Partners Group Private Equity Limited

Good morning. Welcome, everybody, to the Q1 Princess Call. My name is Cyril Ripley from Partners Group, and I would like to introduce you today to Andrea and Federica. Andrea is the Responsible Senior Product Manager at Partners Group for Princess and knows the product inside out. She will be going forward to do investor relations together with me, and we will present today the Q1 highlights. Federica is the Responsible Senior Portfolio Manager at Partners Group for Princess and will present today the portfolio. With this, I already hand over to Andrea.

Thank you, Cyril. It is a pleasure being with you and the audience today. Before we start, if you would like to ask any questions during the webcast, please use the Q&A tool which you can find on your screen. We will make sure to answer you at the end of the presentation. In the interest of time, we will group similar questions and answer in one go. If we run out of time or you have additional questions, please don't hesitate to contact us by email at princess.partnersgroup.com or through the contact form available on the website. I am pleased to report that Princesses NAV developed positively during the quarter, achieving a NAV total return of 3.6% for the first three months. Value creation at portfolio level contributed 4.3%, while currency effects also supported enough growth. A number of portfolio companies contributed to the performance, with the largest three contributors to the NAV increase being top 10 companies for Princess. Namely, the recently announced sale of SRS Distribution, the second largest portfolio company, was the largest contributor to the NAV increase, considering the uplift to Princess' prior carrying value. Further, PCI Pharma Services, a global provider of outsourced pharmaceutical services in the U.S., reported double-digit revenue and EBITDA growth across all segments, while Vishal Megamark, a franchisor of hypermarket stores in India, continued to report strong financial performance. The share price total return over the quarter mirrored the NAV growth at 3.6%, closing March at €10.75 per share. The discount to NAV remains stable, keeping Princess in line with its peers. Portfolio activity was tilted to investments, with Princess adding Rosen and VelvetCare to its portfolio. As already informed in a previous update call, Princess has made an additional commitment to Partners Group Direct Equity 5 fund during the quarter, bringing the total commitments to €50 million. in terms of distributions, these were predominantly received from its direct investments. And towards the end of the quarter, the realization activity kicked off with the IPO of Calderma and the non-sale of SRS distribution. As far as the liquidity position is concerned, the cash balance was 1.5 million euro with an undrawn credit facility of 109.5 million euro. Now, as a reminder to shareholders, Princess maintains a credit facility for short-term liquidity management purposes. Finally, post-quarter end, Princess declared the first interim dividend of 35.5 cents per share, which will be paid to shareholders on 17th of June. Over the quarter, Print has completed the previously announced acquisition of Rosen Group and VelvetCare. While Rosen will be covered later in the presentation, I would like to mention a couple of words about VelvetCare. Firstly, Partners Group has developed a rigorous thematic investing approach, which involves years of focused research into long-term mega-themes underpinned by strong secular growth. One such theme relates to the bifurcation between premium and value offerings in consumer markets and the private label's growing role in the space. Now, one might wonder, what is private label? Well, private label refers to products that are produced by one company and subsequently branded and sold by another one. This allows the brand owner and retailer to offer products with their own branding and design without heavy investment in manufacturing. The segment benefits from several secular trends, including growing income inequality, leading to polarization of spend, growth of discount retailers, and increased use of outsourced manufacturing by asset-like direct-to-consumer brands. At the same time, private label offerings are increasingly sophisticated in terms of value quality segmentation and are enjoying an overall positive shift in perception. Such an example is VelvetCare. Headquartered in Poland, VelvetCare is one of the largest independent manufacturers of branded and private label hygiene paper products in Central and Eastern Europe. VelvetCare has a diversified product portfolio and a strong market position in its core markets. Moreover, it differentiates itself through superior production capabilities, best-in-class technology, and deep relationships with retailers across multiple countries. Partners Group will work with management to build on the company's strong position and drive growth. Key value creation initiatives will include expanding international reach, broadening the product portfolio with a focus on high growth categories, and making targeted acquisitions. In terms of distributions, these were predominantly received from the direct investments. In particular, 1.1 million euros stemmed from its preferred equity stake in Polyconcept, on the back of strong fee cash flow generation over recent quarters. By way of reminder, Polyconcept is a global supplier of multi-category promotional products, operating on five continents and selling in more than 100 countries. While 1 million euro was received from its investment in Global Blue, a New York Stock Exchange listed provider of VAT refund and foreign exchange services for international travelers. This was the result of 100 million US dollars strategic equity investment from internet and technology company Tencent and the refinancing of the companies that both occurring in November last year. The remaining balance of 3.1 million euro was predominantly received from the legacy portfolio and that investments. With this, I would like to hand over to Cyril to discuss our investment approach.

Thank you, Andrea. I would like to talk today quickly about Partners Group. As you know, the Board of Princes realized that Princes is the only product listed at the London Stock Exchange that does not have the name of the manager in the name of the vehicle. Does the Board of Princes ask the manager of Partners Group whether we are comfortable to insert our name, Partners Group, in the name of the product? Of course, he said yes, because at the next HM of Princes on the 21st of June, shareholders are asked to vote for or against changing the name from old Princes Private Equity Holding Limited to new Partners Group Private Equity Limited. Thus, I thought it makes sense to quickly talk about Partners Group. So Parts Group was founded in 1996 and today manages 147 billion of assets under management with over 1,900 employees in 20 offices worldwide. By far the largest asset class with 76 billion of AOM is private equity. The remainder is private infrastructure, real estate and debt. Most of our clients are pension plans and behind these pension plans are 200 million beneficiaries. That is why in the room where we make our investment decisions, which we call the decision room, we have a big banner over the large video conference screens stating, we are responsible for dreams. We once interviewed our end clients, meaning the beneficiaries, and we made a media out of it and showed it to all of our employees. We interviewed... 30, 40, 50-year-old teachers, firefighters, factory workers, nurses in hospitals, train drivers, bus drivers, you name it, and we ask them what their dreams are when they will retire. We realize the higher the return we achieve in our products, the more dreams our clients can fulfill when they retire. And we realize we cannot take too high risks because these people absolutely cannot lose their pensions. So that is why we decided at Partners Group to have a very prudent, very diligent, highly selective investment approach. For example, last year, we looked at 900 investment opportunities on the private equity direct side. But in the end, we only invested in nine companies. So that's only 1% of the deal flow. This also means we decided to broadly diversify our portfolio across vintage years, industries, geographies, and diversify also across many number of companies, investing typically only 1% to 2% of NAV in one single company. Frederica will talk about more of this later. This investment philosophy also applies to Princes, which of course also gets offered its fair share of pro-rata allocation to all new private equity direct investments companies the PG platform is doing in any given quarter. Some Princess shareholders are also pension plans, but many are not. But also the many wealth managers who hold Princess will appreciate their attitude of trying to achieve high returns, but at the lowest risk possible. Every asset manager has one slide showing how good they are, and this is our version of it. Partners Group is a public company itself, and with 38 billion of assets with market cap, we're one of the largest private equity managers now in the world, currently number four by market cap. But we're not just big. We also have a good track record. And, of course, every year we win many industry awards. But also, for example, a previous study resulted in Partners Group by our track record post-global financial crisis was the second best in the industry. Ten years ago, Prince's portfolio was 80% fund-to-fund and only 20% private equity direct. So in the past, Prince's could not fully actually profit from our track record. But going forward, Prince's will focus purely on partner school private equity direct investments. Does the famous slogan in the disclaimer, past performance is no indication of future performance? I think it's true here because I truly believe the future performance will be better because of the focus on partners group, private equity, direct investments going forward and because also lower fees because no double fee layer anymore on the fund to fund part like in the past. Now, private equity means you buy a company for $1 billion and sell it five years later for $2 billion in what we call a 2x multiple, resulting in a 15% per annum return. If you're holding periods eight years instead of five years, then you need even a 3x multiple to achieve a 15% per annum return. But how do we do this? Now, first, you need to find the right company. So you need to have a differentiated thematic sourcing approach. This means we deep dive into thematic research and identify high conviction sectors. I will talk about this more on the next slide. But doing your homework and performing the most thorough pre-buy due diligence you can possibly do is not enough. Once you own the company, you need to create value, which we will call entrepreneurial ownership. Before I joined Partners Group 23 years ago and found the love of my life, meaning private equity, I had a short affair with management consulting at McKinsey. But my lesson learned then was if your goal is to double or triple the enterprise value of a company in five years, this is not possible with just reducing the costs. You need to double or triple the revenues, which in turn will double your net profit. If you manage to increase your EBITDA margin and do some of the free cash flow you use to pay down some debt, you can even achieve a 3x multiple of the equity value. That is what we call transformational investing. So not just finding measures to achieve a 10% or 20% more EBITDA. No, this will be fine tuning. But we want to double or triple EBITDA. And this is what we call transformational. Now on thematic sourcing, 20 years ago, A private equity manager could just wait until their favorite investment banker gives them a call presenting the next private company, which is for sale, and you source your next investment. But today, the industry has really changed. Today, sourcing of new investments is much more complicated. At Partners Group, we have 550 investment professionals which leverage their internal and external network expertise to analyze private markets and are trying to identify the best themes to invest. In private equity, we have specialists looking at healthcare, goods and products, technology, and services. We call these our four verticals. within which we deep dive in these verticals. So within each vertical, you deep dive into themes like, for example, companies whose business model is to speed up the time to market in the pharmaceutical industry. But this is a multi-year process, so which means several years of preparation before the actual purchase of a company. Now, let's have a look at an investment partners group as a platform has done in Q1, and thus, of course, also Princess got its fair prorata share offered and invested as well. Our specialists in the services vertical started four years ago in 2020, looking at the theme called increasing quality and standards. And they identified a sub-theme called testing, inspection, and certification, in short, TIC. As typical for every sub-theme analysis which we do, the investment team mapped out the top 20 companies active in this field and identified Rosen as an ideal match with our criteria, which means it has to be operating in resilient, growing markets with intensifying regulatory scrutiny, clear sustainable technology leadership, and strong data. Rosen was a founder-owned business, so it's not owned previously by a private equity company. And whilst initially there was no appetite for the family to sell, our continued focus and persistence paid off, and we signed the investment late last year. But what exactly is Rosen doing? So Rosen Group has 3,800 employees based in Switzerland, clients in over 120 countries all over the world, And they are the clear market leader in mission-critical inspection services for energy and infrastructure assets. So, for example, they are using a so-called smart pig, which you see on the right hand, lower right side of the presentation. So, this device is called a smart pig, which is used to inspect oil and natural gas pipelines and in future hydrogen pipelines. They contain electromagnetic components such as ultrasonic sensors, radio frequency modules, gauge plates, and they can measure parameters such as diameter, curvature, thickness of the metal, pressure, metal loss, and temperature. In other words, they try to find a crack in a pipeline so that it can be repaired before the pipeline bursts. Now, I have no clue about the pipeline inspection business, but in my free time, I'm a passionate private pilot, and in the aviation industry, we call this preventive maintenance, meaning you don't wait until a part breaks, and therefore you repair or replace the broken part, but instead, you try to anticipate issues and detect and repair problematic parts before they fail. Rosen Group's in-house manufacturing, with over 90% of its technologies developed internally and 275 patents, has positioned the company as a dominant player, holding 40% of market share in North America and Europe, which makes it the clean number one in its industry. The company's future growth is supported by long-term structural drivers. Pipelines currently serve as the backbone of energy transport in many countries, and the aging asset base will require more and more maintenance and inspections. Additionally, with 80% of its revenues guaranteed through take-or-pay contracts, Rosen Group demonstrates a resilient business model, providing a high level of predictability for future cash flows. Just look at one key figure on this slide. 15 years average client tenure says it all. Our investment team has identified potential value creation through the mixed shift towards a new technology called EMOT, which stands for electromagnetic acoustic transducer, which is an ultrasonic testing technique. with imminent process readjustment, potential monetization of data, which actually belong to Rosen, so the data they inspect belong to Rosen, not the company which is actually paying Rosen to do the inspection, and the possibility to leverage on artificial intelligence and machine learning going forward. So with this, it's my pleasure to hand over to Federica, Responsible Senior Portfolio Manager for Princes, to talk about the portfolio.

Thank you, Cyril, and good morning, everyone. I'm Federica Cazzaniga, Senior Portfolio Manager of the Partners Group, and I'm responsible for the portfolio construction, implementation, and management of Princess Portfolio. It's a pleasure for me to be here today, and I will provide an update on Q1 2024 developments. Many of you will already be familiar with Princess portfolio composition, which is designed to reflect the company's goal, that is to provide access to a high quality portfolio of direct private equity investments with broad sector and geographic diversification. With over 96% of the portfolio in direct private equity investments, Princess has now exposure to more than 70 individual companies operating across most economic sectors. yet with a tilt towards the foundational resilient industries where Partners Group focuses its thematic research, as Cyril just outlined. These are mainly industrial, healthcare, and consumer goods, with these three sectors representing now over 70% of the portfolio NADs. There have been no changes in our top 10 portfolio companies during the first quarter of the year. These companies continue to represent just over 45% of NAV. From a portfolio construction standpoint, we tend to size investments at approximately 1% to 2% of portfolio size at entry. And any higher exposure, like the one you will see here for our top holding, is the result of performance that compounds growth. resulting in higher energy share for these assets. It is, for example, the case of PCI Pharma and SRS Distribution, where our investment has grown fivefold during our ownership period. Another way to look at portfolio composition is through the lens of vintage year exposure. This is not only a way to spread risks across macro and market environments, but also a key driver of portfolio liquidity that ultimately underpins portfolio performance over time. As you can see from the pie chart here, the portfolio comprises a very well-balanced and attractive mix of more mature assets, as well as companies that are in their prime value creation phase. Approximately 50% of NAD was invested before 2019, And it now represents the part of the portfolio which is closest to its realization phase. These are mostly companies that we have been proactively positioned for exit or even partially realized, like it's the case for PCI, pharma, and again, SRS distribution. Not less important is, however, the other half of the portfolio here on the left-hand side of the pie chart. These are younger assets where we are all hands on deck in our value creation journey. You will see a few example here, and some of them we've already covered in previous update calls. But one I would briefly highlight is SureWorks, a manufacturer of technical safety gear, tools, and equipment that improve workers' safety, productivity, and wellbeing. We invested in the company in December, 2022, and during the first 12 months of our ownership, Partners Group has already been working very closely with both management and the board, focusing on the company's e-commerce capabilities, as well as the data-driven approach to increase cross-selling effectiveness and other several operational and supply chain optimization measures. And our work with SureWorks is already playing out, with double-digit 2023 EBITDA growth and further margin improvements to over 25% for this company. This is of course just one example, but it is arguably representative of the value we are creating within the portfolio more broadly. And if we turn to the next slide, Here we have a snapshot of the portfolio NAV broken down by the TVPI mark, so our money multiple, which can be seen effectively as a proxy of our value creation initiative and entrepreneurial ownership being reflected in company's values as it is today. First and foremost, I'm pleased to report that the vast majority of our portfolio has strong fundamental growth and over 90% of NAV is currently marked above one. In fact, the weighted average multiple across the portfolio is even over two times, which is, again, as Cyril mentioned earlier, our guiding line in terms of what we aim to do, at least doubling our invested money during ownership. And if we exclude assets whose performance is too early to be assessed, so most recent investments, almost 50% of portfolio NAD is outperforming our base case underwriting plan at entry. And a further 45% are fully on plan, with less than 5% of Princess NAD falling below our initial expectations. It is also worth noting that our underperforming assets represent a limited set of portfolio investments, where negative news has been largely reflected already in the valuation marks, and we do not see these companies' significantly impacted performance going forward. Indeed, if we exclude the limited number of companies currently marked below 0.5, so the 1% of asset NAV you see here on the left-hand side of the chart, we notice a clear correlation between the holding period of our assets and their valuation marks, suggesting that Partners Group continues to compound growth throughout the holding period all the way through realisation. In summary, we take the solid Q1 2024 performance of the portfolio as an encouraging sign of more positive news to come, with good momentum on the exit side, as I will touch on later, that validates our valuation marks, suggesting potential buyers see at least as much value in our assets as what we see today ourselves. Before moving on to an exit update, it is perhaps worth spending a minute on financing markets. Indeed, our higher costs and lower availability of that financing has been one of the drivers or lower transaction volume in the market over the past 18 months. In a time of suppressed investment and exit activity, we've spent time to focus not only on thematic research and on value creation, but also on proactively strengthening the capital structure and resilience of our companies so that they can best continue to weather capital market challenges as well as being attractively positioned for exit down the line. This slide here shows a snapshot of the private equity portfolio of Partners Group Direct Platform, which is a broad reflection of Prince's portfolio itself. And as you can see, despite tight financing markets, our teams have been actively managing the maturity profile of our company's debt, refinancing and extending maturities, whereby now over 70% of our debt matures beyond 2028. Not only that, but almost 90% of our company's financing is Covenant Lite. And also, we are well hedged in terms of interest rate exposure. And we are now 65% hedged in terms of our interest rate exposure at the portfolio level. A portfolio so well positioned in terms of capital structure also means that our capital market team can spend time assisting the investment teams on new transactions to develop financing solutions for new opportunities that we look at. And Rosen is a clear example of these, where we arrange a total debt package in excess of $1.5 billion across a term loan and a revolving credit facility. In particular, the term loan saw strong demand from banking counterparties, resulting in very borrower-friendly terms, but also in a margin that tightened to levels that we have not seen in months, effectively pricing at 350 basis points margin, 75 basis points below our underwriting case, representing over 70 million savings for the company in its financing. A strong capital structure is also critical to make our assets attractive to new buyers. And the proof is in the pudding in the case of Civica. As a portfolio company, it's a global leader in public sector software whose exit was signed in Q4 2023 after we refinanced over £1 billion debt by working with a large group of direct lenders to create momentum and be able to drive terms. In this instance, we addressed the upcoming 2024 debt maturity with a Covenant Lite Unitrans, but we also secured a large unfunded acquisition facility to allow for continued M&A activity. But most importantly, we had made the structure fully portable, meaning that the new acquirer, in this case Blackstone, could retain the financing. So in an environment where financing is hard, it provides certainty on terms and facilitates exit processes. And talking about exits, on the following slides, I prepared a full breakdown of fully realized private equity direct exits within Prince's portfolio since inception, where Partners Group was the majority lead investor. And if you compare this chart to the bar chart I showed just a couple of slides back, you will notice the distribution here is skewed towards higher outcomes. And this is exactly what we want to see when looking at realized exits. So higher money multiples upon realization. In particular, 85% of our realized exits were above the sort of symbolic two times multiple that we set ourselves to achieve. And the realized investment-weighted money multiple was well in excess of three times. And while we are very well aware that fast performance does not ensure future results, our historic culture record is a testament to partners' group ability to create value over cycles, but also to realize it when the time is right. And today we're confident in the high quality of our portfolio companies, their operational and financial strength, and also resilience, just as we've shown before. And this makes them very appealing to potential buyers. Our confidence is also further strengthened by the positive momentum we've seen over the past 12 months, where we have realized either partial monetization or full exit for a number of our portfolio companies. Liquidity events like partial realizations and dividend recaps have been supporting portfolio liquidity with smaller but regular cash flows, while the sales of Hoffmans and Civica returned circa 3% of portfolio NAV over the past six months. Further, during the first quarter of 2024, we announced exits of two of Prince's largest holdings, Calderma and SRS Distribution, which together accounted for approximately 9% of Prince's NAD. So let's spend a moment to look at these two companies together, their story, but also what their exit means for Prince's. Galderma is a recognized global leader in the dermatology space, which was formed from the carve-out of Nestlé's pharmaceutical business in 2019. Partners Group had done significant thematic research on the derma market in previous years and invested at the time of the carve-out. Over the past four years, the company delivered strong revenue and EBITDA growth of approximately 10% per annum and continued to grow its market share through product innovation, geographic expansion, channel optimization, and leveraging portfolio synergies. Last year, in 2023, Partners Group made an add-on commitment to Gelderma, which used the additional capital to deleverage and optimize its capital structure once again, creating more opportunity to invest in growth, but also position for headquarters. The company's IPO was announced in March 2024 and priced at the top end of the range, Stock rallied 20% on its first day of trading, with a closing price fully aligned with Partners Group's latest valuation. Princess will gradually sell down its position over time together with Partners Group, and no meaningful cash flows have been received to date on these exits. However, market pricing as well as current trading further confirm the quality of the asset and also cement our fair valuation approach. The other company we exited this quarter was SRS Distribution, another asset that grew significantly during our holding period, which started in 2018, when we first invested in what's one of the largest distributors of roofing products, landscaping, and pool supply products serving the United States. SRS has materially outperformed our original investment case, thanks to a combination of both organic and inorganic growth, supported by margin improvements. The company was acquired by Home Depot for over $18 billion in March 2023, representing a premium of over 30% to our latest valuation mark and a multiple of money in excess of five times. Prince has already received distributions from SRF in an amount close to its original investment, also thanks to the partial sale announced in December 2023. The full sale to Home Depot is expected to be concluded by the end of 2024, with Princess receiving approximately €70 million additionally upon completion. We have here two very different companies operating in different market segments and sectors with different exit routes, yet they both share a common denominator of proven market leadership, undisputed quality and outperformance, that are reflected in a successful exit outcome that we realized for Princess. As headline-grabbing as these two processes might be, we should not overlook the significant potential that remains within Princess' portfolio as of today. As I mentioned, the portfolio comprises a meaningful number of companies that are both mature and also well-performing. These are fundamentally healthy companies where we have continued to compound growth, and prepare for exit. I've included here just a few examples where exit processes are well underway that in aggregate represent approximately 10% of Prince's portfolio NAD as of the end of March. A few more processes have also been initiated whereby we expect portfolio realizations to gradually revert back to the historical average levels of 15 to 20% NAD per annum. Now, rather than focusing on each of the four specific companies that I've listed here, I would like to draw your attention to two points. The first one is the consistency of operational growth that we achieved for these companies in a relatively challenging macro environment where these companies have continued to grow a double-digit EBITDA rate. But also the second point is the diversity of our exit pipeline, which spans across sectors, regions, exit types, where IPO is perhaps the preferred exit option for a larger, more mature company, and trade sale might be the best option for, for example, our veterinary clinic platform in this case. We continue to weigh all exit options depending on size, type, and maturity of businesses. I'm aiming to find the right owner to continue company success, but also the one that provides the best possible outcome to our investors. continue to realize positive performance at the portfolio level. I will now hand it over to Andrea to summarize our discussion today before we open it up for audience questions.

Thank you, Federica. Now, before we move on to the Q&A, I'd like to leave you with the following key points. First of all, Princess provides shareholders with exposure to Partners Group direct private equity investment strategy, participating in transactions alongside some of the world's largest institutional investors. Partners Group is a thematic investor, focusing on investments in companies where growth is underpinned by long-term transformative trends. We bring extensive resources with a global team, over 200 investment professionals supported by a global network of external industry advisors and operating directors. Prince's portfolio demonstrates diversification, providing investors exposure to companies operating in a variety of industries and jurisdictions. We have built the portfolio over time and we've done so prudently, achieving a very good vintage diversification. We have an attractive mix of mature assets, but also assets that are newer in value creation stage and that gives us sustainable performance over cycles. From an investment perspective, we continue to focus on the discipline deployment of capital and the identification of companies where we believe we can support management to create value. And recent exit news, such as the IP of Golderma and the announced sale of SRS distribution, they show exit activities picking up and that our valuation policy is validated. We believe that a current discount of almost 27% offers value, providing exposure to a well-diversified global private equity portfolio that continues to generate positive NAV performance. Finally, the company's investment objective is to generate long-term capital growth and an attractive dividend yield, and it has achieved double-digit NAV and share price total return performance over the last decade. Now, before we start with the Q&A, I would like to remind shareholders that PRINCESS has published on the website a notice of AGM which will take place on 21st of June. Information about the resolutions is also mentioned in the appendix of the presentation. Now, of course, shall you require any clarification regarding the resolutions, please do not hesitate to contact us. With this, let's move on to the Q&A. I see we already received a number of questions on the webcast. And I think we already have a question for you, Cyril. This is regarding the MSCI total return over three years, which is up 39% versus 14 for Princess. Do you expect to catch up to happen more from valuation multiple in the underlying companies?

Yeah, to be honest, before the global financial crisis, actually, if you look at the Princess Monthly reports, we did not even have a comparable index next to the NAV. You just had a NAV development. And then after the global financial crisis, we started to say, hey, honestly, yes, during the last five years, looking back after the global financial crisis, performance was not great, but at least it was better than the public markets. That is when we introduced MSCI World. Now, actually, that MSCI world is so much triggered by the Magnificent Seven, as you may call, especially the last six months, we are actually even in the board discussed whether we should actually change the the index. So if you look at MSCI World small caps, for example, they have much less performed the last six months. And MSCI World small cap, I think, with an end price value of $1 billion, is more comparable to our $1 billion kind of enterprise values. If you look at Tesla, it's like $500 billion or so, 500 times bigger than what we do. So I'm not sure whether MSCI World is really a good index. So keep us posted to... We will actually think of whether another benchmark will be better. It's not a benchmark anyhow. It's a comparable index. But I think this is now triggered by a lot of technology and a lot of hope, especially in the U.S. But as our portfolio is much more diversified, for example, if there's a biotechnology bubble, we don't have a big exposure to biotechnology and then profit from that. And if there is a technology bubble, we also don't have a huge technology explosion, don't profit from that. It's much more, our focus is on those two companies in Europe and in USA. In that point of view, much more boring, much more stable. So, no, I don't think that we will catch up from that very strong development of MSCI World the last six months, triggered by the Magnificent Seven.

Thank you, Cyril. Now, Federica, I see also a question for you. There is clearly a focus on potential disposers. Are these highly reliant on IPOs to be exited? Can partners group beyond the attack? Is there a healthy pipeline of potential investments?

Yeah, thank you. Thank you for the question. Indeed, over the past, I would say, six to 12 months, we have seen a recovery in the IPO market, which proceeds roughly up 10% year on year in Q1, in line with the sort of overall public market rally. I must say that historically Partners Group has not relied on IPO market in a significant manner for its exit. We're looking at approximately 20% of our realized exits through IPO because our mid-market focus has typically lent itself well to sales in bilateral transactions. But on the back of improving market conditioning, we're warming up to the IPO market. as some of our companies have grown during ownership to size scale maturity that is appropriate for listing. So, net we see this improvement for IPO environment as one that provides a broader spectrum of exit options. However, not the sole exit route we are exploring for our companies. We typically explore different exit routes, and we can see that with the two exits we announced. So, Garderma definitely being an example of successful IPO, but SRS Distribution being one where we exited to a strategic buyer. So, in summary, I'd say that IPOs are becoming a more viable option for our more scaled and mature companies, but we continue really to turn every stone and explore all avenues towards successful exit for the portfolio. And in terms of investment pipeline, again, I think Cicero spent quite a lot of time discussing the length and depth of our thematic work. So our investment teams have identify a good pipeline of investments that we continue to look at across our four verticals. The most advanced investment opportunities are in specialty pharma and care delivery technologies, but also on companies looking at supply chain transformation. We remain diligent and disciplined in our underwriting. seeing good entry levels at this point in time, and we remain ready to execute with dry powder when the time and valuations are right.

Fantastic, Federica. Now, I think I have one back to you. Serial, with a strong dividend, why not buy shares back and reduce the discount enough?

Yeah, and that is why actually the board, for those who attended the last board call, we introduced a new capital allocation policy, which was signed off by the board. And the new capital allocation policy actually basically says if the share discount is bigger than 30% to discount to any, then 75% of free cash flow would be used to acquire shares. And if the share price discount is more than 20%, less than 30%, it's 50% of free cash flow will be used to acquire shares. So the question just is, do we have enough free cash flow? to actually pay the dividends, which the shareholders require. We target a 5% of NAV dividend with a 25% discount, then it's more like 7% on share price, but it's 5% on NAV. So first you need to pay the dividends. And then you need to pay some operating expenses. You need to repay credit line in case you have drawn the credit line. Then we need to reserve some minimum for follow-on investments or new investments. And that is then the definition of free cash flow. The calculation of the first quarter has shown there's not enough free cash flow to do share buybacks. But the board, going forward, every quarter will now actually look at the free cash flow. And if there's free cash flow available, there will be a share buyback approved by the board.

Great. Federica, now another question for you on the portfolio. Do you have any concerns that circa 40% is invested in 2021 and say 2019 to 2020, roughly 15% vintages is potentially a frosty valuation environment?

Yeah, so no concerns on my side, definitely from a portfolio construction perspective. As a reminder, Prince's goal is to invest reflecting partners group activity and the market activity overall. So 2021 in particular was the year strong deployment for partners group but the overall market uh as well uh largely a catch-up uh from from 2019 and 2020 so um as pointed out these three vintages combined um make up for approximately 40 percent of nav just as a reference we we look at approximately 25 percent uh soft cap on our vintage. So if you think about having three years at 40% combined, it's not a figure that would concern me in terms of exposure in itself. That said, I'll also say that the performance for these assets we invested in in the vintages 19, 20 and 21 is also holding up very nicely. The companies are overall healthy with average EBITDA growth in line with the rest of the portfolios in the mid-teens. And these investments, especially for the 2021 year vintage, which is almost a quarter of the portfolio, these are really marked above 1.5 times money multiple on a cost basis on average. And that overall gives me confidence not only that the exposure is not outside, but also that the companies we owned in these years, so we purchased in these years, remain healthy and very well on track for their value creation stages.

Thank you, Federica. Now, I also see a number of questions regarding Galderma, right, and if there is any lockup period regarding this. Yes, we've already announced also in the March report there is a lockup period, and this is around 180 calendar days for the shareholders. Okay. With this, maybe another one for, I see again around Galderma, quite a number of questions. Okay, I think I see again another question regarding the cash flow and credit facility. I think this has already been answered by Cyril earlier. So thank you. Thank you very much for attending our update for the first quarter. As mentioned in the beginning, in the interest of time, we will come back to you or please also write back to us in case you have any follow-on questions or you would like to receive additional clarifications. Thank you very much.