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Operator: Thank you for standing by, and welcome to Navigator Global Investments Limited HY '26 Interim Results. [Operator Instructions] I would now like to hand the conference over to Mr. Stephen Darke, CEO. Please go ahead.
Stephen Darke: Thank you, operator, and welcome to everyone joining the call this morning to discuss Navigator's half year results for the 2026 financial year. I'm Stephen Darke, Navigator's CEO. I'm joined today, as per usual, by my colleagues, Ross Zachary, Navigator's CIO and Head of NGI Strategic Investments; and Amber Stoney, Navigator's Group CFO. Turning to Slide 4, the company snapshot. Navigator is the only ASX-listed company focused exclusively on partnering with leading alternative asset managers. We provide growth capital and strategic engagement to a diverse portfolio of 11 managers. As of 31 December, at the Partner Firm level, Navigator's affiliates manage over USD 84 billion, up 6% over the past 12 months. This AUM is managed across 42 investment strategies and invested via 197 products. These strategies typically have low correlation to global equity and fixed income markets and to one another. Turning to a summary of Navigator's first half 2026 financial results on Slide 5. I'm pleased to report that NGI continued to see strong top line growth and earnings momentum. Our ownership adjusted AUM increased 5% during the period to $29 billion. Higher management fees with higher fee rates and continued strong risk-adjusted investment performance, leading to higher performance fees drove Navigator's first half revenue to USD 108.3 million, up 17% during the period. The group's adjusted EBITDA was USD 48.2 million, a 17% increase from first half '25, leading to a 7% increase in adjusted EPS. On Slide 6, you can see Navigator's ownership-adjusted AUM over the last 12 months and since 2021. The consistent AUM growth over the past 5 years continues. Over the past 12 months, we saw a 7% increase in ownership-adjusted AUM, meaning an additional USD 1.9 billion of AUM. During 2025, we saw marginal net inflows across NGI, with the growth in AUM driven by continued investment performance from both business segments, but particularly across the range of Lighthouse strategies, which have performed strongly in volatile markets. Given the 2025 investment performance, recent and prospective new product launches across NGI's portfolio, more positive sentiment from capital allocators and a generally improving fundraising environment across the industry, we expect to see higher net inflows across NGI's Partner Firms in 2026. Turning to Slide 7. Alternative asset managers who aim to generate positive absolute returns for their investors across all market cycles have a strong alignment of interest in the economic performance of their strategies and the returns they generate for their investors. For Navigator's portfolio of managers, this is typically reflected in higher and more sustainable fee yields, which Navigator and our shareholders are a direct beneficiary of. Here, we show Navigator's underlying revenue composition, taking Navigator's share of the revenues of our Partner Firms, including Lighthouse on a calendar year basis. It's these underlying revenues that ultimately drive earnings for our Partner Firms and result in higher distributions to Navigator, but predominantly -- the latter predominantly occurring in the second half of every financial year. 2025 adds yet another year of strong underlying revenue performance to this chart, further illustrating the power and predictability of Navigator's resilient and growing model over the short, medium and longer term. After a very strong year in CY '24, total underlying revenues were up again in calendar year '25, with a higher relative contribution from base management fees and a lower contribution from performance fees. The average total fee yield, the light blue dotted line, over 5 years increased by 5 basis points to 1.14%, driven by higher management fees and relatively stable performance fees. NGI's Partner Firms have shown consistent growth in recurring management fee revenues, the dark blue bars, in line with higher AUM. The average management fee yield is 74 basis points within the range of 72 basis points to 75 basis points over that 5-year period, reflecting a marginally higher average fee yield than the prior corresponding period. Our Partner Firms have a consistent track record of producing strong risk-adjusted investment performance and hence, performance fees across market cycles and over multiple years. As a result of that, Navigator generates resilient underlying performance fee revenues annually as evidenced by the light blue bars. The performance fee yield, as shown by the gold line at the bottom of the chart, has averaged 39 basis points and in a relatively narrow range of 26 basis points to 47 basis points over that period, reflecting the relative stability and expected recurring nature of that revenue stream, especially through challenging investment cycles. The performance fee yield for calendar year '25 was 41 basis points, slightly higher than the long-term average, but lower than the prior year of 47 basis points. Unlike performance fees from strategies that are benchmarked to a market index, the absolute return nature of the strategies managed by our Partner Firms and the structure of their performance fee mechanics as we outlined at our November Investor Day, drive these outcomes and have now done so for longer than 5 years. Moving forward and based on the long-term track record you can see here, we think it is reasonable to expect performance fee revenues within this range, providing a resilient source of recurring income for Navigator. In the appendix, we present the latest numbers on the lack of correlation across the NGI Strategic Partner Firms. On Slide 8, we show the segment revenue composition for NGI Strategic and Lighthouse across management fees and performance fees. In line with growth since calendar year '21 and prior, Navigator has exhibited consistent continued underlying management fee growth across both NGI Strategic and Lighthouse, with an aggregate USD 216 million revenues generated for calendar year '25, up 9% on the prior year and slightly ahead of the 3-year growth rate of 8%. As you can see on the right-hand side chart, the rolling 3-year average performance fee revenue across the business segments has continued to increase and now sits at USD 101 million from USD 94 million in the prior corresponding period. After a historically strong calendar year '24, overall performance fee revenues decreased by 7%, with NGI Strategic generating performance fee revenues more in line with its 5-year average. It was pleasing to see Lighthouse performance fees increase again, up 23% by prior corresponding period and a 16% across the calendar year -- increase across the year -- calendar year. This result reflects an increasing trend towards the growth of Lighthouse's direct hedge fund business, which incorporates a performance fee model for investor alignment rather than a management fee-only model. As investors saw from our Q2 AUM and performance update released last month, rather than the reliance on an outperformance of any one strategy, Lighthouse is exhibiting strong risk-adjusted returns across almost all of its strategies, exceeding their respective 3- and 5-year averages in 2025. The broader diversification of the Lighthouse performance fee revenue stream is encouraging as we enter 2026. With additional new products and a continued supportive environment for delivering strong investment returns, we remain confident in the ongoing success and growth of the Lighthouse platform. Importantly, Navigator continues to see no fee pressure in either base management fee rates or performance fee rates across our Partner Firms. And in fact, we're observing increases across some strategies and new products as investors are prepared to pay managers who can truly generate non-market-linked investment returns across cycles. Amber will address the updated fee rates across our business segments during the presentation of our latest key metrics. Turning to Slide 9. You can see the earnings power of the diversified portfolio. In the first half '26, we saw strong adjusted EBITDA across both business segments. NGI Strategic increased its earnings contributions by 32% to $19.3 million due to higher cash distributions received during the 6 months. Lighthouse generated a record $28.9 million EBITDA during first half, an increase of 9% from prior corresponding period, driven by the higher management and higher performance fees across the platform, with the operating margin in line with PCP. As noted last May, while Navigator continues to benefit from a resilient and diversified earnings base, subject to market conditions and the timing of revenue receipts, Navigator expects full-year adjusted EBITDA to be lower than FY '25. This reflects comparatively lower investment performance in the NGI Strategic segment relative to the prior strong year, which may result in lower profit distributions in the second half compared with yet again a very strong H2 FY '25. We are very pleased with the ongoing consistent investment performance, management and earnings generations by our Partner Firms, which continue to prove to be some of the leading alternative asset managers globally in their respective area of specialty. There has been and there will continue to be material long-term value accruing to Navigator shareholders from the ongoing organic growth of our Partner Firms who continue to generate that performance and launch new strategies and also a focus on reinvesting our operating cash into new Partner Firms that we source the diligence and execute to further diversify and grow the NGI portfolio and increase the scale of our earnings. Ross will talk more about this, but we remain focused on continuing inorganic growth in 2026. Finally, it's particularly important in this investment environment of heightened volatility to recognize the value of diversification that is generated by a portfolio approach like that, that Navigator adopts. This ensures that overall resilience and consistency of earnings should be able to be maintained across market cycles. And secondly, with stable or indeed increasing fee rates and a resilient investment performance from strategies that are benchmark unaware, Navigator's business model can produce growing revenues, higher fee yields and the resulting increased cash earnings over the medium and longer term. Now, I'll hand over to Ross to provide the NGI business update for the half.
Ross Zachary: Thank you, Stephen. I'm thrilled to have the opportunity to review more about our business and highlight how Navigator's scale and diversification continue to drive value. On Slide 11, what is clear here is that Navigator operates and partners with large established firms who are leaders across a diverse range of unique alternative investment strategies. These businesses deploy well over $100 billion in time-tested strategies across global markets designed and refined over decades to generate strong risk-adjusted returns. Dispersion within and across asset classes, market volatility, interest rate changes, economic cycles and geopolitical uncertainty, all present opportunities to provide their clients strong risk-adjusted returns. These are scaled but growing firms with an average of over $8 billion of firm-level AUM. In today's industry, it's the scale and the related resources that are more critical than ever to attract and retain talent and generate strong results. Lighthouse and our Partner Firms, all benefit from these attributes. In addition, NGI and our Partner Firms have a clear competitive advantage through our partnership with Blue Owl's GP Strategic Capital division. Their 55-plus person business services platform continues to benefit us across various verticals such as capital introductions, operational and technology best practices as well as very targeted human capital advisory engagement. If you flip to Slide 12, we have a snapshot of the business composition today. Across the NGI Strategic and Lighthouse segments, our earnings are generated from over 40 alternative investment strategies delivered through almost 200 products globally. Not only is the business diversified across liquid alternatives, public and private credit, specialized private equity, real estate capital solutions and a variety of commodity strategies, but it also generates revenues through a wide variety of fee terms and structures. Today, an estimated 33% of ownership-adjusted AUM in the NGI Strategic segment or 13% across the entire Navigator business is in long-duration products with highly visible sticky revenues. We expect this contribution from this high-quality and stable earnings stream to continue over time as we add Partner Firms and the existing Partner Firms further evolve their product set. We cannot emphasize enough that the diversification available to us by partnering with independent firms has and will continue to benefit the company and our shareholders as we execute our growth initiatives. Please flip to Slide 13. We'll provide a few select highlights of activity during the period. Our Partner Firms continue to be at the forefront of their respective strategies and prove out why they are leaders in the alternative investment industry globally. During the period, we have seen our partners at 1315 Capital continue to deploy capital into innovative, growing health care companies as well as realize existing portfolio companies in a difficult environment. Another private markets Partner Firm, Marble Capital continues to illustrate their leadership position in a large, highly fragmented asset class with their unique strategy as they specialize in providing capital solutions to high-quality real estate sponsors in regions of America that are experiencing strong, resilient economic growth, coupled with an undersupply of housing. They recently announced that they deployed over $350 million in new investments in 2025 across over 8,300 units, illustrating their impressive ability to execute a focused and differentiated strategy at scale. Similarly, Invictus Capital Partners' highly differentiated approach to residential real estate credit continues to attract the most sophisticated long-term oriented institutional clients in the world. This is evidenced by a recently publicly announced mandate for Moore Capital. CFM, one of the Partner Firms acquired in the NGI Strategic portfolio, has continued to demonstrate their clear leadership position in the global hedge fund industry. With over $20 billion of firm-level AUM today, their investment results have remained exceptionally strong, which, as you can see here, continues to result in winning several industry awards in this past year. Please flip to Slide 14, and we can review the overall growth of the business this year. On Slide 14, you will see that excluding the sale of Bardin Hill, which closed in October, both the NGI Strategic and the Lighthouse segments generated positive organic growth in the period. We are very pleased to report this 5% increase in ownership-adjusted AUM or 7% when adjusting for the Bardin Hill sale in a challenging backdrop for the industry. Our private market Partner Firms are in the process of raising capital for their flagship funds, and we expect to see additional contribution from these efforts in the second half of our fiscal year. Lighthouse continues to demonstrate their long-term proven track record of innovation by creating and offering new hedge fund products, which leverage the breadth and sophistication of their platform to meet both existing and new client demand. It is important to remember that the underlying returns of Lighthouse, our Partner Firms and the public markets show very little correlation to one another. And therefore, we continue to see investment performance across the group as a key driver of AUM and revenue growth. Please turn to Slide 15 to review a cross-section of recent investment performance. This slide summarizes certain indicative performance across both segments. The NGI Strategic composite is comprised of flagship strategies in the NGI Strategic portfolio. And although it generated lower performance in calendar year '25 as compared to recent history, you'll see the 3- and 5-year performance not only illustrates the strength of the track record across this business, but also how well positioned they are for continued growth and performance. At Lighthouse, performance was particularly strong in 2025, with hedge fund products delivering attractive risk-adjusted returns and a broad contribution across their teams and sectors. From what we see, the environment to generate strong returns remains in 2026. This performance data clearly illustrates the power of our model and how Partner Firms that show low correlation to one another can generate the continued durable results for NGI shareholders over time. If you go next to Slide 16, we can touch briefly on our growth strategy and our focus on continued growth through acquisition. The criteria you see on Slide 16 are informed by our deep experience in partnering with, investing in and operating alternative investment management firms for over 20 years. We continue to build and work through a very active pipeline of established and growth-oriented firms who are acutely focused on positioning themselves for sustainable long-term growth. Today, this pipeline is broad and includes both firms that specialize in areas of private market alternatives that we believe our partnership may add value to, as well as certain liquid alternative firms that we think may provide diversification benefit and present the potential to enhance the growth profile of our business. Although we increasingly recognize a trend of larger alternative asset managers capturing investor market share, we are focused on a wide universe of specialized proven businesses that will capture share and add tangible value to their clients over time. When identifying new potential Partner Firms, our goal is to continue to increase the stability, durability and growth profile of NGI's earnings, which in turn strengthens our competitive position to make further acquisitions over time. Thank you. Amber, I'll turn it over to you for the financial results.
Amber Stoney: Thanks, Ross. As Stephen and Ross have covered, we've seen continued momentum across the business, and I'll now take you through the financial results for the first half of FY '26. I'll focus on 3 things: earnings outcomes, what drove them and the strength of the balance sheet supporting our strategy. As outlined on Slide 18, adjusted EBITDA increased 17% on the prior comparative period to $48.2 million, driven by a combination of very strong Lighthouse performance fees, solid management fee growth and higher distributions received from our NGI Strategic Partner Firms. Lighthouse performance fees were $39 million for the half, up from $31.7 million in the prior period, reflecting strong investment performance across the Lighthouse platform. Lighthouse management fees also grew by 8% on prior comparative period, consistent with its higher AUM. From NGI Strategic, we have received $22.3 million of distributions compared to $16.6 million last period. The majority of the increase came from our private market Partner Firms. These revenue increases were partially offset by higher costs. Employee expenses increased by $6 million, largely reflecting the higher bonus accruals tied to lighthouse performance fees. Other operating expenses increased by $4.4 million, driven by higher IT spend, third-party distribution costs and professional fees. In terms of the balance sheet, net assets were $795 million as at 31 December 2025, which is materially the same as it was at 30 June. On Slide 19, we look at both statutory and non-IFRS performance results. Statutory results show a net loss of $4.3 million compared to a significant profit in the prior period. This outcome is primarily due to movements in fair value of investments recognized through the P&L. Such variation in fair value from period to period is indicative of the significant growth in our balance sheet, with NGI currently holding $670 million in investments in our Partner Firms. Importantly, when we adjust for this significant non-cash item as well as other non-recurring items, adjusted EBITDA increased 17% to $48.2 million, highlighting the underlying strength of the operating performance across both the Lighthouse and NGI Strategic businesses. Adjusted NPAT for the half was up 7% to $29.8 million. While this also reflects improved operating earnings, it is impacted by higher interest costs and tax outcomes relative to the prior period. The adjusted EBITDA and NPAT measures are intended to reflect the underlying operating performance of the business for the half, while the statutory outcome includes items that can introduce significant volatility period-to-period given the size of the assets that we hold. Turning to Slide 20. We take a closer look at segment performance. This table summarizing 3 comparative periods shows how diversification across the NGI Strategic and Lighthouse businesses contributed to group earnings, with both improving on the prior period. Lighthouse delivered improved results from operations, supported by higher management and performance fees, with a small reduction in margin compared to the prior half due to increased operating expenses. NGI Strategic was the key driver of group profitability in half 1, with distribution income increasing 34% on prior comparative period and reflecting resilient receipt of earnings distributions from our Partner Firms, particularly in private markets. Looking ahead to the full year, with NGI Strategic expected to contribute a larger share of earnings in the second half, we expect the group's full-year adjusted EBITDA margin to trend closer to the FY '25 margin of 56% due to the expected lower weighting of Lighthouse in the second half results. Slide 21 focuses on the momentum in revenue growth across our key revenue streams. For NGI Strategic, we've seen strong and improving distribution outcomes over recent years, reflecting the quality and diversity of our Partner Firms and increasing exposure to private market strategies that generate meaningful cash earnings over time. This multi-year growth trend continued into the first half of FY '26, with distributions again increasing compared to the prior comparative period. That said, distributions can vary materially period-to-period depending on Partner Firm performance and operating outcomes, the strategy mix and product-specific fee realization. Total distribution income in FY '25 was particularly strong. And while we saw a further uplift in half 1, we note that distributions received in half 2 may be lower than in the prior comparative period. As Ross noted earlier, calendar year '25 composite performance for the NGI Strategic portfolio is lower than for the prior calendar year, and that is likely to have some impact on distributions received in the second half of our financial year. Given the inherent variability of underlying Partner Firm performance and their distributions, as always, forecasting NGI Strategic income for the remainder of FY '26 is difficult. I've previously noted that once again, Lighthouse has delivered strong performance fee revenues in the first half. We are pleased to see the 8% growth of management fees for Lighthouse. A change in AUM mix has improved the average management fee rate this half from 54 basis points to 56 basis points. And combined with continued AUM growth, this has underpinned this increase in fee revenue. The next slide, Slide 22, summarizes the key financial metrics underpinning profitability across both businesses. Starting with NGI Strategic, ownership-adjusted AUM was $11.7 billion at period end. The average management fee rate is approximately 1.2% per annum, which is up 2 basis points from 30 June. The average performance fee rate and AUM that can earn performance fees have held steady at 17% and 80%, respectively, and the 33% to 43% indicative margin range is slightly down on the prior year. Overall, the metrics for the NGI Strategic business remains strong, with investment performance and AUM growth through net flows being 2 of the key variables to impact future distribution outcomes. For Lighthouse, AUM was $17.3 billion, with an improved average management fee rate of 56 basis points per annum. Approximately 23% of AUM is eligible to earn performance fees as at 31 December, with almost all of that AUM at or above high watermarks. Combined with positive investment performance across key Lighthouse products for the 2025 calendar year, this has led to $39 million of performance fees recognized for Lighthouse in this first half. Across both segments, these metrics reinforce the scalability of the platform and the strong conversion of AUM into earnings and cash flow over time. And I'll finish with the balance sheet on Slide 23. We continue to operate with a strong balance sheet, supporting both organic growth and new partnership opportunities. Net debt to adjusted EBITDA was 0.6x at 31 December, well within our target leverage range of up to 1.5x. The group has access to a $100 million credit facility with a 2029 maturity, providing flexibility to fund growth initiatives as they arise. As announced in November, the Board has suspended dividend payments, with the last dividend payment paid in September 2025. This decision reflects our view that the best use of capital at this point in the cycle is to reinvest in growth opportunities and compound long-term shareholder value. To wrap up my section, we've delivered a solid first half with strong underlying earnings and a balance sheet that keeps us well positioned for the opportunities ahead. And with that, I'll hand over to Stephen to take you through the outlook and closing remarks.
Stephen Darke: Thank you, Amber. So as summarized on Slide 25, in the first half of FY '26, we saw consistent and continued financial outperformance driven by a step-up in the Lighthouse business and higher cash distributions received in NGI Strategic during the first half. We saw continued robust investment performance generated across our diversified portfolio of Partner Firms, especially across the Lighthouse strategies. NGI is operating in an environment that continues to benefit leading managers globally with higher volatility and dispersion driving an increased performance by leading alternative asset classes and a greater investor appetite for these strategies. NGI saw an increase in the average management fee rates across our business segments and the maintenance of our flexible balance sheet, the payment of the remaining deferred considerations on the 2022 transactions and the ongoing generation of significant cash flow from our portfolio. NGI is a scaled and diversified platform, which continues to exhibit organic growth across our portfolio of Partner Firms and is positioned for further acquisitive growth. Turning to Slide 26, which you have seen before, it shows how Navigator and its portfolio of Partner Firms have opportunities to drive growth and to compound earnings at a high rate of return. As we do so, the scale, diversification and resilience of our business increases. Navigator's growth will be driven by a number of key factors: one, growth in the broader alternatives industry in which we specialize, increasing demand for our absolute return-focused Partner Firm strategies. The 2026 investor allocation plans by asset class are set out in the appendix at Slide 33, with broad positive net interest in increasing allocations across alternatives, in particular, hedge funds and private equity. There are tailwinds supporting this increased interest and the ability for our leading alternative managers to maintain or increase fee rates, and they include growing investor appetite from wealth management investors and insurance firms globally and our Partner Firms operating in sectors, benefiting from rich trading opportunities and increased volatility, driven by elevated uncertainties in relation to the impact of artificial intelligence, geopolitics and the implementation of fiscal and monetary policies globally. Secondly, continued organic growth and increased scale of our Partner Firms, and that can be generated by strong performance, net inflows, new product launches and increasing their operating margins. Thirdly, such growth could be supplemented opportunistically, and it is by value creation from Navigator and/or Blue Owl's business services platform, which aims to accelerate partner firm trajectory. And not just some of the services that Ross mentioned earlier like capital introduction, there's also a dedicated AI advisory and data science group providing cutting-edge advice to all of our Partner Firms and all of their Partner Firms around how to address artificial intelligence in the new world we all find ourselves in. Finally, there's an addition of new Partner Firms can drive growth to expand the portfolio or indeed, if the opportunity arises to invest additional capital in our existing Partner Firms to support their growth. During 2025, we partnered with 13 Capital, and we have a high-quality pipeline of opportunities, but remain prudently focused on investments that satisfy our criteria. In terms of the outlook for Navigator for FY '26 on Slide 27, we expect our portfolio of firms to continue to perform across market cycles as they have done historically at both the management company level and an investment strategy level. Lighthouse continues to focus on its core mission of generating attractive returns primarily through idiosyncratic risk for its clients, providing relevant and innovative solutions for its clients across array of strategies and aligning as long-term partners for their clients' portfolio managers and other joint ventures. We believe this emphasis will allow Lighthouse to potentially add meaningful scale and diversification to the business in the future. Unlike other listed asset managers in Australia that may benefit from a sustained risk-on period for equity and/or bond markets, NGI's public markets' focused firms show resilience in more difficult time periods, which can provide diversification. In terms of execution of growth strategy, we are focused on acquisitive growth in '26 and to look to add new differentiated Partner Firms that meet our investment criteria and further diversified our earnings. The addition of new firms and the expansion of our portfolio will further Navigator's ambition to be the leading alternatives manager listed on the ASX and a leading partner to asset managers globally. In terms of funding growth opportunities, we're generating strong operating cash flow. As Amber says, we have a flexible credit facility only drawn around 30% currently and all deferred consideration paid during the year on our acquisitions with only an earn-out left in relation to 1315. In terms of our financial outlook, while Navigator continues to benefit from a diversified and resilient earnings base, subject to market conditions and the timing of receipts, we expect FY '26 adjusted EBITDA to be lower than FY '25, and it reflects the comparatively lower investment performance in the NGI Strategic relative to the prior year, which may result in lower profit distributions compared with a strong H2 FY '25. Importantly, though, we remain highly confident in the outlook for Navigator and its Partner Firms to deliver strong returns across the cycle, including during periods of market volatility. Before I conclude and open to questions, I want to revisit on Slide 28, why we think Navigator is a unique and compelling investment proposition as the only pure-play alternatives firm on the ASX. Navigator and our portfolio of global Partner Firms have deep expertise across diverse sectors of the alternative industry and established track records of generating returns. Management continues to focus on acquisitive growth, but on the right terms and with the right Partner Firms. Along with the consistent organic growth across the business segments, we continue our progress towards achieving our 2030 target of over USD 45 billion of high fee-paying AUM. Our portfolio is very well positioned to benefit from the significant structural tailwinds driving alternative asset management and over the medium and longer term to deliver superior performance for its shareholders. In particular, in this world of rapidly changing technology and the advancement of artificial intelligence, Navigator should be expected to benefit both in terms of investment performance, particularly with our underlying quantitative strategies and improved processes and efficiencies that are implemented and will be implemented at our Partner Firms. When advised by leading AI advisory and data science groups by the BSP, these factors have the potential to improve the growth trajectory and operating margins of our Partner Firms and Navigator over the longer term. Thank you for your time, everyone. I would now like to open the call to questions. Operator?
Operator: [Operator Instructions] The first question comes from the line of Nick McGarrigle with Barrenjoey.
Nicholas McGarrigle: Maybe just a question around, just to clarify the relationship with Blue Owl and so much is there involved with private credit investments. My understanding is that's a completely separate segment to the Dyal business effectively that you're exposed to. I have been getting a few investor questions about that. So, it was worth just getting you guys to clarify the current position that they're in on the private credit side and how that relates to your business?
Stephen Darke: Yes. Thank you, Nick. I, obviously, been following a lot of that press. I think everyone understands this. But Blue Owl hold their stake in Navigator by their first GP staking fund owned by institutional investors rather than the Owl balance sheet. That fund does not have an end date. Owl are working with their portfolio companies, including NGI to help maximize value for their own investors like any asset management business. Their manager sourcing and the BSP are all part of that GP staking business. It operates independently and not part of the private credit business. Just stepping back, though, and so really, very little, if any, impact on Navigator. I don't really want to comment on the specific private BDC capital return that's in the press right now as I'm not an employee or a spokesperson or an investor in that vehicle. But I would urge people to review very carefully what has happened. There's a lot of conflicting reports about the facts and the outcomes. But very, very clearly aware of all the noise and it has no impact on Navigator and the way that we work with Blue Owl as frankly, on that GP staking side, without a doubt, the global leader and strategic partner. Just more broadly, though, while we're on that topic, Nick, it's worth talking about Navigator and private credit. And I'll hand over to Ross. But even though, on Slide 12, we referred to sort of the asset class AUM as including public and private credit at sort of 31% of the portfolio, everyone should realize that most of that is really publicly traded fixed income as part of the hedge fund portfolios and maybe we should break it out going further. Marble and Invictus are not private credit. They're specialized real estate credit firms and both performing well in their sector. I think out of all of our managers, Waterfall, who I have an affinity for all the way back to 2005, given their focus on structured credit and ABS, they do have private credit strategies. They represent $13 billion of our $84 billion at a partner firm level. It's been challenging, but they've seen these difficult environments before, and they have a long track record of investing well for their investors. And I know that they're focused on ensuring their assets and portfolios are performing. So Navigator, not a large exposure to that space. And even within it, not every private credit strategy is the same, not every manager is the same. And there are opportunities, frankly, right now in some sectors and challenges in others. So, I just thought it was important to highlight that, Nick. I would say that what's happening, I think, globally around here is just, frankly, evidence of a liquidity mismatch between various GPs putting assets that are illiquid into strategies that are more liquid. There's always going to -- we saw this in the GFC. There's always going to be tension around that structure. Anyway, apologies for the long answer, but I think it's worth dealing with both U.S. private credit as well as Blue Owl in the same breath.
Nicholas McGarrigle: That's helpful. And then you've given, I think, the performance fee number for the strategic portfolio in the first half. and then we've guided -- you guided to potentially lower distributions in the second half as a flow-through of that and group EBITDA being down year-on-year. looks to me like the delta on the performance fee is only $15 million, which on a look-through basis doesn't imply that big of a step down for distributions in the second half. can you just talk through the building blocks to the assumption around the second half Strategic profit? Because I guess that has to come down quite a bit given you've had such a strong first half in Lighthouse.
Stephen Darke: Yes, there's a lot in there, Nick. Maybe I'll start and then Amber can perhaps address more on the building block side. I think there's a couple of slides in the deck that just -- that indicate. One of them is the composite return slide where you see across the Navigator Strategic portfolio numbers in more of the 6% to 7% net return range, which are, as Ross pointed out, lower than the 3- to 5-year strong averages. We have to remember a couple of things. That's only around $20 billion of the overall AUM that, that represents. Like, for example, the private market firms that we all hold are not represented in that composite return, and they're performing well. Ross can talk about that. The second thing I would say, if you have a look at those indexes at the bottom of the page, the indices there, the 6% is well in ahead because you have to remember, there's very little volatility, mostly alpha ahead of those hedge fund indices and also really ahead of Lighthouse's long-term averages. So, still a great result out of the portfolio. As a result of that, though, given the performance fee mechanics, you do see an impact on expected performance fee revenues that then translates through to earnings. But to your point about quantum, and I will pass over to Amber, out of those performance fee revenues, obviously, then bonuses are paid. And the great thing about the business models is that we have a variable cost base that's linked to revenue. So to the extent you do see top line revenues, performance revenues come down, we will see compensation relevant to those revenues also comes down, which helps buffer the margins and the operating -- the profitability at each of our Partner Firms and then ultimately, also at Navigator level. But Amber, do you want to talk maybe about the building blocks and how we're thinking about the second half?
Amber Stoney: Yes. I guess to probably zero in on Nick's point, looking at Slide 8, just the difference between the Strategic going from $87 million to $72 million, with that $15 million delta you referred to, the thing that we don't have the clarity on right now is how that revenue translates into profit distributions to the point. So, comp decisions are still to be made and depending on which managers are contributing to that and how they actually comp their staff in relation to those fees can have a different impact on distributions versus just pure change in revenue. So, we're still waiting to see some of those come through, and we'll have a clearer idea sort of as we normally do come April, May. And as you know, our usual practice is to give an update at that time when we've got more clarity on how that flows through to earnings.
Stephen Darke: I'll just supplement on that topic actually, while the operator gets to the next question. Back in May of last year, the investors may remember that during the earnings upgrade that we gave to the market then in relation to FY '25 that we called out that there was particularly strong distributions during that year, not something that can't be repeatable, but we did think there might be a little bit lower distributions in the year and we now find ourselves in a situation where that's the case. But none of it is concerning. And the market consensus, as you know, Nick, is around the $103 million to $106 million. We feel very good about that level. We just have to realize that unlike a lot of the long-only managers where performance fee revenues can go from 100 to 0 extraordinarily quickly, we can see a little bit of variability. And I do love Slide 7 because it shows that sort of range of performance fee yield, and you'll see that we're 41 basis points this year versus 47 last year. So, you've got a 6-point move. To Amber's point, it's got to play out to earnings, which will cut the delta. It won't be 15. It will be way less than that. But regardless, you can't imagine it. You can't expect it to go from the bottom left to the top right every single period. So yes, we feel good about this year in the portfolio, but we have to call out a slightly lower second half distribution versus, we believe, the prior corresponding period. Ross, we've crossed over into a lot to do with NGI Strategic in the second half. Is there anything you want to add to a very important question from Nick?
Ross Zachary: No, not too much to add. I think you guys covered it pretty well. My main point would just be to echo what you said, Stephen, which is despite a lower year on a relative basis, still a very strong year across the portfolio as a segment as well as the Lighthouse business, which again just shows the potential as well as this year's model playing out. So, happy to answer further questions though.
Operator: Next question comes from the line of Tim Lawson with Macquarie.
Tim Lawson: Can you just help us understand -- obviously, at 17% EBITDA -- adjusted EBITDA increase versus the only 7% at the adjusted EPS line, can you just talk about the moving parts across the 2 halves to make that impact?
Amber Stoney: Yes. So, below the line from an EBITDA perspective, obviously, the key impacts on that is depreciation, amortization, interest and tax. So, our interest expense is a little higher this period compared to the prior half. We've been more drawn on the loan facility comparatively speaking. So, we've ended up with a higher interest expense, which has contributed to that slight difference. I think our depreciation is also slightly higher. So as we continue to build like, particularly Lighthouse continues to build out its offices around the globe, we spend money on fit-outs and various equipment, and we'll depreciate that over time. So, we have seen a marginal increase in depreciation. And also, our tax outcomes can be a little variable, just the nature of the U.S. income that we get. We basically invest through partnerships that provide underlying information on tax, and that can get trued up from period to period. So, we've just had a bigger impact from a tax expense perspective this year as we've gotten updated underlying information through. So, each of those 3 are slightly higher compared to the prior year, which has created a 7% versus a 17% growth.
Tim Lawson: That's great. And just maybe some color on the fact that the facility was drawn more this half.
Amber Stoney: Yes. So, I mean, we basically paid out the remainder of the Invictus, which was almost half of what the original investment was in August. So, given our cash flow is always lower in the first half of the year and significantly higher in the second half of the year, we've drawn on the facility just and that's the beauty of the flexibility around that. So, we're continuing to pay it off. We've already paid down some of it. And as and when we get more distributions through, that will be paid down.
Tim Lawson: Okay. And then the second question just on the deals pipeline. Can you maybe, Stephen, talk a little bit about how you're seeing opportunities out there and Ross?
Stephen Darke: Yes. I'll hand that to Ross actually.
Ross Zachary: Tim, thanks so much for the question. I would start off just to say that there's really been no slowdown despite a little bit of choppiness as you guys covered in kind of private credit landscape headlines as well as continued, I would say, both optimism, but uncertainty in kind of private markets and private equity in general. The pipeline is full as ever, with the key theme of diversification. It is concentrated in private market alternatives. So, specialized private equity continues to be an area that we really find attractive to add, but we're also spending time in real assets and some areas in private credit. But as Stephen alluded to in the answer about Blue Owl, areas of private credit that, number one, are very specialized in nature, given our focus. But also we are really not looking at Partner Firms who are targeting the retail alternatives trend or kind of either in the BDCs in the U.S. or other vehicles you're familiar with in Australia to deliver that. These are mostly private credit firms that are both specialized and partnering with institutional firms -- institutional clients such as insurance companies and sovereigns and things like that. So it's attractive. And what I would say is, as Stephen said in the outlook, we think 2026 will be a year where we hope to continue to allocate capital in a similar fashion that's been working as you've seen with the private market alternative firms and the NGI Strategic portfolio. So, remain hard at work at a pretty exciting time right now.
Operator: Next question comes from the line of Fraser Noye with UBS.
Fraser Noye: Just a couple of questions from me. Stephen, just on the outlook for lower adjusted EBITDA in FY '26, it's consistent with your prior messaging. Can you just give us some color on the Partner Firms or the asset classes which are driving this? I know you've previously spoken about weaker commodities being a factor. Is that still the case?
Stephen Darke: Fraser, thanks for the question. As you know, challenging to speak specifically about managers, but I would say, yes, in certain sectors, and you just named one of them, overall, it's just been challenging. Let's just take commodities. Challenging to trade energy, to trade precious metals, to actually make money. I think it's not just one manager, it's a lot of managers across the industry globally. So, I would say that's the case. But like as you can tell by the sort of amount of AUM at Lighthouse that's above high watermark and also Ross can talk about the other strategies. And he also called out that really only one of our Partner Firms has a mainline strategy that's negative. All the others are positive. And I think that really is a good reflection on diversification and resilience. And our M&A, to Ross's point, is going to extend that and to increase that. But yes, there is a little bit of weakness in areas like that, Fraser. Ross, is there anything you want to add on that?
Ross Zachary: Yes. I mean, again, I also won't speak to any individual Partner Firms' performance, but mostly not because we can't, but also because it really is a portfolio approach. And we will see in any kind of 3-, 5-year period, a potential year where certain strategies would naturally just have a lower absolute return. Still, as Stephen said, doing their job, generating strong risk-adjusted returns in their particular specialty. But given the diversification across this, that will happen. And then in a year like this year, it just depends on the overall contribution. But just to reiterate, the momentum across these businesses is really strong. The performance outlook from an investment and financial receipts is really strong given the market environment. And we haven't touched on it a lot yet, but the investor appetite and outlook for allocating new capital into the strategies, including the one you guys have mentioned, is also really strong because the opportunity sets there. So it really is just about communicating clearly with yourselves and our other shareholders rather than anything indicative to the future outlook of the company.
Amber Stoney: Yes. I was probably also going to say, listening to ourselves, we might be coming across overly cautious, and that's not really meant to be the case. I think we're really just trying to reiterate the previous guidance that you pointed out, where we just want to make sure that we've had a really strong half and that it's a balanced look at the remainder of the year. So...
Fraser Noye: Understood. And just secondly, just keen to unpack the fair value adjustment to financial assets and liabilities. I appreciate this can be volatile period-on-period and is non-cash. But can you just give us some color on the assumptions that's driving this over the first half?
Amber Stoney: Yes. So, we have a process that every half, we use an external valuer to value the investments for us. They give us a valuation range, and we take a pretty disciplined approach about choosing midpoint unless there's something to indicate otherwise within that range. And one of the key inputs to that is underlying cash flow forecasts. And you can see that from the composite performance, that's one of the key investment performance that feeds into those forecasts. So the fact that we have a slightly lower calendar year '25 composite return versus FY '24 really feeds into how some of those models actually work. So, it's not that it's a long-term expectation of a decrease in value. It's really sort of a bit more of a mathematical function of the inputs that feed into that model from that perspective. And we take a pretty conservative approach. We use pretty discount rates that incorporate a fair bit of risk in them. So, we want to be quite conservative with our valuations from that perspective. And so it just does change period-to-period as some of those inputs change, including other inputs like market multiples, cost of capital, all of those sorts of things vary from half to half.
Stephen Darke: And just to add to that. And I'm by no means an accountant, but it's interesting in the Navigator's sort of financial accounts, you've got a number of managers who changes in unrealized valuation go through the P&L. Then you've got some other managers and actually, those managers go through other comprehensive income. Those managers were marked up on our private market side. So, our net assets were flat period-on-period. We want the market to look at this as a portfolio. Adjusted EBITDA -- sorry, statutory EBITDA last year was such a high -- I never quoted the number. I think it was $160 million, but we never used that number. We like to -- you look at a cash flow proxy and look for adjusted EBITDA and adjusted NPAT as a better way to look at the business. So yes, it's just a situation where I think that the reaction to the NPAT situation is not really reflective of the overall performance of the business. But we're very cognizant of the statutory result.
Operator: Next question comes from the line of Laf Sotiriou with MST Financial.
Lafitani Sotiriou: Just wanted to follow up, Ross, on some of the NGI Strategic portfolio potential acquisitions you're looking at. Could you give us a bit more color? Are there 2 or 3 live transactions that you're possibly looking at? Are any of them towards the latter end of BD, and what's the market environment like? Is it -- is there a shortage of opportunities coming being presented? Or is it price that's the issue? If you could just give us a bit of color about the market environment and just specifics around the number of transactions you're looking at?
Ross Zachary: Yes, no, absolutely. And Laf, thanks so much for the question. Maybe I'll start with the second, if that's okay, on market environment. From what we see, not only for ourselves, but across other groups we kind of speak with on a kind of collegial basis in the industry, 2026, there is actually a pickup in activity. I think across real estate firms and areas of real assets, firms are increasingly confident in their existing portfolios and outlook and therefore, seeking partners. Likewise, in specialized private equity, there's been both sector as well as asset class kind of pressure on them. And I think a lot of -- that's always been a big part of our pipeline, but I think we're seeing very strong firms coming out of that looking for a partner and ready to transact in 2026. So, that's quite active as well. And the overall outlook, just given all the uncertainties both I and Stephen mentioned on the call in the general markets have these firms on the front foot. They're speaking with institutional investors and other groups all the time, and they have a lot of demand, and therefore, they want to prepare their business with either balance sheet capital and/or a strategic partner to capitalize on that. So, it remains a really active industry overall in terms of finding strategic partnerships. In terms of our pipeline, like we said, it's probably -- I'm going to use rough numbers. Hopefully, it's helpful to illustrate it. Probably 70-30 private markets versus liquid alternatives, which is a bit of a pickup in liquid alternatives, quite frankly, again, because we're seeing firms in demand and growing and therefore, looking for a partner. And there are some areas such as some more specific sector long/short, some areas of quant that we're not in, some areas of credit, such as areas of credit relative value and also just areas of private/hybrid credit that we don't have represented that are really interesting. So, those are there. We continue to like areas of the private markets that are just specialized. So, that could mean more sector specialists like 1315 Capital in health care. but maybe areas of other broad sectors such as either technology, business services, defense, things like that. Those are the types of sector-specific private equity firms in the pipeline. And then we also like kind of growth and even secondaries when we can access them. So, there's a couple of those. I would say just being fully transparent, there's 2 to 3 opportunities that are developed, but maybe hedging, but also just being completely open and candid with you, Laf. There's always about 2 to 3 that are developed just given we're pursuing things. So, there's really no way for us to know that those will transact, but we're feeling really optimistic for this year that we can add to the portfolio. I hope that helps.
Lafitani Sotiriou: No, that does. And can I just follow up on Lighthouse, Stephen, just more so? There's a comment in there that active current pipeline focused on new products and institutional mandates. Does that still extend to possible joint ventures? If you could give us an update on that, please?
Stephen Darke: Yes, no, happy to do that, and I'll address the sort of the Fortress joint venture shortly. But yes, we're seeing elevated interest -- or Sean and team are seeing elevated interest at the Lighthouse level and are in advanced pipeline discussions in relation to North Rock's beta 1 product, which is sort of the combination of sort of select beta and alpha for institutional investors, seeing a pipeline of investors interested in investing in that product. Also interestingly, and it's the first time I've sort of heard this, but accelerated interest in some of the offshore hedge fund strategies. So certainly, according to Sean and the team, for those hedge fund platforms that had non-U.S. exposure, non-U.S. strategies, there was actually more alpha to be generated and higher returns for investors in either global strategies. So, for example, Penglai Peak, the Japanese multi-PM strategy that sits within Lighthouse, has seen some pipeline activity and interested investors in that product, which is fantastic. Also, despite the timetable being longer than expected, as you point out, there is continued progress on investor engagement on the Fortress Lighthouse multi-strat product. I think still -- I think it's been a little frustrating. And it's not really in the Lighthouse side, but really important to get that product structured to be able to scale quickly out of the gate. And I know there are cornerstone investors meetings happening, frankly, as we speak. I'd also, I think, you call out some of the customized mandates, a couple of pipeline mandates, large ones. Lighthouse may not win them, but large managed accounts, they're in active RFP process because to be honest, we're seeing, as you saw from that slide in the appendix, hedge funds are now the most sought after sort of allocation for 2026 by institutional investors according to Bank of America. So, I think in that situation, Lighthouse is very well placed to win some of those larger mandates. They're at a slightly lower fee level. They're pretty close to the average fee for Lighthouse, but we should see some of those execute during the course of '26. So on the sort of net inflows, new product side, Laf, that's a couple of touch points. Also, given how well the macro manager, which is quoted on Slide 15, has performed without 13, net, and that's in the normal strategy, the dynamic asset class of that product is actually up closer to 23% that is seeing interest that it hasn't seen for some time. The macro strategies are doing exactly what they should be doing in this climate. So it'd be disappointing not to see investor flow into that strategy. So, that's what really gave credence to the, I guess, more positive outlook during my first session. Next question comes from the line of Nick McGarrigle with Barrenjoey.
Nicholas McGarrigle: Just one follow-up. The newer investments, the private market firms, can you just give us an update, Ross, on progress there? Looks like the result there for the half was really strong. Was there a performance fee in that? Or is that now kind of a typical recurring type level of profitability from those firms? And I guess, the intentions or the plans for them to continue growing into '26 in terms of flows?
Ross Zachary: Yes, no, I'd be happy to. So if we think about those as Marble, Invictus and 1315 Capital, our newest partnership in aggregate, frankly, not how we designed it, but they all are raising capital right now. So it is hard to comment. They've also seen significant flows in this period. So, that contributed to the positive flow in the NGIC segment, but we do expect it to continue. And so if you think about between now and June 30, we would expect to see all 3 of those firms raise more capital. The distribution increase this year that Amber highlighted was a mix of increased FRE or management fee driven as well as some GP side, but nothing chunky to -- that would be any out of the ordinary. So, we haven't seen kind of a lumpy GP side overinflate that. So, we think the -- you could think of it as kind of a trend upwards as those have now scaled and continue to scale.
Operator: Next question comes from the line of Tim Lawson with Macquarie.
Tim Lawson: You just talked a little bit in the Directors' Report around the private market Partner Firms' distribution. It's obviously up very strongly for specific at 10.5% versus 5.5%. Can you just expand on the mix of that from crystallization versus distributions? And also any sort of color you can give on the NGI Strategic part, which you get in the annual report, but I don't think we get in the half year.
Stephen Darke: Ross, do you want to take that or would you like Amber to?
Ross Zachary: Amber, do you want to start and I can elaborate?
Amber Stoney: Yes. I mean, it's really consistent with what Ross just said, actually. So it's probably a combination of both, pretty similar on -- in terms of what's coming from, to your point, the distributions from management fee side as well as what's coming from the carry and GP realization. So, that increase is sort of roughly probably about 50-50 on both sides.
Stephen Darke: Tim, I was going to just as a follow-up there. I mean, we have received cash distributions after the end of the reporting period up until now of around about $12 million across the portfolio. But given the variability, that doesn't necessarily indicate anything in relation to the second half, but just updating everyone on cash distributions received post end of reporting period. I would also say that in relation, at least to Lighthouse, certainly, the second half of the year or the calendar year of 2026 has kicked off very well across all the strategies. We are seeing performance continue really from last year into this year. And as -- and I'm talking to Sean last week, until we get to midterms or discussions around midterms and the U.S. political seeing sort of second half of this year, the environment is pretty constructive for continued growth in those strategies that take advantage of dispersion and volatility. So, just a little bit of color for everyone in terms of how we're feeling about the environment, obviously, all subject to market conditions.
Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Stephen Darke: Thank you, everyone.