wish to ask a further question, please rejoin the queue. Your first question comes from Julian Braganza with Goldman Sachs. Please go ahead.

Operator: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Please limit your questions to two questions at a time. If you wish to ask a further question, please rejoin the queue. Your first question comes from Julian Braganza with Goldman Sachs. Please go ahead.

Speaker #4: If you're on a speakerphone, please pick up the handset to ask your question. Please limit your questions to two at a time. If you wish to ask a further question, please rejoin the queue.

Speaker #4: Your first question comes from Julian Braganza with Goldman Sachs. Please go ahead.

Speaker #2: Good morning, guys. Just a first question: I was wondering if you could provide some color around the gross inflows and gross outflows, just to be interested.

Julian Braganza: Good morning, guys. Just the first question. I was wondering if you could provide some color just around the gross flows and gross outflows. Just be interested, I know you don't provide the numbers, but just be interested to see how that's been tracking more recently.

Speaker #2: I know you don't provide the numbers, but I'd just be interested to see how that's been tracking more recently.

Speaker #1: Hi, Julian. Yeah, thanks for the question. I mean, as you know, we don't break that down. It's sort of hard for me to answer that in any generality without sort of providing selective disclosure here.

Tim Carver: Hi, Julian. Yeah, thanks for the question. As you know, we don't break that down. So hard for me to answer that in any generality without providing selective disclosure here. But what I'd say is that, we continue to have positive inflows on a gross basis and obviously outflows on a gross basis. So, it's not completely one-sided.

Speaker #1: But what I'd say is that we continue to have positive inflows on a gross basis, and obviously outflows on a gross basis, so it's not completely one-sided.

Speaker #2: OK. Then maybe just then in terms of the tax rate, the 25.3%, is that sustainable from your going forward?

Julian Braganza: Okay. Then maybe just in terms of the tax rate, the 25.3%, is that sustainable from here going forward?

Speaker #1: Yeah. So I think that, as we've talked about before, the unique nature of U.S. tax for a firm like ours is that we have many different states that we pay taxes in.

Tim Carver: Yeah. So I think that, as we've talked about before, the unique nature of US tax, for a firm like ours, is that we have many different states that we pay taxes in. So we pay federal tax plus state taxes, and the state tax rates change all of the time. It's obviously unpredictable to know exactly where tax rates will change state by state. So the best way to think about taxes has been just to take the current print and extrapolate that forward. I think that's the most accurate way to project taxes out in the future. We know, of course, that they will change, but there's no reason to believe that they should directionally change one way or the other. So I think that the best thing to do is just extrapolate from the most recent tax rate and carry that forward.

Speaker #1: So we pay federal tax plus state taxes. And the state tax rates change all the time. It's obviously unpredictable to know exactly where tax rates will change.

Speaker #1: State by state. So, the best way to think about taxes has been just to take the current print and extrapolate that forward. I think that's the most accurate way to project taxes out in the future.

Speaker #1: We know, of course, that they will change, but there's no reason to believe that they should directionally change one way or the other. We don't, so I think that the best thing to do is just extrapolate from the most recent tax rate and carry that forward.

Tim Carver: We know, of course, that they will change, but there's no reason to believe that they should directionally change one way or the other. So I think that the best thing to do is just extrapolate from the most recent tax rate and carry that forward.

Speaker #2: OK, thanks so much for that.

Julian Braganza: Okay. Thanks so much for that.

Speaker #4: 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.

Operator 2: Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Elizabeth Miliatis with Macquarie. Please go ahead.

Operator: Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Elizabeth Miliatis with Macquarie. Please go ahead.

Speaker #4: Your next question comes from Elizabeth Melantis with Macquarie. Please go ahead.

Speaker #5: Good morning, and thanks for taking my question. I'm sorry if I missed it—I was just on another call. But just around portfolio positioning overall, we've been noticing a bit more of a lean into tech.

Elizabeth Miliatis: Good morning, and thanks for taking my question. I am sorry if I missed it. I was just on another call. Just around portfolio positioning, overall, we have been noticing a bit more of a lean into tech, across the four funds. Just your view on what has shifted there.

Speaker #5: Across the four funds, just your view on what's shifted there?

Speaker #1: Yeah. So, we have found better opportunities simply because some of the drivers on the compute side seem to be far more sustainable here versus even six months ago.

Rajiv Jain: Yeah. We have found better opportunities simply because some of the drivers on the compute side seem to be far more sustainable here versus even six months ago. For example, if you look at GPU rentals late last year were actually declining. Now they turned up a few months ago. If you look at the reseller price of GPUs, same thing. They were actually selling a meaningful discount, late last year. That has begun to turn. The last part is the valuation of some of these hyperscalers had come off significantly. For example, NVIDIA, as I mentioned, was 35x last summer, is 16, 17x. Amazon was again high 20s or 30x earnings back to 20 odd times earnings. So multiples have come off some of these names. The second part is in this sell-off in Korea and Taiwan.

Speaker #1: I mean, for example, if you look at GPU rentals late last year, they were actually declining. Now they've turned up a few months ago. If you look at the reseller price of GPUs, it's the same thing.

Speaker #1: They were actually selling at a meaningful discount late last year. That has begun to turn. And second, the last part is the valuation of some of these hyperscalers had come off significantly.

Rajiv Jain: The last part is the valuation of some of these hyperscalers had come off significantly. For example, NVIDIA, as I mentioned, was 35x last summer, is 16, 17x. Amazon was again high 20s or 30x earnings back to 20 odd times earnings. So multiples have come off some of these names. The second part is in this sell-off in Korea and Taiwan.

Speaker #1: I mean, for example, Nvidia, as I mentioned, was 35 times last summer, is 16, 17 times. Amazon was again high 20s or 30 times earnings, back to 20 odd times earnings.

Speaker #1: So, multiples have come off some of these names. The second part is, in this selloff in Korea and Taiwan, we thought that this is an excellent opportunity to actually go back into some of these names, simply because we do believe that the markets might remain tighter for longer.

Rajiv Jain: We thought that this is an excellent opportunity to actually go back in some of these names simply because we do believe that the markets might remain tighter for longer and the free cash generation is fairly strong. That is the other area we added. Net net, if you look at it today, the portfolio positioning seems to be fairly different from where it was in March. We are actually overweight tech and semiconductors across all the books, marginally underweight emerging markets still. If you look at, for example, in international, it is a few hundred bps based on overweight. I think the other big part is that the industrial CapEx numbers seem to be broadening out, whether you look at Europe, Asia for most part, but definitely North America. That is the other area that we added.

Speaker #1: And the free cash regeneration is fairly strong, so that's the other area we added. So net-net, if you look at it today, the portfolio positioning seems to be fairly different from where it was marked.

Speaker #1: So, we are actually already in tech and semiconductors across all the books, marginally underweight in emerging markets still. But if you look at, for example, international, it's a few hundred bps overweight.

Rajiv Jain: We are actually overweight tech and semiconductors across all the books, marginally underweight emerging markets still. If you look at, for example, in international, it is a few hundred bps based on overweight. I think the other big part is that the industrial CapEx numbers seem to be broadening out, whether you look at Europe, Asia for most part, but definitely North America. That is the other area that we added. I think there is a lot less defensive posture in terms of our positioning as of now.

Speaker #1: But I think the other big part is that the industrial capex numbers seem to be broadening out, whether you look at Europe, Asia for the most part, but definitely North America.

Speaker #1: So that's the other area that we added. So I think there's a lot less defensive posture in terms of our positioning as of now.

Rajiv Jain: I think there is a lot less defensive posture in terms of our positioning as of now.

Speaker #5: OK. Got it. And maybe just around on the financials, just costs going forward, how are you feeling around that cost to income ratio? Should flows continue to remain negative?

Elizabeth Miliatis: Okay, got it. Maybe just around on the financials, just costs going forward. How are you feeling around that cost to income ratio should flows continue to remain negative?

Speaker #1: Yeah. The way I'd answer that is we obviously are very careful about managing expenses. We obviously don't provide guidance. But there's no reason to believe that our aggregate expenses have to be meaningfully higher or are somehow abnormally low right now.

Tim Carver: Yeah, Liz, the way I would answer that is that we obviously are very careful about managing expenses. We obviously do not provide guidance, but there is no reason to believe that our aggregate expenses have to be meaningfully higher or are somehow abnormally low right now. I think we will just continue to be careful in managing expenses. As we have said before, obviously the margin is driven by revenue, right? If you had market off by 10% or flows off by 10%, our margin would be impacted, of course. Equally, if markets are up 10% or we had significant growth in revenue, our margins would expand. It is really the revenue line, and obviously it is unpredictable what the revenue line would be. All things being equal, there is no reason to believe that our margins would change materially from here.

Speaker #1: So I think we'll just continue to be careful in managing expenses. As we've said before, obviously the margin is driven by revenue. So if you have market off by 10% or flows off by 10%, our margin would be impacted, of course.

Speaker #1: And equally, if markets are up 10% or we had significant growth in revenue, our margins would expand. So it's really the revenue line, and obviously it's unpredictable what the revenue line would be.

Tim Carver: Equally, if markets are up 10% or we had significant growth in revenue, our margins would expand. It is really the revenue line, and obviously it is unpredictable what the revenue line would be. All things being equal, there is no reason to believe that our margins would change materially from here.

Speaker #1: But all things being equal, there's no reason to believe that our margins would change materially from here.

Speaker #5: OK. Got it. Thank you.

Elizabeth Miliatis: Okay, got it. Thank you.

Speaker #4: Thank you. Your next question comes from Siddharth Parameswaran with JPMorgan. Please go ahead.

Operator 2: Thank you. Your next question comes from Siddharth Parameswaran with J.P. Morgan. Please go ahead.

Operator: Thank you. Your next question comes from Siddharth Parameswaran with J.P. Morgan. Please go ahead.

Speaker #2: Thank you for taking my question. Just a question for Rajiv. Rajiv, it seems like you've considerably changed your sector posturing, and I suppose even some of the logic that you were previously giving around being defensive on tech.

Siddharth Parameswaran: Thank you for taking my question. Just a question for Rajiv. Rajiv, it seems like you have considerably changed your sector posturing and I suppose even some of the logic that you were previously giving around being defensive on tech. I think previously you were talking about a secular trend, et cetera. Just curious, firstly, is that not an issue anymore? Secondly, it is such a rapid change in your assessment of this. How are your clients reacting to this? It seems like, having taken a very extreme stance leading to some of the performance we have seen, to switch now. It is probably the right thing to do, but have you had conversations? How are they taking this? Could you just give us some idea of exactly whether they are on board with this?

Speaker #2: I think previously you were talking about circular funding, et cetera. Just curious, firstly, is that not an issue anymore? And secondly, just with such a rapid change in your assessment of this, how are the clients—actually, how are your clients reacting to this?

Speaker #2: It seems like having taken a very extreme stance led to some of the performance we've seen. To switch now, it seems like, I mean, it's probably the right thing to do.

Speaker #2: But how have you had conversations? How are they taking this? Could you just give us some idea of exactly whether they're on board with this?

Speaker #1: Yeah. Look, I think, yeah—Tim, you want to take that?

Rajiv Jain: Yeah. Tim, you want to take that?

Speaker #3: Well, I was going to, Rajiv. I was going to offer—let me take the client piece, and then maybe you can talk about how you got to repositioning.

Tim Carver: Well, Rajiv, I was going to offer, let me take the client piece and then maybe you can talk about how you got to reposition. Siddharth, I think it's important to understand that this is actually not atypical for us. We don't have it in the slide deck this year, but if you go back and look at our historical earnings releases, you'll see that we move the portfolio around, and often quite meaningfully and quite rapidly. That's part of what we're known for, is we talk about having a very adaptable approach, and we're following the data. It's bottom up, stock by stock, we move. Clients expect that. As long as it's international and they understand that what we're seeing in our research is causing us to move portfolios, clients are on board for that. That's what they're expecting us to do.

Speaker #3: But Siddharth, I think it's important to understand that this is actually not typical for us, so we don't have it in the slide deck this year.

Speaker #3: But if you go back and look at our historical earnings releases, you'll see that we moved the portfolio around, and often quite meaningfully and quite rapidly.

Speaker #3: That's part of what we're known for—we talk about having a very adaptable approach. We're following the data. It's bottom-up, stock by stock.

Speaker #3: We move, and so clients expect that. As long as it's rational, and they understand that what we're seeing in our research is causing us to move portfolios, clients are on board for that.

Speaker #3: That's what they're expecting us to do. As we often say, if you want a dogmatic growth manager or a dogmatic value manager, you can go find them.

Tim Carver: As we often say, if you want a dogmatic growth manager or dogmatic value manager, you can go find them. But what clients hire us to do is to move and be fairly aggressive in moving the portfolio, be adaptable, and follow the data very rigorously. I don't think we have any risk with clients being upset about the portfolio moving. Now, what we have to do is make sure that we are communicating that clearly and that we're doing that for the right reasons. There may be some clients who have their own views, and they will sell our portfolios because our views are no longer in line with theirs. But it won't be because of the fact that we moved the portfolio. That is something the clients expect.

Speaker #3: What clients hire us to do is to move and be fairly aggressive in moving the portfolio, be adaptable, and follow the data very rigorously.

Speaker #3: So, I don't think we have any risk with clients being upset about the portfolio moving. Now, what we have to do is make sure that we are communicating that clearly, and that we're doing that for the right reasons.

Speaker #3: And there may be some clients who have their own views, and they will sell our portfolios because our views are no longer in line with theirs.

Speaker #3: But it won't be because of the fact that we moved the portfolio. That is something that clients expect.

Speaker #1: So yeah, look, I think, as Tim said, if you go back to the second half of 2021, we cut back very aggressively in the last quarter of 2021.

Rajiv Jain: Yeah, look, I think as Tim said, if you go back to 2021, H2, we cut back very aggressively in Q4 of 2021. Meaningful overweight tech to significant underweight tech, and we wrote about that extensively. In 2022, we entered 2022 with very little in tech and almost a high teen exposure to energy. We exited 2022 with something similar, and in February, March, we were back overweight tech, right. I think this is not so typical. I can go back over 25 years. We've done this again and again. But the question is why we're doing this. The reason is that whether the data points sort of indicate if you're getting paid or not for the names that we would love to buy based on the valuation growth and obviously durability of that growth.

Speaker #1: Meaningful overweight tech to significant underweight tech. And we wrote about that extensively. In 2022, we entered the year with very little in tech, and almost high-teen exposure to energy.

Speaker #1: We exited 2022 with something similar. And by February, March, we were back overweight tech. So I think this is not typical. I can go back over 25 years.

Speaker #1: We've done this again and again, I think. But the question is, why are we doing this? The reason is that, whether the data points sort of indicate if you're getting paid or not for the names, we would love to buy based on the valuation and growth, and obviously the durability of that growth.

Speaker #1: It's the question of conviction. And we did not have that high a conviction. And obviously, the multiples are high. Now, as I said, where we have underestimated is the demand strength for compute and the pricing.

Rajiv Jain: It's a question of the conviction, and we did not have that high a conviction, and obviously the multiples are high. As I said, where we have underestimated the demand strength for compute and the pricing. If the pricing changes, look, the GPU rental is $1.50 or $4 or whatever it is. I mean, that changes economics for a lot of different things. I think our job is to refresh the book on literally on a daily basis. It is bottom up, name by name, and we'll make mistakes as we have done before. But I think in the long run, this adaptability has served us very well. Because if, for example, things change again, it doesn't mean we are wedded to these names.

Speaker #1: So if the pricing changes—look, the GPU rentals are $1.50 or $4, or whatever it is—I mean, that changes the economics for a lot of different things.

Speaker #1: So I think our job is to refresh the book literally on a daily basis. And it is bottom-up, name by name.

Speaker #1: And we'll make mistakes, as we have done before. But I think, in the long run, this adaptability has served us very well because, if, for example, things change again, it doesn't mean we are wedded to these names.

Speaker #1: I mean, that's actually, as Tim said, most of the clients come here not to sort of say, we're going to be long the fastest-growing names forever, or we're going to be long energy forever.

Rajiv Jain: Actually, as Tim said, most of the clients come here for not saying that they are going to be long, fastest-growing names forever, or they are going to be long energy forever. That depends on the bottom-up basis expected returns.

Speaker #1: I mean, that depends on the bottom-up basis expected returns.

Speaker #2: Yes, OK. Thank you, that makes sense. Just a second question if I can—regarding fees. I mean, average fees have held up quite well. I'm just keen to understand if any conversations at all are being pursued by clients around fees.

Siddharth Parameswaran: Yep. Okay. Thank you. That makes sense. Just a second question, if I can. Fees, average fees held up quite well. Just keen to understand if any conversations at all are being pursued by clients around fees. If you could just make some comments around the fee outlook.

Speaker #2: If you could just make some comments around the fee outlook.

Speaker #3: Yeah. I know there's nothing material on any discussion. I mean, we have, obviously, thousands and thousands of clients, so I can't speak to every single client.

Tim Carver: Yeah. No, there is nothing material on any. We have obviously thousands and thousands of clients, so I cannot speak to every single client. But there is no material pushback on fees. I think our fees are very favorably priced in the marketplace. We started out the business that way. It is very consistent. No fee pressure of any substance there. The one place that I would note is obviously in this period, we did not have performance fees, and in prior periods, we have. So that is a significant contributor to the revenue line. But even still, the number of assets on which we have performance fees is single digit percentage of our overall book. So it is not a huge driver to the business in any event.

Speaker #3: But there's no material pushback on fees. I think our fees are very favorably priced in the marketplace. We started out the business that way.

Speaker #3: It's very consistent, and so no fee pressure of any substance there. The one place that I would note is, obviously, in this period we did not have performance fees as in prior periods.

Speaker #3: We have. So that's a significant contributor to the revenue line. But even still, the number of assets on which we have performance fees is sort of a single-digit percentage of our overall book.

Speaker #3: So it's not a huge driver for the business in any event.

Speaker #2: OK. Thank you very much.

Siddharth Parameswaran: Okay. Thank you very much.

Speaker #4: Thank you.

Operator 2: Thank you.

Operator: Thank you.

Speaker #3: Thank you.

Siddharth Parameswaran: Thank you.

Tim Carver: Thank you.

Speaker #4: There are no further questions at this time. I'll now hand back to Mr. Carver for closing remarks.

Operator 2: There are no further questions at this time. I will now hand back to Mr. Carver for closing remarks.

Operator: There are no further questions at this time. I will now hand back to Mr. Carver for closing remarks.

Speaker #3: Wonderful. Well, thanks again, everybody, for joining us, and thank you for the thoughtful questions. We look forward to seeing you at a show here in a couple of weeks.

Tim Carver: Well, thanks again everybody for joining us, and thank you for the thoughtful questions. We will look forward to seeing you on our roadshow here in a couple of weeks. Wishing everybody all the best.

Speaker #3: And, yeah, wishing everybody all the best.

Operator 2: That does conclude our conference for today. Thank you for participating. You may now disconnect.

Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.

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Half Year 2026 GQG Partners Inc Earnings Call

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