ICG plc

Good morning. Thank you for joining this webcast covering ICG's results for the 12 months ended 31st of March, 2026. The slides are available on our website, along with the accompanying results announcement. As a reminder, unless stated otherwise, all financial information discussed today is based on alternative performance measures, which excludes the consolidation of some of our fund structures as required under IFRS. This morning, I'm joined by our CIO and CEO, Bernardo Fest, and our CFO, David Bacardi. They will give an overview of our performance during the year, and we will then take questions.

And with that, I'll hand over to them all. Thank you, Chris. Good morning, everyone. Fall year 26 has been a good year for ITG. We reinforced our scaled competitive position, beat by some margin our fundraising targets, established a strategic relationship with Amundi, and more generally built on our track record of strategic and financial growth. Over the next 45 minutes, we will be discussing this in more detail. But first, I'd like to look at this year in the context of what I believe underpins ITG's success. It comes as no surprise to those who have been following us for some time that our first priority remains investment performance. As more capital comes into credit markets from non-traditional sources and new fund structure, I think this only becomes more important. We are not looking to offer clients beta or to take inconsiderate risks. We want to offer them consistent outperformance with a particular focus on cash returns, on realized performance, or in industry lingo, DPI. We're not looking to grow AUM at all costs. We are focused on delivering significant growth that is built on enhancing the track record and reputation of existing strategies and introducing new strategies with solid foundations, all with a view to generate long-term, sustainable, consistent FRA growth. And this approach is clearly leading to ICG gaining market share. And we have substantial amount of white space to grow into both in our flagships and our scaling strategies. If we continue to execute successfully on the opportunities ahead of us, this will inevitably translate into strong shareholder outcomes in the form of earnings growth and cash generation. In that context, our strategy is clear. We aim to reinforce our position as a leader in alternative asset management with a reputation for uncompromising focus on investment performance. We are doing that by scaling up established strategies and scaling out into new areas where we see client demand and attractive investment opportunities. This is reinforcing our position with clients. And during four-year 26, we gained 83 new institutional LPs, bringing our total to over 870. In my view, the number of alternative asset managers that have the potential to be globally relevant to clients is shrinking. ICG has emerged as one of the winners in this regard, and I believe we are positioned to continue that trajectory of outperformance. turning to for year 26 in more detail. As of 31st of March, 2026, we manage $126 billion of assets globally. Fundraising in the year outperformed our expectations at $17 billion, and fee-earning AUM grew 11% during the year. We grew flagship and scaling strategies, established an exciting long-term partnership in the wealth market with Amundi, And we continue to hire, notably broadening our insurance and North American coverage within our marketing teams and hiring into our European and Asian corporate investment teams. We are resolutely on the front foot during this cycle. That translated into strong financial performance. We generated $350 million of fee-related earnings, or FRE. That's up 23%. year-on-year. We are also reporting 127 million pounds of performance fee income and 861 million pounds of group operating cash flow, a record level by quite some margin. To dig a bit deeper into fundraising, which at $17 billion materially surpassed our expectations, we had our best year ever for real assets, raising $5.5 billion, and for scaling strategies more broadly, which include real assets, where we attracted $8.4 billion. In total, 34% of our capital came from North America. This is an interesting trend that I think is driven by two factors. Firstly, there's clearly a desire among some North American LPs to diversify into Europe, Across many of our strategies, we're natural beneficiaries of this. And secondly, it is testament to the years of effort we've put into our American marketing capabilities and to the increasing recognition of our performance and breadth. Turning to some specifics, Europe 9 has continued to raise very successfully, both in terms of size and pace, and today stands at over 10 billion euros. we will likely be oversubscribed and we'll hold a final close by the summer ahead of the initial fundraising period deadline. In a market environment where many require extensions to fundraising period, this is an impressive outcome. This is also ICG's first ever commingled fund to be bigger than 10 billion euros. It operates in a space that is increasingly attractive And I believe it will be the largest structured capital fund of its kind globally. We are also, as you know, a global leader in GDP-led secondaries. And I do not know of any other European manager with global leadership in two asset classes. So, positive developments for the flagships. We also had two scaling strategies that held final closes for their more recent funds. both at or even above their targets, and both in real assets. Infrastructure 2 and Metro 2 saw big upsizes, high re-up rates, and strong cross-selling from existing ICT clients, as well as good interest from new clients. Successful second vintages are a critical milestone. They are vital to cementing the reputation and position of a strategy. As a result, we can look confidently to meaningful growth in those strategies in the coming decade. This is a very promising development. We now have visibility on significant organic growth potential in the broad real asset space. And this could be further enhanced by expanding into adjacencies such as Infrastructure Asia, which we have recently launched, or others such as possibly infrastructure debt. Looking ahead, we have high hopes for LP secondaries, which will be in the market for four-year 27. It is also likely we will launch the six vintages of both strategic equity and senior debt partners later in four-year 27, although the exact timing of those is not certain. Given our fundraising cycle and which funds happen to be in market at a given point in time, We expect fundraising in full year 27 naturally to be below that in full year 26. But as David will talk about later, the trajectory of our fee-earning AUM, which drives our management fees and FRA, is only loosely related to in-year fundraising. It's really the fundraising cycle that matters. And on this, importantly, this year has anchored our performance for this fundraising cycle. And it's clear that we're well on our way to achieving our four-year fundraising guidance, potentially even a year early. Turning to investment activity, transaction levels remained healthy over the last 12 months. We deployed $14 billion across our direct investment strategies and realized almost $7 billion. The broader point, in my view, is that while there is always an element of lumpiness in these figures, we have remained very disciplined in our deployment across strategies. Our investment committees drive this culture, and during the year, these discussions have been some of the hardest in my memory. We have, for instance, clearly been more cautious than many in direct lending in recent years, Although in full year 26, largely by taking advantage of financing opportunities in our existing portfolio, this strategy has deployed close to $4 billion. And in secondaries, both GP and LP led, the opportunity set has been huge, but we are being incredibly and increasingly selective and in particular cautious around valuation. Given the macro situation, I do not anticipate a meaningful change in the investment environment during 4-year 27. And with dry powder of $36 billion, we are well positioned across all asset classes to invest through the cycle and to lean in hard when we see particular opportunities emerge. Ultimately, what clients care about is realizing performance, and cash return, especially in higher return strategies with no natural liquidity. These strategies, which represented three-quarters of our management fees in 4-year 26, have an established track record of market-leading DPI. During the year, we distributed $9 billion to clients in these strategies, further anchoring fund returns. On the right-hand side of the slide, We show how DPI for a number of these funds has evolved over time. This metric is clearly becoming more meaningful for clients and is a key differentiator for many of ACG's strategies, directly contributing to our continued success in fundraising. Meanwhile, our debt strategies have continued to perform strongly. I'm going to spend a minute on direct lending, our senior debt partners, the flagship strategy to remind you what we do, and given the noise in the market, what we do not do. 100% of our loans from SDP are senior secure, cash pay, cash flow-based lending. That way we're old school. We do not lend to value or to revenue. There is no pick or sub-debt in SDP. We have minimal software exposure. In the unrealized vintages, SDP 5 and 4, it's approximately 5%. And for the last two years, we have not written a single direct loan in the U.S. by choice. From a product perspective, we have no open-ended or so-called semi-liquid structures in direct lending. And the consequences here are twofold. Firstly, we are not exposed at all to redemptions. And secondly, we have substantial dry powder to deploy and take advantage of the cycle. And this conservative approach has not escaped institutional investors and is contributing to our enhanced reputation. Our CLO business, which is also not exposed to reductions, similarly been performing strongly. This year, we issued three new CLOs and are continuing to receive dividends in line with our historical average. So, in all, when I look across the portfolios and fund performance, whether in higher return strategies or debt strategies, I feel we are very well positioned to continue to deliver for our clients and to strengthen our market position and standing with LPs. That delivery and our clients' confidence in our future potential has enabled us to gain market share in recent years across both our flagship and scaling strategies. This slide is indicative only as market-wide data is never perfect or entirely comparable. But based on publicly available data, all of these strategies have grown faster than the markets in which they operate. But let me reiterate, and it goes back to my first slide, I view this as an output of our investment performance. Top quality returns to clients lead to growth. And I expect that to continue. Institutional investors, with whom I exchange all the time, remain committed to product markets and are looking to grow allocations with the right managers. However, from my perspective, they are increasingly focused on alignment of interest with GPs. They are increasingly wary of managers pursuing an AUM gathering strategy, They do not want their deployment cycle to be governed by the ebbs and flows of wealth capital and evergreen vehicles or to have to worry about potential conflicts of interest in allocations. In this respect, ICG stands in a differentiated position compared to many of our global alternative asset manager peers. Looking ahead, the opportunity set for us is huge. Based on our existing client base, Today, three-quarters are invested in only one strategy, and fewer than 20% are invested in two strategies. As demonstrated by the final close of Infra 2 and Metro 2 in real estate, cross-selling is becoming an increasingly meaningful part of our fundraising, along with our continued ability to attract new clients. I'm confident that today we have the investment strategies, scale, and client franchise to be beneficiary of institutions seeking to do more with fewer managers. To conclude, I'm very proud of the results we are reporting today. I view them as another checkpoint in the journey of profitable, scalable growth that ICG has been on for over a decade, and I see huge opportunity ahead. Importantly, our strategy is clear, aligned to what our clients want and how the market is evolving, and we have financial resources and people to execute on. And with that, I'll pass over to David.

Thank you, Benoit. I'm going to talk about our evolved financial presentation and then dig into our FY26 financial performance in more detail. But before that, I want to reinforce the link between the strategy that Benoit has just outlined and the financial results we're reporting. We have a broad and scaled range of investment strategies across multiple asset classes, which has led over the last five years to our fee earning AUM doubling to $87 billion at March 26, all organically. And due to our focus on growing higher return, higher fee strategies, we are seeing a very positive mixed effect in our management fee rate, which has expanded by 13 basis points over the last five years to stand at 98 basis points today. The link to our financial performance is clear, a diversified range of scaled and scalable strategies that meet our clients' needs, leading to growing fee earning AUM at attractive management fee rates. This resulted in management fee growth above that of fee and AUM. As our strategies scale up through multiple vintages, we see significant operating leverage. That link between our strategy and our financial performance has driven the evolution in our financial presentation that you see today, which focuses on three distinct related attributes of value. The first is fee-related earnings, or FRE, defined as the profit generated from the management fees less group cash operating expenses. This metric clearly shows the trajectory I was describing on the previous page of growing fee earning AUM, management fees, and operating leverage. Shareholders also receive performance fee income, which in our financials has no cost associated with it. And finally, we have the balance sheet portfolio, which co-invests alongside our clients in our funds, and seeds new strategies and products. Alongside these three metrics, we will also focus on group operating cash flow and net debt. Importantly, from a shareholder perspective, we are also reporting these on a per share basis. Put together, this financial presentation aligns with our business and the drivers of shareholder value. It's clear and simple. and it's comparable to other global alternative asset managers. In the coming pages, I will focus on each of these five components. Feedback on our FRA disclosure back in November was very positive, and of course, we will welcome any more thoughts on this evolution. As a result of these changes, we are updating our medium-term financial guidance. We are replacing guidance on FNC margin, with guidance that over the medium term, we expect FRE margin, excluding catch-up fees, to expand. Over the last five years, FRE margin has grown by 14 percentage points. The rest of the guidance remains unchanged. And as Benoit said, we're two years into our fundraising guidance and have raised $40 billion over the $55 billion. So we're on our way to meeting or exceeding this target. And we continue to expect performance fee income over the medium term to represent between 10% and 20% of our total fee income. So moving to full year 26 specifically, and starting with a snapshot of the financial performance, we are reporting FRE of £350 million, up 23% year on year. Performance fees were £127 million, including a £72 million transitional gain due to the change in recognition methodology announced in October of 2025. And our balance sheet portfolio stood at £2.6 billion. You can see these on a per share basis on the right-hand side of the page. At a group level, our operating cash flow was very high at £861 million. This was a key driver of reducing our net debt to £113 million, down from £629 million in March 2025, and our net debt to FRE now stands at 0.3 times. So before moving to each of these metrics in turn, I'll start with fear in AUM. This has grown 11% over the last 12 months, and today stands at $87 billion. We also have $19 billion of AUM not-yet-earning fees, which would generate approximately £120 million in annual management fees if deployed. And as Ben was said earlier, in-year fundraising only has a loose link to the in-year trajectory of fee-earning AUM. This is clear if you look at this over the last decade. Fee-earning AUM has grown every year, including through a series of macro shocks, which public market valuations and private market transaction activity saw appear as a significant volatility. Over the last decade, our fee in AUM has grown at an annualized rate of 17%, and over the last five years, at an annualized rate of 14%. The effect of fee in AUM growth and expanding fee rates is visible in our management fees. which for FY26 was £685 million, up 13% year-on-year in absolute terms, or 17% excluding catch-up fees. Over the last five years, management fees have grown at an annualised rate of 20%. Over that period, we've also seen meaningful shifts in the composition of management fees by asset class. As shown on the chart on the left, credit and private debt have grown more modestly over this period, while Scottish capital, private equity secondaries, and real assets have delivered significant expansion. And combined, our higher return strategies account for over 75% of our management fees. Looked at another way, the three scaling strategies that Benoit mentioned earlier, LP secondaries, real estate, and infrastructure, have become increasingly meaningful, Together, the three of them now account for over 20% of group management fees, compared to around 10% five years ago. This is important development. It reflects the success of building these capabilities organically, is evidence of the increasing diversification at scale, and gives clear visibility on the embedded growth potential within ITG today. Turning to FRE, which for FY26 was £350 million, or 120 pence per share, this is up 23% in the year and 30% annualised over the last five years, driven by high growth in management fees alongside strong cost control, with FRE operating expenses up 5% year-on-year. For FRE margin, excluding catch-up fees over the last five years, has grown from 33% in FY21 to 47% today. And as I said earlier, over the medium term, we expect to see continued expansion in that FRA margin. Performance fee income was £127 million this year, including a £72 million transitional gain due to the change in recognition approach announced in October of 2025. The majority of the transition gain, £49 million, was driven by the initial recognition in structured capital and secondary strategies, including Euro 8, SE4 and Mid-Market 1. Realised performance fees, that is cash received, came in at £96 million in the year, due to some large realisations of funds that are in carry. Looking ahead, as we continue to grow high return strategies, performance fees are likely to become a more visible and significant contributor to our top line. Moving to the balance sheet portfolio, which had an asset value of £2.6 billion as of March, our balance sheet exists to support the growth in our fee-earning AUM, which it does through two routes. Firstly, co-investing alongside our funds, which accounts for about 90% of the fair value, and secondly, by seeding new strategies and new products. As a result, the balance sheet performance mirrors that of the funds in which it invests. From a P&L perspective, over the last five years, it has generated an average annual return of 10%, including a 5% return for this financial year. During the year, all asset classes except debt generated between 5% and 8% returns, while debt returned negative £7 million, which is negative 2%, It was driven by a number of market-to-market movements within our CLO portfolio. This year's outcome, in the context of a challenging macro backdrop, underlined the diversification and the resilience of the balance sheet portfolio, which we expect to generate low double-digit percentage annualized returns over the long term. From a cash perspective, not only does the balance sheet benefit from the cash generation of our funds, we have also been deliberately reducing the absolute commitment from ICG PLC as strategies become more established. We have a proven track record of doing this, which you can see clearly on the right-hand side. As a result, organically growing strategies is cash intensive in the early years and progressively asset light as we move through the vintages. Doing this successfully is highly accretive to FRA per share, and the co-investment portfolio has become highly cash generative as vintages have progressed. This dynamic is now quite visible, with the co-investment portfolio generating an average net cash flow yield over the last five years of 10%. Indeed, as we believe we're in the early stages of a multi-year cycle in which the balance sheet could generate significant cash from our existing product set as older co-investments are realized, and funds currently be invested have lower absolute commitments from the firm. Of course, there'll be an element of lumpiness to this, but the structural trend is clear. Cash received from FRE, performance fees, and the balance sheet portfolio have each grown year on year in full year 26. This has led to a very strong year for the group operating cash flow, which totals 861 million pounds, compared to £533 million last year. And as a result of this profitable cash-generated growth, our financial position has never been stronger. We ended the period with total available liquidity of £1.5 billion, a net debt of £113 million. We have a very robust capital structure and a disciplined approach to managing both our debt and our equity base. So, drawing this all together, we have strategic and financial flexibility like never before to maximize long-term shareholder value. And we have a clear capital allocation priority to execute on that. Our progressive dividend policy continues, and our ordinary dividend of 87 pence per share for full year 26 marks the 16th consecutive year of growth. Once we reach the position of zero net debt, we will continue to allocate thoughtfully. In this regard, all options are on the table. Optimizing co-investments alongside our existing products and strategies. Seeding new products and strategies. Making strategic investments, whether in M&A or partnerships more broadly. And of course, returning capital to shareholders through dividends or buybacks. As a management team, we view these options in the round to assess what will generate the best risk-adjusted long-term growth in FRE per share. Taken together, these results give us confidence in the trajectory of the business and in the opportunities ahead. With that, I'll pass back to Chris.

Thank you very much. Thank you very much. Thank you, David. To keep things moving, we would ask that you please try to limit your questions to a maximum of two each.

An analyst can ask several questions through the raise hand function at the bottom of your Zoom screen or star nine filed in iPhone. And alternatively, people can submit questions through the Spark Live platform.

We already have a number in and I will start with Oliver Caruthers at Goldman Sachs. Oliver, your line should be open.

Morning, team, and thanks very much for the presentation. I just have one question. and it follows on from that slide 22, David, that you showed at the end. I guess if we think of part two here, that was hitting net debt of zero, which looks like you might be doing this year. So I'm interested a little bit in how you think this capital deployment priority might play out in practice. And I guess I'm thinking of this also in the context of the new FRE performance fees and balance sheet disclosure that you give. and the new guidance that gives alignment on this metric on an FRE per share basis. As you say, this aligns you to the global peer set. I think it also highlights how you traded a discount to this global peer set, and it sounds like you're very focused on closing that discount. So, you know, as you say, the balance you did at the beginning of this early year cycle of elevated cash flow given, you know, maturing investments and the lower commitment needs. So in the context of that, I guess, four-part capital deployment priority, I'm really interested in how you think about share buybacks in this context. Thank you.

Yeah, good question. I think a few things I'd say, I mean, firstly, just picking up on one of the comments you made or the patients you made, I think we're very focused on growing the business, investment performance. And as we said in our presentation, that will drive growth and positive outcomes for shareholders over the long term. That's what we are in control of. That's what we want to drive. And that's our focus, our investment performance first. The other things will follow. We think FRE for share and FRE in general therefore gives you a much clearer basis of comparison to global peer sets. That was one of the drivers of why we think this is an important way to exhibit the growth that we've already achieved and the growth potential to come. And then on capital allocation priorities, I deliberately made the comment that we're very committed to the progressive dividend and reaching zero net debt. Those are our near-term priorities. We're clearly not there yet in terms of reaching a net cash position. And given the operating environment, actually having strategic optionality opportunities And, you know, extra liquidity is not a bad thing. And so we don't feel sort of undue hurry around that. You're right. If you play the sport under reasonable assumptions, that will be something that plays out over the next year or two as a practical matter.

Yeah, I agree, David. And, I mean, we'll see. Time will tell. And, you know, as David said, you know, that's giving us optionality. It may be that we find ourselves in a very strong financial position exactly at the right point in the cycle. As you're aware, not everyone is showing the sort of performance that we are showing today. There is a lot of pain in the broader alternative asset management industry. This could create some opportunities for us. Historically, one, we've been cautious, and two, It's been made difficult by, as you pointed out, the fact that we've always traded at a meaningful discount to peers. But I could see situations where we could take advantage of the environment and perhaps accelerate our growth in some specific area. So that's certainly something that we're keeping a very close eye on.

Perfect. Thank you, Ollie. Let's now go, please, to David McCann at Deutsche Neumann. David, your line should be open.

Yeah, morning. Hopefully you can hear me okay. Yeah, two questions for me, really focusing on the new disclosures, if that's okay. So the first one really is, as with the changes that have been made, are you going to subsequently make any changes to the board and other key staff remuneration KPIs and like the new disclosures? And if so, what KPIs are now going to matter to the board and what hurdles need to be achieved? That would be the first question. And then secondly, just a more technical one really, about the definition of FRE that you've now struck. Can you just outline why you're not including share-based compensation, depreciation and amortization within the definition of FRE? And related to that, how should we think about the instance of the effective tax rate across the group, splitting them between FRE, PRE and the other components? Thanks.

Morning, David. Let me take your questions maybe in reverse order. So in terms of the technicals of the definition, we're using a definition that we believe to be quite comparable to market standards. Most firms don't include share-based compensation in FRE. It's meant to be more aligned to a cash view of the world, and shares obviously aren't cash. So in that sense, it's comparable. We do obviously break out all the components. So if you choose to reconstruct the measure a different way or adjust, that's obviously available to you as well. Tax effects are what they are. It tends to be more about the mix of investment returns versus fees, and obviously those are hard to predict in a given period. That effectively creates the ETR for the year. Again, you'd have to have a view on mix of revenue to really come up with that answer. And in terms of the board, obviously, we're not talking about the board here today. We're actually talking about, you know, external presentation of the FRA metric, the margin, and the guidance. But I'm sure in due course, you know, the performance measurement of the management team will be aligned to the way that we're talking about our medium-term guidance.

Thank you, David. Let's move on to Hubert Lam at Bank of America. Hubert, your line should be open.

Hi. Hi. Good morning. Just got two questions. Firstly, on costs, can you just give us your guidance on group cost growth for this year? I think we're 26, there's only 3% cost growth, which is better than expected, so just wondering how we should think about this year. Second question is on deployment. I think, Ben, I think you were a bit cautious on, correct me if I'm wrong, on deployment this year, similar to last year. Considering you have about $13 billion of dry powder and debt and the dislocation we're seeing in that market. Do you see possibly more opportunities to deploy that this year?

Thank you. Let me just take the cost question first, Hubert. Good morning. Yes, I think we've clearly got operating leverage in the business. We've been talking about that for some time. Three-quarters of our cost base, as you know, is people and people-related expenses, so that's really a view on how much that counts and compensation outcomes. And so we have good control levers around that. I wouldn't take 3% as new normal. I've been guiding more in the 5% to 10% range because we are clearly still growing the business. And as we said in our presentation, we will want to make selective hires, add to the platform, continue to improve the client experience, all of which implies some cost. But clearly we've got positive operating margin embedded into what we've already got.

And a question on deployment. As I mentioned during the presentation, discussions at investment committees these days are lively and interesting. If you think about it, we have to contend with an incredibly complex geopolitical environment, economic uncertainty, and you add to that the AI disruption and what this could mean for various industries. So, That creates quite an interesting environment. Within that, you know, listen, you know, our goal is to be finding the opportunities and finding opportunities that work, you know, long-term. We're investing for the long-term. And so we're looking through cycles. There are always opportunities. The answer will be different by asset class. I mentioned indirect lending earlier. So we've taken advantage of our existing portfolios. We've been doing this for a long time in direct lending. And so we've been taking advantage of our existing portfolios to add financings to companies that we know and with legal documentation that is quite favorable, particularly compared to what we see in the number of deals in the market these days. We also have a number of niche strategies, not in size because they've been growing in size, but certainly in their approach. There are flagship structured capital. I mean, it's precisely designed to deal with an environment like this one. You know, it's self-originated transaction. There are non-sponsored deals where we're supporting family owners and founder owners. So, you know, it requires a lot of origination capability, but that means you're less... beholden to the, you know, the broader buyout market in that cycle. So, you know, it's not a surprise I mentioned how successful we've been in fundraising there. That shouldn't be a surprise because that's quite an interesting space to be in right now. And we happen to be a global leader. So, you know, you have to pick, you know, pick your spots. I mentioned secondaries as well. There's a lot of deals on secondaries because obviously all the GPs are looking for some liquidity and LPs as well. Having said that, you know, there are still questions around equity valuations, and so we're very, very cautious. So, you know, this is an environment where, yes, you want to, you know, find the opportunities to deploy, but you also, you know, need to be conscious of the risk out there and remain quite selective and cautious, which has always been – that's what we're known for. That's always been our approach, so we're not going to move away from, being more on the conservative side and highly disciplined in the point.

Thank you very much. Moving on, Nick Harmon from City. Your line is open, Nick.

Yes, good morning, gents. Thanks for taking my questions. Can you hear me okay? Can you hear me? Hello? Yes, can. Ah, perfect. So thanks. Yeah, two questions from me. On the first one, I guess on the balance sheet, you've got the NIR targets, and I hear that you still expect to achieve double-digit returns over time, but does that imply, I guess, more volatility in balance sheet returns in the short term, potentially from debt returns? And I guess more broadly, it feels like you're trying to de-emphasize the balance sheet a little here. This is another strong set of results that have been overshadowed by the balance sheet. Maybe this is a question for another time, but have you considered other actions to minimize volatility in balance sheet returns? And then the second question I had was, you said that you see significant operating leverage and are targeting FRE margin accretion. You're at 51% today or 47% ex-catch-up fees.

uh affected at the end of your fundraising cycle broadly speaking but do you think where do you think this will reach by the end of the next fundraising cycle would 50 be a a reasonable assumption thanks okay let me let me take those so i mean firstly um we haven't changed our view on the balance sheet let's be let's be clear um we talk about double digit returns over the uh medium to long term that still remains our view um why is that because as we said The balance sheet is invested in the funds, and that's what the funds do over a long time horizon. So in substance, nothing has changed. This year was a 5% return. I don't think in the environment we're in, that should be massively surprising to individuals, and it shows the diversification benefit of the balance sheet, if anything, invested across multiple asset classes. And then on the margin, I tend to agree with your direction of travel in your statements. we are going to agree FRA margin over time. It will be lumpy in a given year because of the fundraising cycle and the way that management fees are recorded. But fundamentally and structurally, we can agree FRA margin from here, which is exactly why we put it into the guidance.

I think it's worth mentioning because it's not clear. I mean, obviously, it's in the data pack, but the balance sheet has very limited exposure to direct lending because we practically don't co-invest in the direct lending funds. because we don't have to, because LPs understand that the returns are not suitable for our balance sheet, so we hardly co-invest. And so the exposure is on CLOs, which we've historically disciplined ourselves to limit at around 10% of the balance sheet. So our exposure to debt instruments or debt strategies in the balance sheet is actually quite limited. I think there's a bit of a misconception, potentially a misconception there. And fundamentally, as David said, The balance sheet is essentially tracking our funds. And again, I think the linkage has not really been made. We wouldn't be fundraising and having the success that we've been having and that we've been showing during this presentation for a long time now if our funds weren't performing well. And that's what the balance sheet is invested in. It just mirrors that. So everything's medium to long term for us. What happens in a given year is largely irrelevant. But medium term, it will reflect what we are, you know, what we are doing in our funds, which clearly OPs seem to appreciate. Yeah, exactly.

And because you'll have seen the Converse portfolio generated for nearly 500 million pounds of net cash flow. So you should think of cash generation as well on that. Moving on comes time. Michael Thompson at Barclays. Your line should be open.

Good morning. Thank you for taking the question. A couple, please. The first one, then, while you were making some comments about the nature of private wealth and how your institutional angle is particularly strong, I was just interested in how we think about the Mundi partnership and the products you're likely to put there and how those will suit your more institutional focus and how you're going to change pieces around the investment process, if at all, around that. And the second one was just talking about some of the fundraising. You talked about the FY27 back-end, I think, strategic equity and senior debt starting to raise. That feels like a slight bring forward from, I think, previous conversations, but you can correct me, obviously, if I'm wrong. But given the employment environment was seeming, from your commentary, to be challenging still, I was quite surprised you would bring those forward in that environment. But feel free to correct me if I've misunderstood the previous position.

Okay, thank you, Michael. Two good questions. First of all, on Amundi, that's a really good question. And the main reason we entered into the partnership with Amundi is that we share a very similar view on how to approach the alternative asset class for wealth, which is largely not how it's been done to date, which is why we're going to take our time, by the way, to craft the product that we think are adequate and adequately protect the end investor. So, for instance, the evergreen vehicles, I don't think are appropriate for many of the asset classes in our world. They can work in credit and in LT secondaries, but with a number of caveats. And I'm not going to do a whole list, but for instance, I mean, I have some pragmatic rules. For instance, that if you have an evergreen vehicle, it should be investing in parallel to the institutional fund that you have, which no one does, by the way. This is not the way it's been done. and it has implications because it means that you're not going to be rushing to invest any money that's coming through the door in your Evergreen. You're just going to wait for the next deal that gets done. So you're going to be holding cash for longer, which has an impact on returns, but it's the right thing to do. So, yeah, this is one example, but, you know, we're putting a set of, you know, of our own rules and constraints in what we think is the right thing to do. and we'll only approach the market on that basis. There's another aspect, which is fundamentally, I mean, in both Mundi's and our view, is the long-term bigger price, but it will require education of the market, which is that in many areas of the market, particularly anything that has to do with retirements, with pensions, and especially in Europe, the education will be that some of these portfolios should have a long-term outlook and therefore be invested in, you know, long-term strategies. And for that, alternative assets are a very good way to diversify, but you need to explain that they're liquid and that you cannot magically create liquidity out of fundamentally illiquid products. So, that's what we're working on. I think, you know, I mean, I think long-term the potential is huge, but we're going to, you know, remain very disciplined in that way and, you know, And as a result, there is no inconsistency, because I think that was part of your question, with how we're approaching infrastructure, because in a sense, we're pushing wealth closer to how we're investing institutional investor money, which is as it should be. You're also avoiding all the potential conflicts of interest of allocation between buckets, which I think is a really bad idea to get into that. and we don't want to dip into that. So that's for how we're approaching the wealth opportunity with Amundi, but there's a lot of work going on. Just yesterday, we filed in Luxembourg with the CSFB to create the CCAP, which will be the umbrella CCAP for our VRS product. So things are progressing. On the fundraising front, you're partially correct. So on direct lending, I think we're pretty much on track with what we expected. It's always difficult to predict the exact timing because it's, you know, as you pointed out, it's correlated to deployment. But that's pretty much when we expected to come back to market with SDP, sometime this year or maybe early next year or so. You know, maybe we're a quarter ahead, but I wouldn't make too much of that. Strategic equity, it's true that we were perhaps a bit ahead of what we initially anticipated, which incidentally is why we thought for a while about launching a mid-market version of that strategy, and we decided to hold precisely because the large cap was going to come back a bit earlier than we thought, and we didn't want to create an overlap. We might come back to that in the future. But that's just, you know, for strategic equity, you know, Two deals will move the needle. So, you know, again, I wouldn't make too much of that because you're successful on two transactions closing and suddenly you're ahead of time or we could, you know, it so happens we're ahead, but, you know, you could be late by six months. It doesn't make much of a difference. So, yes, I mean, we're slightly ahead on strategic equity. In the scheme of things, there's a really change thing. What really matters is the cycle. is how much we raise in the next fund. We have a global leadership in that strategy. That fund is larger than that of peers globally by some margin. I'd like to maintain that head start. So that's going to be the goal for the fundraising of the next strategic equity.

Thank you very much. We have Hayley Tam from UBS. Hayley, I think you'll want to go. Or perhaps we don't. With that, I think there are no more verbal questions from the... Can you hear me now? Oh, yes, you can.

Hi, sorry. I did the classic. I forgot to unmute, so I apologize for that. Can I ask you two questions, please? Firstly, on the cash flow generation from the portfolio on the balance sheet, I think there was a significant realization of more than £500 million you flagged this year. Was that all from reducing the co-investments or optimizing the co-investments, or was there any particular realizations that we should be flagging? That's the first question. And the second one, just in terms of the balance sheet investment returns, 8% on structured capital and secondaries for two consecutive years. Now, can I just confirm what you said a few times? That is representative of what you're seeing on the flagship funds. And if so, how can we square that with the very impressive IRRs and MOICs that you report for those funds? Thank you.

Yeah, maybe I'll just take a realisation question, Hayley. Obviously, it's the totality of everything that's going on in the funds. that's generating that realisation. I described it as quite high because we had a good year for realisations across portfolios and therefore the balance sheet benefited as do LPs from those realisations. So that's why we had the higher elevated level of structural inflows. But I also described the trend. The trend is clear. We continue to allocate less capital to successive integers, which is what we're doing. the back book of current investments will be generating more cash and will be more positive to pay down the debt and do the other things we talked about. So it's more the trend and more the direction of travel, which I think was particularly interesting, but it was a high year for realizations from a balance sheet perspective.

The difficulty is always the same. It's very difficult to look at a one-year performance and draw conclusions on funds because And yes, you know, there is a link, but it's not an immediate link. I think I've mentioned before that there are a lot of things that come into play in the fund. So, structured capital, in structured capital, our performance is upper teams, right? So, this is upper teams over the life of the fund. From one year to another, particularly if you've had a number of exits, typically, because that's what accounting requires, The closer you get to exit, the more you converse towards whatever exit value would be. And so once you've achieved that, well, there's no uplift for a period of time because you've recognized it in the past. And also when you're deploying, you do not recognize any uplift in value for a year unless it's debt and you have interest and you have to recognize the interest accrual. But otherwise, if you have any equity component, our policy is we do not recognize any increase in value for a year And so, the more you deploy, the less of an increase you're seeing in your NAV, at least in the near term, and then you see that catch up later on. So, that's why it's very difficult to look at it in your, I think it's more helpful, and we provide some information on that, to look at some performance, because in the end, that's where the down sheet ends up reflecting. It just may be in different years or spread out over a longer period of time. But if the question is, are you seeing a deterioration In the performance of the underlying fund, the answer is no, absolutely not. We're not seeing that at all. Nor should we, in a way, because we're not experiencing a recession. It would be unusual if we were to see this at this point. Thanks.

There's been a written question around whether we see any merit in doing something along the lines the SRTs that banks have been doing around balance sheet risk transfer.

David, that's not something that we consider in the balance sheet. We can't. Just to be clear, that's not a financial decision. We can't. The balance sheet is co-investing in the fund. It's the alignment of interest. That's our co-investment in the fund. We are committing to the LPs to remain essentially, to keep skin in the game. So, we couldn't, through the backdoor, de-risk the balance sheet, i.e., you know, disalign ourselves with LPs. That's not what they want. That's not what they need, right? I think it's important to, really important to understand is LPs in our world are looking for alignment of interest. They're typically looking for 1% to 2% of co-investment in any strategy. Some of it is put in personally by the investment teams, but I can imagine if you're raising a $10 billion fund, the teams cannot put up 1% to 2%. That's why you need the balance sheet. But as a result, the balance sheet needs to remain on the hook. You can't suddenly start securitizing or doing some, you know, fancy off-balance sheet. You're risking.

Great. And there is one written question that we'll close with.

Benoit, your CEO review and your tone today has been maybe slightly more long-term optimistic on the opportunities ahead, particularly around the scaling strategies in for real estate and LP secondaries.

If you were to think five, ten years ahead, what could you do with the existing product suite of business?

Well, that's a bit of crystal ball. The reason I – maybe I sounded more optimistic. The reason for that is, as I pointed out – You really only know that a strategy has probably taken hold once you're through the second vintage. Raising a first fund, having a first-time fund close is incredibly hard, but even when you've done that, it's only once you've raised the second vintage, which is typically much larger than the first one, that you've properly established a team, established a credibility, you have an LP base, And you can then look at, okay, normally if things go to plan, normally you're just going to increase that strategy. And it so happens that in real assets, so both in infra and in real estate, hopefully in LP secondaries tomorrow, but we're not there yet in LP secondaries. But in infra equity and in real estate equity, we are now there. And that's why I sound a lot more confident because once you've reached that point, it's a lot easier to start thinking about, okay, I've raised the $3 billion plus equity strategy for Europe. It's not unrealistic to think that the next one can be $5 billion plus. It's not unrealistic to think that on the back of that success, I can start looking at Asia. Same thing in real estate. Maybe with an eye on the U.S. more than Asia in real estate. So, certainly, it's more credibly opening the door to growth, which is maybe why I'm sounding more confident. It's just it's easier to be more confident on those. Hopefully, a year from now or two years from now, we'll be able to say the same about LP secondary. And as a result, suddenly, that's creating quite a lot of growth potential, right? Because if you look at – you just put – You just put infrastructure and real estate together, and, you know, you put the two together, and in the next vintage, the two together, the two combined, could be as large as our historical flagship fund, as European corporates. And these are fees-uncommitted strategies, and so it's the same level of profitability. That's, you know, that's a bit of outrage.

Brilliant. Thank you all for joining us. Thanks for attending today. And this concludes the presentation. Thank you all.