Home Alternative Investments Edited Transcript of RPL.AX earnings conference call or presentation 23-Aug-22 2:00am GMT

Edited Transcript of RPL.AX earnings conference call or presentation 23-Aug-22 2:00am GMT

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Half Year 2022 Regal Partners Ltd Earnings Call Aug 23, 2022 (Thomson StreetEvents) — Edited Transcript of Regal Partners Ltd earnings conference call or presentation Tuesday, August 23, 2022 at 2:00:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Brendan O’Connor Regal Partners Limited – CEO * Ian Cameron * Ingrid Groer ================================================================================ Conference Call Participants ================================================================================ * Nicholas McGarrigle Barrenjoey Markets Pty Limited, Research Division – Analyst ================================================================================ Presentation ——————————————————————————– Operator [1] ——————————————————————————– Thank you for standing by, and welcome to the Regal Partners Limited 1H ’22 Results Briefing. (Operator Instructions) I would now like to hand the conference over to Mr. Brendan O’Connor, CEO. Please go ahead. ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [2] ——————————————————————————– Thank you very much, and good afternoon, everyone. Thank you for joining us today for Regal Partners Limited inaugural interim results for the 6 months to 30 June 2022. If you turn to Page 3 in the contents slide. I’ll highlight that I’m Brendan O’Connor, CEO and Managing Director of Regal Partners. And joining me today is Ian Cameron, the Group CFO; and Ingrid Groer, the Head of Investor Relations. Ian and I will present a few slides today on the Regal Partners business and our interim results, and then we’ll pause and respond to questions that are coming through online. If I reflect upon the last 6 months, so the 6 months to 30 June 2022 on Slide 5. We’re delighted to present the inaugural interim results for Regal Partners following the completion of the merger between VGI Partners and Regal Funds Management on the 3rd of June this year. Renamed, rebranded and a new ASX ticker RPL, the business and staff are very excited about the growth opportunities that lie ahead. By combining the 2 businesses, we’ve created a market-leading provider of alternative investment strategies with $4.7 billion of the fund. The integration of the businesses between Regal and VGI is progressing well. Indeed, the benefits of Regal’s centralized proprietary trading risk management and back-office system has been further reinforced and is now serving as the centralized platform for the business going forward. In addition, it’s pleasing to see early wins from the collaboration between the investment team, and in particular, the transition of the lead role of VG8 portfolio to Phil King, supported by the combined resources of Regal and VGI. As part of that transition, we have decided to close the Tokyo office. Coming to our results. The statutory NPAT for the 6 months was $4.9 million for the half, a result which is shaped by the reverse acquisition treatment of the merger, further detail of which Ian Cameron will take you through later in the presentation. We believe a better presentation of the underlying progress of the business is actually via our pro forma normalized NPAT of $20.1 million. In what turned out to be a very challenging 6-month period given headwinds in markets, we were delighted to be able to earn $22.7 million of performance fees, very similar to the number we preadvised the market back in July. I’d highlight that we’re not proposing to pay an interim dividend given the special dividend paid by VGI prior to completion. And I’d finish by saying we’re well positioned for growth within our existing funds and new investment strategies, including our soon-to-be launched private credit fund and further investing in our resource royalties’ capability. Turning to Slide 7. As I mentioned, Regal Partners aims to be the leading provider of alternative investment strategies in Australia, delivering superior investment returns through a high-quality investment and operational team. It really is a privilege to lead such a high-caliber and well-credentialed team. And I think it is an essence of the combined Regal, VGI culture that distinguishes us from other asset managers in the marketplace. We believe that there are strong tailwinds behind alternative investment strategies. The historically high valuations on traditional asset classes, investors looking for growth are increasingly turning to alternative sources of alpha. There’s a growing awareness of the benefits of combining alternative investment strategies with traditional investment portfolios that may be overweight, long-only equity, fixed income and real estate. And finally, alternative investment strategies have been a mainstay, a key part of the building wealth for long-term investors, and that is increasingly demonstrated overseas and increasingly being demonstrated within our Australian client base. Finally, I’d add from an RPL shareholder perspective, alternative investment strategies have represented a disproportionate contribution from the alternative investment strategies in asset management revenues. Turning to Slide 8. The key points I’d highlight here is Regal Partners Limited has the scale of $4.7 billion of FUM, the combination of 4 dedicated alternative investment management business being Regal Funds Management previously privately owned, VGI Partners being the listed entity as well as Kilter Rural and Attunga Capital businesses, which have been part of the Regal Funds Management stable for several years now. We have over 100 staff, including 40 investment professionals, and occupy 4 offices globally. And first, to highlight on Page 9, there are probably 5 key takeaways in the presentation. As I’ve highlighted a number of times now, we are a specialist and diversified manager of alternative investment strategies. What’s unique to us relative to VGI’s past is we’re very much focused on growth. we have a growth-focused strategy, leveraging our institutional-grade corporate and distribution operating platform. We now have a diversified investment capability with a long heritage of delivering strong investment returns for our clients across a range of asset classes. And it’s pleasing to see that through a challenging market environment, we have fundraising momentum right across the business. And finally, a very pleasing element of shared cultural alignment and philosophy behind both Regal and the VGI business, both had significant investment in our strategies as well as the manager. Turning to Slide 10. This is a pictorial representation of the 4 businesses that have combined to create Regal Partners today: Regal Funds Management with its long heritage in pioneering the hedge fund and private markets space in Australia since 2004; VGI, which is very much a fundamental investor but focusing on global principally and Asian high-conviction, long-short equities; Kilter Rural, which offers private market exposure to Australian farmland, water and ecosystem assets and is a key part of the pillar around our growth in real and natural assets; and Attunga, joined into the business through a 51% acquisition in December last year, Attunga offers private market exposure to electricity, power and environmental commodity markets. All 4 businesses have a unique heritage, however, a shared focus on performance and alignment with investors. Turning to the next few slides. I’ll spend a little bit of time talking about the Regal story for those that are less familiar, given it was privately owned prior to the merger. On Slide 12, we’ve had dramatic growth in our funds under management since starting the business in 2004. And over the last 5 years, in particular, I think the collection of assets under management from clients as well as studying investment performance across the Regal investment team has delivered growth in FUM to just over $3.2 billion prior to the merger. That number includes the FUM that we’ve gathered inorganically through the acquisition of the Kilter Rural business and the Attunga business as well as our joint venture with the Resource Royalties Fund with Gresham. Turning to Slide 13. further representing the growth of the business is perhaps best demonstrated by the growth of the investment strategies to now 13 investment strategies, 40 investment professionals, one of the largest investment professional teams in Australia and across 4 asset classes, those asset classes being long-short equities, private markets, real and natural assets and capital solutions, growth areas that we’re very excited about. The table on 14 highlights, I think, a very distinguishing feature for the Regal business. And that is key performance, key long-term performance across all our strategies, performance that really represents the performance of each of the strategies and the investment personnel that have delivered that, something that we’re very proud of. Turning to Slide 15. I’d also highlight the diversity of the business as it’s grown to be a $3.2 billion manager, and that is diversity by FUM with long-short equities being the bulk of it, but more recently growing into private markets, real and natural assets as well as capital solutions and then diversification of FUM by liquidity with over 60% of FUM with strategies that are either quarterly, semiannual or term-based in their liquidity requirements. The diverse asset base provides us with confidence for future growth of business. On Slide 16, another distinguishing feature around the Regal business is the diversification of FUM by channel. We have continued to invest in our distribution capability, and that has yielded strong results in the broadening of our distribution and our client profile. I’d highlight that we’ve appointed a Head of International Distribution based in our Singapore office as well as a Head of Distribution for our Kilter Rural business just last month. Finally, in the period leading up to the merger with VGI on Slide 17, I’d highlight an acceleration in what has been the development of the business, resulting in a transformational year for the Regal business. With over $700 million in net flows in the 12 months to 30 June 2022, those net flows have occurred at a margin that are incremental to the average margin that we’re currently earning. We successfully raised over $200 million via a heavily oversubscribed placement within our successful listed fund RF1. We’ve launched new strategies, including the sector-specific resources long-short fund in 1 November last year and the health care long-short fund with both the Australian trust and a Cayman version that will appeal to offshore investors, and we’re receiving strong feedback from those investors around pipeline investments for that strategy. We’ve been delighted with the senior executive hires that we’ve been able to attract to add to our existing stable of talented personnel, including a Chief Risk Officer, James Persson, who joined from Credit Suisse; a Head of International Distribution, Ingrid Nell, now based in our Singapore office; and an Australian Head of Trading, John Manchee, who sits at our Sydney office now as we have sent our former Head of Australian Trading, Campbell Chambers, over to the New York office for Regal. We’ve increased our ownership stake in Kilter Rural. We’ve acquired a majority stake in Attunga Capital. And as I said, today with the merger of VGI, we now have $4.7 billion as a leading provider of alternative investment products. Turning back to the combined group of Regal Partners Limited, a brief update on the merger on Slide 19. I referenced before that the integration and collaboration between the teams is progressing well. I’m delighted that we’ve been able to highlight that we’ve transitioned to one dealing and risk management system, and work is well underway about building the — integrating the other systems that build out the ecosystem of the asset management business we’ve put forward as Regal Partners Limited. We highlighted in June, we highlighted that Phil King would lead the management of VG8 together with the resources of Regal Funds Management as well as VGI. And as part of that transition, we’ve closed the Tokyo office. Further, Rob Luciano from the VGI Partners perspective is now solely focused on portfolio management, having stepped off the VGI Partners Board, and we’re seeing early signs of the focus that Rob is bringing to bear on that portfolio, and we’ll have more to say about that in future periods. Finally, with the team expansion, as I’ve mentioned, that we’ve moved Campbell Chambers to our New York office, we’re taking advantage of the greater footprint that the combined business has. And importantly, the Board has approved a common long-term incentive arrangement to promote alignment of employees with RPL shareholders, a key plank of the efforts that we’re going to, to align our staff with the outcomes for shareholders. On Slide 20, the diversification of the business is perhaps best portrayed now by a FUM by asset strategy, again, dominated by long-short equities. But as I mentioned, we’re very excited about the growth in the other pillars of the business being private markets, real and natural assets and capital solutions. We had strong diversity by the liquidity of our underlying products. And finally, the FUM and client channel gives us great opportunity to be able to cross-sell products across what has largely been a synergistic acquisition as we combine the client base of both businesses. I’ll pause there now on Regal Partners Limited and pass over to Group CFO, Ian Cameron, who will walk you through the financials for the interim results. ——————————————————————————– Ian Cameron, [3] ——————————————————————————– Thanks, Brendan. I’m pleased to present the inaugural half year results for Regal Partners Limited. Turning to Slide 22. Due to the accounting technical requirement around reverse acquisition accounting, the statutory results reflect the Regal Funds Management business for the entire 6-month period and incorporates VGI’s results on a consolidated basis from 4 June being the day after completion to 30 June. The pro forma normalized profit and loss on Slide 22 has been prepared on the basis that all entities were consolidated for the entirety of the half and provide a clear indication of business performance in the half as a result. The pro forma normalized profit or loss should be read in conjunction with the statutory results. The Kilter and Attunga businesses have been consolidated 100% of the results and the portion relating to the noncontrolling interests are then deducted from current and maintained profits. We’ve also included a reconciliation of statutory NPAT to normalized NPAT for H1 in the appendix on Slide 30. The group recorded normalized pro forma management fees for 6 months to 30 June of $33.3 million, equating to a management fee margin of circa 1.2% of total average FUM. Performance fees for the 6 months totaled $22.7 million, with the resources funds, tactical opportunities funds performing well at the Regal Funds Management level as well as the Attunga power fund also performing well despite market headwinds. Employee expenses, including BAU staff costs as well as bonuses relating to the half to be paid in September this year. Normalized NPAT for the half was $20.1 million, which normalizes the noncash amortization of contract assets and share-based payments, the fair value loss on investments in the 6 months and any one-off transaction costs incurred in relation to the merger. Turning to the next page, on FUM. The Regal Funds Management fund has grown significantly since 2017, as Brendan noted earlier. However, the last 12 months, FUM has been volatile due to a combination of investment performance within some strategies and what has been difficult market conditions combined with net outflows, including dividends and distributions from the funds. I’m pleased to report that total FUM for the combined group at the end of July is $4.8 billion, up from $4.7 billion at 30 June. Turning to the next page on the balance sheet. The group’s balance sheet remains robust with no net debt and approximately $50 million in surplus capital that primarily relates to the investments and seeding capital in the Regal Funds Management’s unlisted funds as well as VG1 and VG8’s investments on balance sheet. Given the recent special dividend at the time of the merger of $0.397, and overall, the large amount of dividends of $0.767 fully franked paid to shareholders over the last 12 months to June ’22, the Board concurrently with management decided that there would be no interim dividend for the half. The Board intends to target a dividend payout ratio of at least 50% of normalized NPAT thanks to the maximum extent possible in future periods, provided the group has sufficient capital and income. The intangible asset balance comprises $168 million of goodwill and management rights attached the underlying funds arising from the merger. I’ll now pass back to Brendan. ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [4] ——————————————————————————– That’s great. Thanks very much, Ian. I’ll now turn to the strategy and the outlook for Regal Partners Limited Group. On Slide 26, we highlight 3 key areas. As I mentioned, I think that we’ve got a diversified, scalable and growing platform for the business going forward. We have limited concentration risk with no single external investor greater than 5% of our funds under management. And we’ve got multiple and growing asset classes. We’ve got a diverse, but in particular, strong term-based heavy buyers towards term-based products. And we have a proprietary operating platform that continues to scale to service new products and new asset classes. I mentioned earlier that we have chosen to be a specialist alternative investment manager, and there are very attractive tailwinds behind the growth in alternative investment strategies. In particular, with Regal SKU and VGI SKU towards high net worth and family office investors, we think we’re well positioned to provide those investors with access to further differentiated and unique products that will help achieve alpha over what is expected to be a challenging period for investment returns going forward. The business itself, I think, has strong economics. It has attractive management fee margins when compared to other asset managers, and 100% of products have performance fee earning capability. Indeed, the combined Regal and VGI history shows a long heritage of generating performance fees through the cycle. Finally, we have significant available capacity with total capacity currently estimated to be $15 billion across the Regal Partners Group. On Slide 27, I’ll finish before Q&A by talking about our multiple opportunities for growth. They’re best summarized across these 5 areas, which is to focus on maintaining our existing fundraising momentum. The combined business has good momentum, and I’m keen to ensure that we continue to invest in the team that has delivered that to build that capability and ultimately lead to greater cross-sell opportunities within the group, and in particular, excited about finding new clients offshore with our new Head of International Distribution Overseas. We’ll be looking to seed new strategies but also develop new partnerships. We have a long history of actually generating good organic growth but also accelerating the growth of the business through inorganic partnerships, and I believe that will be a mainstay of the growth of the business going forward. We’ll continue to invest in the distribution capabilities. We have, as I mentioned before, I think, first-class investment team and the capabilities there. It’s pleasing to be able to develop and grow an equally first-class distribution and marketing capability, and we’re very excited to continue to invest in that function. We have inorganic growth opportunities ahead of us, and I think through seed opportunities, we’ll be able to develop those ourselves and inorganic growth opportunities that we see presented to in the marketplace. And we continue to assess a range of opportunities in that regard. But perhaps last but certainly not with at least, and that is to retract and retain the best talent. The pedigree of both businesses built upon the talent within the business, and you can see that by putting a common long-term incentive structure in place, we have made a very early move to solidify the teams across the businesses overall to garner their attention and their focus on driving great outcomes for the Regal Partners Limited shareholders. We’ll continue to sort of invest in that team, and we believe it’s the best way to ensure that we generate best returns for our clients. That’s the end of the formal part of the presentation. We’ll pause now for Q&A, and I might invite Ingrid Groer to lead the questions as they come through. ================================================================================ Questions and Answers ——————————————————————————– Ingrid Groer, [1] ——————————————————————————– Thanks, Brendan. So we have a few online. So I might start with this one for you. First question is, “Regal and VGI appear to have very different cultures. This can cause difficulties in a merger. How are you managing these?” ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [2] ——————————————————————————– Yes, it’s a great question. And no doubt that there have got some differences in the cultural background behind some of the business, but there’s also many similarities. And like any relationship, we’re very much focused on harnessing the similarities of the business as a common platform for growth, identifying where there are differences, if they’re helpful to the group going forward to harness that, but if they’re not, seek to remove that. And one example that we’ve sought to remove is, I think, a less-than-ideal long-term incentive structure behind the VGI side relative to the Regal side. And as I said, I think we’re very pleased to pull together a common long-term incentive structure for all staff of the combined group that can align their focus with that of the RPL shareholder. There are other avenues where we’re looking to harness the team to increase greater collaboration on the investment side. That is being brought to bear both on the VG1 portfolio and the VG8 portfolio as well as the Regal funds that actually have the ability to invest in more global large-cap names. So it’s early days, but I’m very pleased with the progress we’re making in the collaboration across the group. ——————————————————————————– Ingrid Groer, [3] ——————————————————————————– On a related topic, someone else has asked, “Can you make some comments on staff retention and turnover? So you’ve touched on the incentive plan, but can you expand any further on that?” ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [4] ——————————————————————————– Yes. I think we’re operating in different business locations today. So Regal is staying in the Sydney offices of the Gateway building. VGI is staying in the Phillip Street offices of the VGI business. But increasingly, there’s collaboration between the 2. There’s greater sort of efforts from staff to spend time in both offices. And perhaps it’s natural that sort of that integration works, with the 2 businesses develop a rhythm and the sharing of ideas, the cadence around those opportunities increases. So through time, collaboration, greater communication, and indeed, today’s result is perhaps a great way of further reinforcing the common objective across both teams. And I think that will lead to greater collaboration going forward. ——————————————————————————– Ingrid Groer, [5] ——————————————————————————– Thank you. The next question we had is — and again, you’ve touched on this a little bit but, “Regal and VGI have a long history in long-short equities. Will Regal Partners continue to grow in these strategies or other verticals?” ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [6] ——————————————————————————– Yes, that’s another good question. So I think there’s a capacity within our long-short equities, no doubt. But if you have a look at those pie charts that represent the proportion of FUM that represented by long-short equities as a combined group relative to others, we’re very excited about growth in the other pillars, so being private markets, real and natural assets, and in particular, what we’re calling capital solutions, which will be the launch of our private credit opportunities fund as well as further development in the resource royalty space. So I think there’s opportunities across the board, but I think we’ll see that pie chart diversify out over time. ——————————————————————————– Ingrid Groer, [7] ——————————————————————————– I have a couple of questions on dividend policy. I think it was mentioned on earlier slides, but can you just elaborate on whether capital is being kept in reserve for acquisitions or other growth initiatives? ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [8] ——————————————————————————– Yes, certainly. The business today has surplus capital of around $50 million. That’s largely represented by seed investments we’ve made in both VG1 and VG8 together with Regal unlisted product. It’s our intention to continue to keep that — those investments within those products to further support the growth and scale of those products. And so we believe that we’ll continue to invest in the sort of development of further strategies and products. And so capital, whilst we have a capital-light business, opportunities to sort of provide capital to seed new products going forward has always been at the forefront of our mind. And we’ve also always demonstrated, I believe, a good return on the capital deployed as we launch new strategies. So coming back to your specific question around the dividend, bearing that capital need for further seeding, I think we can commit to a profit — a dividend policy of at least 50% of net profit after tax on a normalized basis, and we’ll seek to frame that to the full extent possible. ——————————————————————————– Ingrid Groer, [9] ——————————————————————————– Thanks, Brendan. Slipping back to talking about some of the new verticals, who are we managing the private credit capability? ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [10] ——————————————————————————– Yes. We’re delighted to have 2 very experienced individuals join the team, Jacob Poke, who’s joined from a long stint at Goldman Sachs in the Capital Solutions area; and another individual called Gavin George, who most recently had spent time at the credit division of Sixth Street of the TPG private credit business. Both Jacob and Gavin are portfolio managers reporting directly through to myself. And they will lead our private credit business. And as I said, we’re perhaps a month away or 2 from being able to launch the private credit opportunity fund. ——————————————————————————– Ingrid Groer, [11] ——————————————————————————– Another similar topic. “What will be the key drivers of growth of Regal going forward? Would Regal look at further acquisitions or expanding into private equity or venture capital?” ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [12] ——————————————————————————– Yes. The unifying, I guess, objective for Regal overall is being a specialist provider of alternative investment strategies. So 2 of the asset classes you mentioned, being private equity and real estate, fall naturally or can fall naturally within that broad church of alternative investment strategies. So we look at a number of opportunities. We’ve had a history, as I mentioned before, of seeding and developing some of those organically. But what we’re really excited about, I think that some of the inorganic opportunities that the group is now seeing as being a listed entity, and I think we’ll continue to explore that without taking the eye off our core products that we have at the moment. ——————————————————————————– Ingrid Groer, [13] ——————————————————————————– Would you be able to expand further on Kilter and what opportunities do you see there going forward? ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [14] ——————————————————————————– Yes, Kilter is a great business in the sense that it has a long heritage in managing water, farmland and ecosystems based down in Victoria and has a similar ethos around a very strong focus of performance for investors and alignment with investors, but further, I think, has demonstrated a long association with demonstrating what many would call sort of an ESG focus or impact focus on their products. And I think that really drives to deliver sustainability of their returns right across the business. So whether it be in their water products, their farmland and then managing ecosystem assets as part of their farmland products, they are always looking to generate a sustainable outcome balancing the needs for investors with the needs of the environment. ——————————————————————————– Ingrid Groer, [15] ——————————————————————————– Brendan, next question is, “Are Regal and VGI running competing long-short equity strategies? And if so, would they possibly be consolidated in the future?” ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [16] ——————————————————————————– No, that’s not our view at the moment. We believe that the Regal suite of products and the VGI suite of products are mutually exclusive. I think they stand on their own 2 feet as being very credible strategies that have a right in investment portfolio. I think that there is some work to do to sort of turn around sort of the sort of investment performance of the VG1 and VG8, undeniably. But that, I think, does not take away from the fact that it’s a very credible investment strategy in its own right. And I think, as I said, pleasing to see some of the early progress we’re making around being able to close the NTA gap — share price NTA gap on VG1 and VG8 and take those strategies forward. ——————————————————————————– Ingrid Groer, [17] ——————————————————————————– So on that topic, someone’s actually asked, “Could you expand further on what Regal Partners will do to address the discounts in VG1 and VG8?” ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [18] ——————————————————————————– Yes. I think what we mentioned at the merger and certainly at the AGM around that, we highlighted the success that we have had in managing the RF1-listed product. It ultimately got to a premium — trading at a premium. But that premium was built upon 3 pillars, and that was a concerted strategy from our perspective. Undeniably, performance is the first and foremost part of that. And I think there’s no escaping that you need good performance as a prerequisite for the next 2 pillars to work. But if performance can be achieved, I think that performance can actually be really enhanced by a very active communication strategy. And I think we have out there in the marketplace that we’ve announced a roadshow for both the VG1, VG8 and RF1 products later this year, which we’re putting together as we speak. And the third pillar of that action is around capital management. And capital management is essentially a proactive approach to distributions or dividends in the respect of VG1 and VG8, but also an active buyback. The active buyback seen to provide liquidity for exiting investors where necessary but also a very accretive purchase or acquisition for continuing investors. And it’s early days, but it’s great to see some progress made around that from a VG8 perspective, and we’ve got no reason to believe the same won’t apply to VG1 in time as well. ——————————————————————————– Ingrid Groer, [19] ——————————————————————————– And in terms of the VGI open-end advantage unlisted, are you confident that you can stem the outflows that we’re seeing there and the cycle performance? Is there anything else that you can do, especially given Regal has got its own strong long-short offering? ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [20] ——————————————————————————– I think the biggest opportunity there is actually having the lead portfolio manager, Rob Luciano, now freed up from actually a lot of the business management aspects as we continue to sort of invest in the team that supports Rob. Through time, we believe that the investment performance there will return as well. Time will tell there, but I think it’s a case of being able to sort of provide the right building blocks in place to enable Rob and the team to focus on investment management free from the distractions that can be all consuming at times around running a publicly listed business. ——————————————————————————– Ingrid Groer, [21] ——————————————————————————– Great. And I got one more question online before I think we might go to a question on the phones. So the question online I’ve got here is, “What role will Mr. Chambers be fulfilling in New York?” ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [22] ——————————————————————————– Yes. So Campbell Chambers is basically our Head of Trading North America at the moment. We basically have a Head of Trading function in Australia, John Manchee, who just recently started with us in Australia here in the Sydney office replacing Campbell. We have a similar capability in our Singapore office, and the ability to be able to have a very trusted and high-performing employee in Campbell out of our New York office provides an extra string to our bow and be able to sort of provides greater visibility of trading opportunities effectively around the clock. So between the Asian market, the Australian markets and North America, we’re in a better position to be able to deliver alpha for our clients. ——————————————————————————– Ingrid Groer, [23] ——————————————————————————– Thanks. Could we now go to the question on the phone, please? ——————————————————————————– Operator [24] ——————————————————————————– (Operator Instructions) Your question comes from Nick McGarrigle from Barrenjoey. ——————————————————————————– Nicholas McGarrigle, Barrenjoey Markets Pty Limited, Research Division – Analyst [25] ——————————————————————————– I just wanted to ask a question around plans for future growth. It seems like there’s a lot of different types of alternative businesses in the mix, but just want to get a sense of ambitions to start new managers by new managers investing stakes and just the philosophy around that. ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [26] ——————————————————————————– Yes. Thanks, Nick, and good question. I think first and foremost, it needs to be something that an opportunity that we believe we’ve got an edge in that we can add value. I think secondly, it needs to be done in a manner that is not unduly distracting to the business that we’re running today. I think we have very near-term good opportunities ahead of us within our business today in terms of growing our existing products to capacity and developing out the new investment strategies we’ve started such as private credit. So we’ll keep an active eye on looking out for other opportunities to grow in other spheres of the alternative investment strategy universe, but it needs to come with that high threshold, I think, of being accretive to what we’re doing today and not unduly distracting from our core competencies in the products we have today. ——————————————————————————– Nicholas McGarrigle, Barrenjoey Markets Pty Limited, Research Division – Analyst [27] ——————————————————————————– And just obviously, the merger has only been effective for a number of months, but just an update on what the pipeline of those opportunities might look like on both the sort of seeding and the acquisition phase. Has it been in the development under Regal Funds Management? Or is it sort of taking an assessment of the market now as it stands? ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [28] ——————————————————————————– Perhaps the former. So I think there’s a number of initiatives that we’ve been sort of looking at, none of which are sort of at a stage that are ready to be presented to the market or anything like that at this stage, and it would be premature to say anything more. The team has had a very, very active 6-month period capitalizing on the actual profile that we have being a listed business now and some of the extra opportunities that are now coming into play. ——————————————————————————– Nicholas McGarrigle, Barrenjoey Markets Pty Limited, Research Division – Analyst [29] ——————————————————————————– And what about with the existing managers where you hold not a full 100% stake? Will that be a model that you pursue? Or is there generally an ambition to get to 100% stake? ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [30] ——————————————————————————– Yes, I think it’s always a matter of getting that right balance. I think what I would say is that we like to be able to take majority positions. At the end of the day, you need to be able to have someone in charge and their hands on the wheel driving that forward. But at the same time, you need to be able to have good partners that you can work with. So we believe that we’ll be — well, we’re demonstrating we’re a good partner to the businesses that we have today and would like and over time and see ourselves increasing our ownership stake within those businesses. But that’s a very nuanced conversation done with the business partners that have been effectively founded that business. ——————————————————————————– Nicholas McGarrigle, Barrenjoey Markets Pty Limited, Research Division – Analyst [31] ——————————————————————————– And I’m not sure if you can give us an update, maybe it’s too early just on performance into the new financial year. I know that in the investment memorandum, there were some high watermarks that were — the funds were sitting below. Has that changed significantly into the new financial year? ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [32] ——————————————————————————– Yes, with the date of the investment memorandum, the EGM, I think material was perhaps back in May. June was a challenging period across markets, and we weren’t immune to that. I’m pleased to say that we’ve bounced back well through July and August. And so we have a range of strategies and the diversification of these underscores the point about diversification. We’ve got a range of strategies that are above high water mark and a range that are below. But I think, overall, we’re in pretty good shape on both absolute and a relative basis. ——————————————————————————– Nicholas McGarrigle, Barrenjoey Markets Pty Limited, Research Division – Analyst [33] ——————————————————————————– And can you give us a sense on — as there was obviously a very large fee in — I think it was the June half year of the prior year, north of $100 million of performance fees. And then it was, I think, $23 million in the half year just gone. Can you give us a sense on when there was that very large event, was that on crystallization of private vehicles? Or was that just strong equity performance? Just to get a sense on how we should be looking at the data points to track to work out how the business is tracking against that history of performance. ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [34] ——————————————————————————– Yes. May I guide you to the fact that as I mentioned, 100% of the strategies that we have, have a performance fee earning potential. The period that you’re referring to back in June 2021 was a great, I guess, alignment of the plants in respect of all our products earning performance fees at that stage. And so it’s a combination of both private market funds as well as the equity funds, the unlisted equity funds. So it was broad-based is the summary answer. ——————————————————————————– Ingrid Groer, [35] ——————————————————————————– We’ve got a couple more online, but I know that we’re coming towards 40-minute mark, and so we might need to wrap up soon. Another question online was just with the performance fees just recorded, “Were there any VGI performance fees in that? Or was there any more color you can give?” ——————————————————————————– Ian Cameron, [36] ——————————————————————————– I can take that. Thanks, Ingrid. So as I mentioned before, most of the performance fees came from the resources fund as well as the tactical opportunities funds as well as Attunga power fund. VGI did not recognize any performance fee income in the 6 months to 30 June. ——————————————————————————– Ingrid Groer, [37] ——————————————————————————– And another question online, which is similar to one we just touched on, but would we ever operate like Pinnacle in terms of acting like a back-end distributor for some fund managers where you take a stake in them? ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [38] ——————————————————————————– We think our approach by taking majority stakes is a little bit different to perhaps our — my understanding of how Pinnacle operates. We believe that alignment with investors is perhaps best served by being able to both strategically drive the rest of the business as well as invest in those products directly and further support both the manager as well as the underlying products. So we see ourselves taking majority stakes in businesses rather than minority stakes. ——————————————————————————– Ingrid Groer, [39] ——————————————————————————– So I don’t think we have time for any more questions at this point, but we might follow up with a few people offline after the mark after briefing. ——————————————————————————– Brendan O’Connor, Regal Partners Limited – CEO [40] ——————————————————————————– Okay. Thank you, Ingrid. Well, thank you, everyone, for joining what, as I’ve mentioned, was RPL’s or Regal Partners Limited Inaugural Interim Results. Hopefully, this has been a helpful presentation and sort of providing a bit of background to who we are and our earnings. And we look forward to communicating to you in the future. Thanks for your time. ——————————————————————————– Ian Cameron, [41] ——————————————————————————– Thanks, everyone. ——————————————————————————– Operator [42] ——————————————————————————– Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

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