Key performance indicators

We use a number of key performance indicators to measure our performance.

1. Investment performance

Our objective:

We target at least 60% of AUM to outperform benchmark or peer group over rolling three-year periods.

How we performed:

Three-year investment performance was strong in 2016 and has been above our target for the last five years.

Five-year investment outperformance was 85%.

Long-term performance:

Investment performance – Long-term performance (bar chart)

2. Net new business*

Our objective:

We seek to generate positive net new business in Institutional, Intermediary and Wealth Management.

How we performed:

We generated net new business of £1.1 billion in 2016. Institutional generated strong net inflows of £4.3 billion. Market uncertainty impacted client demand in Intermediary and we saw net redemptions of £2.9 billion. There were net outflows of £0.3 billion in Wealth Management.

Long-term performance:

Net new business – Long-term performance (bar chart)

3. Assets under management and administration*† (at 31 December 2016)

Our objective:

An important influence on AUMA is the level of markets, but we aim to grow AUMA over time in excess of market growth, through positive investment performance and net new business. Currency movements may also impact asset levels.

How we performed:

AUMA increased by 27% in 2016 to £397.1 billion, driven by net new business, positive investment returns, the weakening of sterling and acquisitions.

Long-term performance:

Assets under management and administration – Long-term performance (bar chart)

4. Net operating revenue margins* (excluding performance fees)

Our objective:

As a key driver of revenue, we focus on net operating revenue margins by product and by channel, which are calculated based on AUM. As Institutional, Multi-asset and Fixed Income have grown, net operating revenue margins have declined but we benefit from the greater diversity of our business.

How we performed:

In 2016, net operating revenue margins declined to 48 basis points*, in line with our expectations.

In the future, net operating revenue margins may continue to decline, reflecting changes to the business mix and pressure on fees.

Long-term performance:

Net operating revenue margins – Long-term performance (bar chart)

5. Total cost ratio*

Our objective:

We target a 65% total cost ratio, recognising that in weaker markets the ratio may be higher than our long-term target.

How we performed:

In 2016, this ratio at 64% was better than our target.

Long-term performance:

Total cost ratio – Long-term performance (bar chart)

† Before exceptional items.

6. Total compensation ratio*

Our objective:

By targeting a total compensation ratio over a market cycle we align the interests of employees and shareholders with our financial performance.

We aim for a total compensation ratio of between 45% and 49% depending on market conditions.

How we performed:

In 2016, this ratio at 44% was better than our target range.

Long-term performance:

Total compensation ratio – Long-term performance (bar chart)

† Before exceptional items.

7. Basic earnings per share

Our objective:

We aim to grow earnings per share consistently, recognising the potential impact of market volatility on results in the short term.

How we performed:

In 2016, basic earnings per share before exceptional items increased by 5%.

Long-term performance:

Basic earnings per share – Long-term performance (bar chart)

† Before exceptional items.

8. Dividend per share (in respect of the year)

Our objective:

Our policy is to increase the dividend progressively, in line with the trend in profitability. We target a dividend payout ratio of 45 to 50%. For more information, see (PDF:) page 104.

How we performed:

The Board is recommending a final dividend of 64.0 pence per share, bringing the total dividend for the year to 93.0 pence per share, an increase of 7%. This represents a payout ratio* of 50%.

Long-term performance:

Dividend per share – Long-term performance (bar chart)

* See glossary.
Following the acquisition of Benchmark Capital, this KPI was amended to include assets under administration in addition to assets under management.