PGIM UPDATE
David Hunt
President and CEO,
PGIM
AS OF JUNE 30, 2019, UNLESS OTHERWISE NOTED
Key Messages
- Our scaled, diversifiedmulti-manager model and strong investment performance have produced consistent positive net flows that position PGIM as a winner against the backdrop of industry headwinds
- PGIM's success is underpinned by disciplined investments in broadening and globalizing our investment and distribution capabilities, and gaining recognition for our unified brand
- PGIM targetsmid-to-high single digit earnings growth through the cycle driven by our strong and growing position in attractive segments of the asset management industry
2
PGIM's industry-leading position is driven by strength across attractive sectors
Top 10 Global Asset Manager(1) | Assets | |
($ billions) | ||
1 | BlackRock | $5,976 |
2 | Vanguard Group | $4,867 |
3 | State Street Global Advisors | $2,511 |
4 | Fidelity Investments | $2,425 |
5 | BNY Mellon Investment Management | $1,722 |
6 | The Capital Group | $1,677 |
7 | JP Morgan Asset Management | $1,659 |
8 | Amundi | $1,633 |
9 | The Goldman Sachs Group | $1,542 |
10 | Prudential Financial(2) | $1,377 |
Top
3
Alternatives asset manager(3)
Real Estate manager worldwide(4)
Assets in Investment Grade credit strategies(5)
Foreign manager of Japanese institutional assets(6)
- Pensions & InvestmentsTop Money Manager's list, May 27, 2019. AUM as of December 31, 2018.
- Worldwide AUM includes assets managed by PGIM and Prudential'snon-proprietary AUM.
- Willis Towers Watson Global Alternatives Survey, July 2017. AUM as of December 2016. Ranking is based on the aggregate AUM aggregated by parent company in all alternative assets classes, regardless ofsub-asset class.
- IPE Real Assets, Real Estate Managers by Worldwide AUM as of June 30, 2018. Publication as of November / December 2018 issue.
- Investment Grade Credit Manager Survey,IPE International Publishers Limited, March 2019. AUM as of December 31, 2018.
- Nenkin Joho by R&I. AUM as of March 31, 2019. AUM ranking pertains to separate accounts and does not include AUM for institutional funds.
3
Significant scale in attractive asset classes delivers a well-balanced mix of revenues
Fees by Asset Class(1)
Private | ~50% of fees from higher growth areas(2) | |
Fixed | ||
Income | $676 mnfrom real assets(3)& alternatives | |
& Equity | ||
8% | ||
Real Estate | $203 mnfrom private credit(4) | |
Debt & Equity | ||
21% | Public | |
Fixed | $200 mnfrom non-U.S. equities | |
Income | ||
47% | ||
$123 mnfrom liability-driven and | ||
Public Equity | outcome-oriented solutions | |
24% | $123 mnfrom quantitative strategies | |
- Based on asset management fees as of June 30, 2019.
- Fees for the year ended December 31, 2018. Percentage excludes fee overlap across stated categories.
- Includes real estate, infrastructure, energy, and natural resources strategies.
- Excludes real estate lending through the PGIM Real Estate Finance business.
4
Deep relationships with top tier third-party client base
Fees by Client Type
1,400+third-party institutional clients
General | 102clients have over $1 billion invested with PGIM | |
Account | ||
20% | ||
159of the top 300 global pension funds(1) | ||
21of the 25 largest U.S. corporate pension plans(2) | ||
Institutional | ||
Retail | 47% | 18of the 25 largest U.S. public pension plans(2) |
33% | ||
4thfastest organic U.S. mutual fund AUM growth(3) |
Information as of June 30, 2019, unless otherwise indicated.
- P&I/Towers Watson Top 300 Pension Funds ranking, data as of December 31, 2017, published September 2018.
- Based on U.S. Plan Sponsor rankings inPensions & Investmentsas of September 30, 2017, published February 2018.
- Simfund, as of June 30, 2019 among top 50 competitors between 2008 and 2Q19. Excludes ETFs and money market funds.
5
Scaled global presence across clients, talent, and investment opportunities
•$368 billion of AUM(1)from non-U.S. clients | •1,250+ investment professionals | •37 offices in 15 countries |
Data as of June 30, 2019.
(1) AUM from non-U.S. clients includes affiliates.
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Consistent, strong investment performance underpins our growth and financial success
Investment | Percentage of PGIM AUM(1) | |
Performance | Outperforming Benchmark | |
90% | 92% | |
86% |
Earnings
Client
Flows
3 YEARS | 5 YEARS | 10 YEARS | ||
Source: PGIM calculations as of June 30, 2019. Past performance is not a guarantee or reliable indicator of future results. All investments involve risk, including the possible loss of capital. Performance is defined as outperformance (gross of fees) relative to each individual strategy's respective benchmark(s).
- Represents PGIM's benchmarked AUM (85% of totalthird-party AUM is benchmarked over 3 years, 74% over 5 years, and 57% over 10 years). This calculation does not include non- benchmarked assets (including general account assets and assets not managed by PGIM). Returns are calculated gross of investment management fees, which would reduce an investor's net return. Excess performance is based on all actively managed Fixed Income, Equity, and Real Estate AUM for Jennison Associates, PGIM Fixed Income, QMA, Prudential Capital Group, PGIM Global Partners, PGIM Real Estate, and PGIM Real Estate Finance.
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Third-party net flows
($ billions)
Third-Party Net Flows(1)
$36.5
$30.0
$22.6 | $23.8 | $21.9 | |||||
$20.1 | |||||||
$11.0 | $11.0 | $10.8 | $15.6 | $13.7 | |||
$9.8 | $7.1 | ||||||
$5.5 | $5.7 | ||||||
$0.5
($3.5)
2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 1H19 |
- Represents unaffiliatedthird-party net flows; excludes flows from the General Account and other affiliated Prudential businesses. 2003 and 2004 third-party net flows shown in chart represent only institutional third-party net flows.
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Leading capabilities in private markets drive origination momentum
($ billions) | Private Originations | ||||||||||||
$30.5 | |||||||||||||
$27.7 | $26.6 | $26.5 | $28.4 | ||||||||||
$25.1 | |||||||||||||
$19.9 | $21.8 | ||||||||||||
$18.6 | $14.9 | $18.0 | |||||||||||
$15.8 | $15.2 | $13.9 | |||||||||||
$14.6 | |||||||||||||
$12.1 | $8.7 | $9.8 | $12.2 | $13.7 | |||||||||
$5.8 | $8.4 | ||||||||||||
$11.9 | $11.4 | $10.5 | $12.6 | $13.5 | $12.5 | ||||||||
$9.9 | $10.1 | $9.6 | |||||||||||
$6.3 | |||||||||||||
$5.3 | |||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 1H19 | |||
PGIM Real Estate Finance | PGIM Private Capital | ||||||||||||
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Strong, capital-efficient growth supporting margin expansion
($ billions)
Pre-tax AOI | Adj. Operating ROE(1) | Adj. Operating Margin(2) |
$1.0 | 35% | 31% |
$0.5
29%
15%
2010 | 2018 | 2010 | 2018 | 2010 | 2018 |
- Adjusted operating return on equity representsafter-tax AOI as a percentage of average attributed equity excluding accumulated other comprehensive income.
- Reflects Adjusted Operating Margin and representspre-tax AOI as a percentage of adjusted revenue. Adjusted revenue excludes passthrough distribution revenue and consolidations. Adjusted revenues are not calculated in accordance with GAAP and a reconciliation to the comparable GAAP measure is included in the appendix of the presentation. 2010 Adjusted Operating Margin has been restated from prior investor materials to conform to the definition herein.
10
Strategic investments are paying off and will result in additional operating leverage in the future
Adjusted Operating Margin
Margin | |||
expansion of | |||
(170 bps) | ~200 bps | ||
360 bps | |||
29% | 31% | ||
2010 Adjusted | Operating | Strategic | 2018 Adjusted |
Margin(1)(2) | Leverage | Initiatives(3) | Margin(1) |
- Representspre-tax AOI as a percentage of adjusted revenue. Adjusted revenue excludes passthrough distribution revenue and consolidations. Adjusted revenues are not calculated in accordance with GAAP and a reconciliation to the comparable GAAP measure is included in the appendix of the presentation.
- 2010 Adjusted Operating Margin has been restated from prior investor materials to conform to the definition herein.
- Includes both PGIM and Corporate initiatives.
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Key Messages
- Our scaled, diversifiedmulti-manager model and strong investment performance have produced consistent positive net flows that position PGIM as a winner against the backdrop of industry headwinds
- PGIM's success is underpinned by disciplined investments in broadening and globalizing our investment and distribution capabilities, and gaining recognition for our unified brand
- PGIM targetsmid-to-high single digit earnings growth through the cycle driven by our strong and growing position in attractive segments of the asset management industry
12
PGIM's vision and strategy for long-term success
To be widely regarded as a premier active global investment manager
across a broad range of public and private asset classes
1 | 2 | 3 | 4 |
Broaden and | Modernize our | Expand our | Selectively |
globalize our | multi-manager | reputation and | acquire new |
products | model | brand | investment |
capabilities |
Deliver superior risk-adjusted returns for clients
13
Disciplined execution on our strategic initiatives has generated $100 billion of net flows over the past 5 years
1
Broaden and globalize our products
29% of assets from non-U.S. clients, up from 11% in 2010
2
Modernize our multi-manager model
Built a broad set of vehicles including European Mutual Funds (UCITS), ETFs, Collective Trusts, and Retail Separate Accounts
3Expand our reputation and brand
Global brand launched in 2016; now ranked #12 by U.S. investors(1)
4
Selectively acquire new investment capabilities
Acquired London-based quantitative hedge fund(2)to broaden QMA platform
Note: All data as of June 30, 2019 and comprehensive across third-party institutional, third-party retail, and general account unless otherwise specified.
- Based on NMG Consulting Global Asset Management Study of asset management brands, September 2018.
- PGIM signed deal to acquire Wadhwani Asset Management on November 13, 2018.
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Key Messages
- Our scaled, diversifiedmulti-manager model and strong investment performance have produced consistent positive net flows that position PGIM as a winner against the backdrop of industry headwinds
- PGIM's success is underpinned by disciplined investments in broadening and globalizing our investment and distribution capabilities, and gaining recognition for our unified brand
- PGIM targetsmid-to-high single digit earnings growth through the cycle driven by our strong and growing position in attractive segments of the asset management industry
15
PGIM's winning business model
While many firms struggle for scale or performance in the face of industry headwinds, three winning business models have emerged
Margin 30%
For illustrative purposes only.
Specialized boutiques with | Very large public |
managers offering | |
strong investment | |
cheap index | |
performance | |
Global firms managing public and private assets with strong investment performance
Active public managers with
poor performance /
benchmarking-hugging
0% | Size proportional to |
Flows (% of AUM) | |
number of firms |
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Robust growth trajectory through cycle
($ billions)
Mid-to-high single digit earnings growth is expected to
Pre-tax AOI | be driven by: | |
1. | Proven ability to capture industry flows and market share in | |
areas where PGIM already has leading capabilities | ||
$1.0 | 2. | Operating leverageacross our business as we add to our scale |
3. Strong presence and focus in high-growth areas
$0.5 | • | Alternatives | |
• U.S. Defined Contribution and Retail | |||
• | International markets | ||
• | Scaled technology investments | ||
2010 | 2018 | 4. Market growth and portfolio level income(1) | |
(1) Includes equities and real estate market appreciation, dividends on equities, fixed income coupon reinvestments, and income on real estate properties.
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Growth opportunity: Alternatives
Market Opportunity(1)
($ trillion)
$21
$14
$11
$5 $6
$3
2004 2007 2012 2017 2020E 2025E
PGIM's Positioning
PGIM AUM | ||
Alternatives(2)(3) | Top 3 | |
$240 bn | ||
Real Estate(2)(3) | Top 3 | |
$148 bn | ||
Private Credit(2)(3) | Top 3 | |
$89 bn | ||
Infrastructure(4) | $22 bn |
Investments for Future Growth
Building out private credit capabilities (e.g., mezzanine, direct lending)
Further scaling and broadening PGIM Fixed Income's suite of hedge funds
Driving growth of QMA's global macro
and managed futures strategies
- PwC Asset & Wealth Management Revolution, published 2018.
- Data reflects AUM as of June 30, 2019. Alternatives AUM represents hedge fund, mezzanine and other private credit, real asset, and infrastructure products across all PGIM businesses.
- Rankings per Willis Towers Watson Global Alternatives Survey 2017.
- Infrastructure AUM includes private credit infrastructure and energy strategies, Jennison utility equity, natural resources, global infrastructure, and Master Limited Partnership (MLP) strategies as of June 30, 2019.
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Growth opportunity: U.S. Defined Contribution and Retail
Market Opportunity | PGIM's Positioning | Investments for Future Growth |
Enhancing dedicated coverage | ||||
$10 tn | #8by DC AUM(2) | of DC sponsors and consultants | ||
U.S. | $6 tn | Named Top 5DCIO manager(3) | Leveraging Prudential's | |
Defined | ||||
collective strength in retirement | ||||
Contribution | Leading capabilities to meet | |||
to scale target date funds | ||||
growing demand for retirement | ||||
2013 | 2023E | income solutions | Pioneer in direct Real Estate | |
investing for DC plans | ||||
Passive | 61%of AUM | 4thfastest organic U.S. mutual | ||
in Active MFs | ||||
ETFs | fund AUM growth(5) | Continue to build on strategic | ||
and Active | ||||
20% | ||||
partner status (e.g., Edward | ||||
U.S. | ETFs(4) | |||
Institutional approach to serving | Jones) | |||
19%$17 tn | ||||
Retail | retail intermediaries | Scale up suite of active ETFs and | ||
61%Active | ||||
Passive | Leading Fixed Income franchise | Retail Separate Accounts | ||
MFs | MFs & ETFs | meets investors' demand for yield |
Source: (1) North American Institutional Markets 2018; Cerulli report. (2) Pensions & Investments Top DC Money Manager's list, July 23, 2018. Ranked by total defined contribution (DC) U.S. institutional AUM as of December 31, 2017. (3) "The Dominant Players in 401(k) Land" by Institutional Investor, June 19, 2018. Ranking of Defined Contribution Investment-Only (DCIO) managers based on ratings from plan advisers overseeing at least $100 mn across multiple plans. (4) Morningstar data as of year ended December 31, 2018 (excludes money market funds). (5) Simfund, as of June 30, 2019. Ranking only references long term mutual funds and excludes ETF and money markets. Results may differ from PGIM Investments (Strategic Insight/Simfund excludes Day One and private funds).
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Growth opportunity: International markets
Market Opportunity
$3.5 trillion
Japaninstitutional assets (10% CAGR)(1)
PGIM's Positioning and Investments for Future Growth
- Top 3 foreign manager of Japanese institutional assets(2)
- Generated a total of $30 billion inthird-party net flows over the last 5 years
$11.7 trillion | • | 20 sales professionals covering EU institutions and intermediaries, doubled since 2013 | ||
Europe | UCITS assets | • | PGIM's flagship strategies delivered through ~30 UCITS funds | |
(10% CAGR)(3) | • | AUM from European clients grew by 14% CAGR over the last 5 years | ||
Emerging | $6.9 trillion |
institutional assets | |
Markets | |
(14% CAGR)(1) | |
- China: $23 billion AUM JV(4), up from $5 billion in 2010; deepening local coverage of top institutions
- EM investment capabilities: Top 5 EM active investment manager(5)with $44 billion across public debt and equities strategies
$1.0 trillion | • | Establishing deeper local origination footprint for private credit and real estate | |
Australia | institutional assets | ||
• | Hired local sales team to capture international opportunities with superannuation funds | ||
(12% CAGR)(1) | |||
Source: (1) McKinsey - data as of YE 2017; CAGR since 2011. (2) Nenkin Joho by R&I. AUM as of March, 31 2019. AUM ranking pertains to separate accounts and does not include AUM for
institutional funds. (3) European Fund and Asset Management Association's Quarterly Statistical Release published in 2019 - data as of YE 2017; conversion rate of EUR/USD 1.201 (YE 2017
from Macrotrends) used. CAGR since 2011 is calculated using EUR values of the total market. (4) AUM as of YE 2018. (5) Based on eVestment data as of YE 2018.
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Growth opportunity: Scaled technology investments
Making significant investments in new technology leveraging the
global scale of PGIM across the entire asset management value chain
Data Science | Robotics & Automation |
Evaluating how alternative data, artificial | Deploying robotic process automation to |
intelligence, and machine learning can be | enhance efficiency and improve controls |
incorporated into investment processes | |
Data Architecture | Digital Transformation |
Providing faster information-driven results | Increasing the effectiveness and efficiency |
using alternative data and cloud computing | of the institutional and intermediary client |
architecture | journey through digital capabilities |
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Key Messages
- Our scaled, diversifiedmulti-manager model and strong investment performance have produced consistent positive net flows that position PGIM as a winner against the backdrop of industry headwinds
- PGIM's success is underpinned by disciplined investments in broadening and globalizing our investment and distribution capabilities, and gaining recognition for our unified brand
- PGIM targetsmid-to-high single digit earnings growth through the cycle driven by our strong and growing position in attractive segments of the asset management industry
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PGIM Disclosures
This information has been prepared by PGIM, Inc.("PGIM"). PGIM is the primary asset management business of Prudential Financial, Inc.("PFI") and is a registered investment advisor with the US Securities and Exchange Commission. PFI, a company with corporate headquarters in the US, is not affiliated in any manner with Prudential plc, a company incorporated in the United Kingdom.
These materials represent the views, opinions and recommendations of the author(s) regarding the economic conditions, asset classes, securities, issuers, or financial instruments referenced herein. Distribution of this information to any person other than the person to whom it was originally delivered and to such person's advisers is unauthorized, and any reproduction of these materials, in whole or in part, or the divulgence of any of the contents hereof, without prior consent of PGIM, is prohibited. Certain information contained herein has been obtained from sources that PGIM believes to be reliable as of the date presented; however, PGIM cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. PGIM has no obligation to update any or all of such information; nor do we make any express or implied warranties or representations as to the completeness or accuracy or accept responsibility for errors.
These materials are not intended as an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services and should not be used as the basis for any investment decision. Past performance is not a guarantee or a reliable indicator of future results. No liability whatsoever is accepted for any loss (whether direct, indirect, or consequential) that may arise from any use of the information contained in or derived from this report. These materials do not take into account individual client circumstances, objectives, or needs, and are not intended as recommendations of particular securities, financial instruments, or strategies to particular clients or prospects. No determination has been made regarding the suitability of any securities, financial instruments, or strategies for particular clients or prospects. For any securities or financial instruments mentioned herein, the recipient(s) of this report must make their own independent decisions. Distribution of this information to any person other than the person to whom it was originally delivered is unauthorized and any reproduction of these materials, in whole and in part, without prior consent of PGIM is prohibited.
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PGIM Disclosures (continued)
© 2019 Morningstar, Inc. All rights reserved. The information contained herein (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance does not guarantee future results. Prudential does not review the Morningstar data and, for mutual fund performance, you should check the fund's current prospectus for the most up-to-date information concerning loads, fees, and expenses.
Securities products and services are distributed by Prudential Investment Management Services LLC, a Prudential Financial company and member SIPC. QMA, Jennison Associates and PGIM, Inc. are registered investment advisors and Prudential Financial companies. QMA is the primary business name of Quantitative Management Associates LLC, a wholly owned subsidiary of PGIM, Inc. PGIM Fixed Income and PGIM Real Estate are units of PGIM, Inc.
© 2019 Prudential Financial, Inc. and its related entities. QMA, Quantitative Management Associates, Jennison Associates, Jennison, PGIM Real Estate, the Prudential logo, and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.
These materials are for informational or educational purposes only. The information is not intended as investment advice and is not a recommendation about managing or investing assets. In providing these materials, PGIM is not acting as your fiduciary.
Mutual funds are not insured by the FDIC or any federal government agency, are not a deposit of or guaranteed by any bank or any bank affiliate, and may lose value.
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Reconciliation of Adjusted Operating Margin
($ in millions) | 2010 | 2018 | ||
Total Revenue attributable to the PGIM Division | $ | 1,973 | $ | 3,294 |
Less: passthrough distribution revenue | 120 | 112 | ||
Less: revenue associated with consolidations | 31 | 46 | ||
Total Adjusted Revenue attributable to the PGIM Division | $ | 1,822 | $ | 3,135 |
Adjusted Operating Income attributable to the PGIM Division | $ | 523 | $ | 959 |
PGIM Adjusted Operating Margin | 28.7% | 30.6% |
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Prudential Financial Inc. published this content on 13 August 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 August 2019 07:21:09 UTC