Cvc Capital Partners Plc

Good morning and welcome to the CBC Capital Partners PLC 2025 half-year results call. Please be aware that this call is being recorded and all participants are currently in listen-only mode. I would like to hand over to Walid Damu to begin the meeting. Walid, please go ahead.

Thank you and good morning everyone. Today we will update you on our performance for the first six months of the year. We have 60 minutes for the call, and as usual, we'll begin with the presentation, and after that, we'll open the floor for questions. Presenting today are Rob Lucas, our CEO, Fred Watt, CFO, and Rob Squire, Head of Client and Product Solutions. Rob, over to you.

Thanks, Waleed, and good morning, everyone. Welcome to our interim results, and thanks for joining the call. While we're here to talk about our very encouraging H1 results, I also hope that you'll take away from the presentation that we're continuing to make good progress in building CVC for the medium and long term. Our objective throughout the last 40 years has been to deliver top class returns for our stakeholders today, while at the same time building and strengthening CVC for the future. And that is what we're continuing to do. We are incredibly fortunate to be so well positioned in a fast-growing, dynamic market, and we are all on a very exciting journey together. In terms of our first half results, H125 represents another period of encouraging performance. We've seen strong fundraising momentum across CVC. and we're benefiting from long-term structural tailwinds overlaid with clients allocating ever more capital to scaled multi-asset managers such as CVC and increased interest in Europe. We continue to scale and diversify our fee-paying AUM, which has increased from €128 billion as of June 24 to €140 billion today. We'll talk about our investment activities in more detail. But the last 12 months, deployment and realizations both increased by more than 20% year on year. And importantly, these realizations are delivering strong investment performance for our clients. With last 12 months, average realized returns of 3.3 times gross multiple of money and 27% gross IRR. As Fred will walk you through later, this resilient operating performance is translating into strong financial performance. Both revenues and EBITDA grew by 14% over the last 12 months, with PRE tracking our expectations for the full year. And the cash generative nature of our business allows for increased distributions. As a result, in October, we will pay an interim dividend of €250 million, bringing total distributions over the last 12 months to €475 million. As you can see on slide 4, our key medium-term focus remains delivering on the plan we outlined at the time of the IPO, and we are making excellent progress against our strategic ambitions. Rob Squire will talk about this in more detail, but we're delighted with the significant fundraising momentum we're achieving across CVC and we're building an exciting pipeline of future product launches. We're working hard to deepen and expand our institutional client base and to drive further growth through wealth and insurance. And I'll talk a bit later about our achievements across credit, secondaries and infrastructure, which together now represent about 50% of our fee-paying AUM. At the centre of everything we do is our focus on delivering attractive investment performance for our clients. This was very much a feature in the first six months of this year, and we're continuing to achieve significant success with realisations with the last 12 months' period representing a record year. All of this generates a highly attractive financial profile, growing, predictable and cash generative, allowing us to continue building out our business and delivering on our plan. I'll now hand over to Rob for a more detailed update on the fundraising and the successes he and the team have achieved. Thanks, Rob.

Thank you, Rob, and good morning, everyone. If we turn now to slide five, I'd like to start my section with a brief recap on where CVC was just two years ago and the transformation that we've experienced in capital formation. As shown on the left-hand side, at 30th of June 23, our fee-paying AUM stood at 97 billion euros. Since then, CVC has aggregated around 60 billion euros of capital across our platform to bring us to a fee-paying AUM at H125 of 140 billion euros. This growth over the last 24 months has been achieved in one of the more challenging environments that we've seen in private capital since the onset of the GFC in 2008. With that capital now closed, we feel well positioned with our current processes also. We have 29 billion euros of active fundraising underway, with much of it already well advanced and indeed de-risked. It's important to note that 90% of this capital 90% will support our credit, our secondaries, and our infrastructure platforms. Beyond this, as we look forward into 26 and 2027, we have an attractive and relevant mix of well-established institutional funds, such as CVC Europe 10, sitting alongside several new institutional strategies, such as credit and infrastructure secondaries. as well as a growing suite of strategies in our evergreen space for private wealth. So when we look at the first half specifically on page six, the main message from my side is one of continued progress in deepening our existing client relationships through greater cross-selling, while simultaneously expanding into new channels and also winning new clients in our existing channels. The first half was very active for CBC in terms of capital formation. We held over 35 individual fund closings and aggregated over 6.3 billion euros of capital closed during a period of significant uncertainty and also volatility. During times like these, our experience has been that clients will focus ever more of their time on core relationships with proven partners. Turning to slide seven, I'm briefly covering some of the milestones from the first half. starting with private equity, and in Q1, we held the final close for our third StratOps vintage, securing €4.6 billion and becoming the only GP globally to have a third vintage long-duration vehicle closed and actively deploying. We also launched CBC Catalyst, our new private equity strategy, focused on fast-growing European middle market buyouts and building on our 40-year track record of successfully investing in the area. We've already secured over $800 million for this fund and expect to hold a final close next year. Finally, for private equity, looking forward, we expect to launch both CBC Europe 10 and CBC Asia 7 in 2027, consistent with the three- to four-year investment cycle for private equity that we previously communicated. On secondaries, we continue to see strong momentum. I'm pleased to report that the $5 billion for the sixth vintage shown on page seven now totals around $6.5 billion, and we remain confident in exceeding our $7 billion target at final close in 26. At that $7 billion target, Fund 6 would be in excess of 2.5 times the size of Fund 4, which Glendower was investing when it was acquired by CBC. Turning next to credit, our fourth European direct lending round has now raised more than €10 billion of investable capital, exceeding our €6 billion guidance. We expect to hold a final close in late Q3, and given our strong deployment, would anticipate being back in the market with the success of Vintage 5 in 2026. While on credit, it's worth referencing that our CLO equity for capital raise has now exceeded its $750 million target, and a final close is expected to support future CLO issuance of between $15 and $20 billion. Lastly, on the institutional side, CBC's infrastructure fundraising is progressing well, and last month we commenced the process of rolling closes for both DIF 8 and Value Add 4. We expect to complete the first closings for both strategies by year-end 25, thereby de-risking a substantial proportion of our €8 billion target. Finally, in private wealth, we've seen very strong momentum, which I'll cover in depth on the next slide. On page 8, I want to start with a quick reminder of how we view private wealth at CVC. We believe private wealth is an important long-term opportunity for CVC as part of a diversified funding base for our firm. CVC believes the growth of private wealth is supported by a series of long-term structural factors present in many markets around the world as individual investors seek to commit an ever greater share of their wealth and their pension to private markets. Our focus at CBC is ensuring that our long-term investment performance, which has served us so well in the institutional channel, is now replicated in that wealth arena for the years to come. In terms of where we stand today, a slight update to the data on the slide is that as at September 1st, our two existing evergreen structures, CVC-CREG and CVC-PE, together now exceed 2.5 billion euros in value. When considering these vehicles, it's important to note that to date, both vehicles have only been distributed outside of the very large U.S. wealth market. We're pleased to report that CBC PE will launch in the U.S. in early 26 with an attractive list of distributors ready for that U.S. structure. Building on the success of CRED and PE, we're now actively preparing for the launch of comparable evergreen products in both the secondary and infrastructure strategies to broaden the number of offerings that our wealth partners can access with the CBC Group. Finally, to support the continued growth of our evergreen products, we're continuing to invest in our wealth team to ensure that we at CBC have the capabilities that our distribution partners require. In closing, we feel really positive about the progress that we've made in the evergreen space from a standing start not that long ago. I look forward to the opportunity to update you on our progress in the space in future calls. Thank you, and I'll hand back to you, Rob.

Lovely. Thanks, Rob. As I mentioned earlier, credit, secondaries and infrastructure together represent about 50% of fee paying AUM and are really important growth engines for CVC. Each of these platforms benefit from long term structural tailwinds and we've scaled each significantly as we lever the CVC network for sourcing and distribution and continue delivering attractive investment returns for our clients. You can see on the chart that these three strategies together represent two-thirds of the growth in fee-paying AUMs since December 2021. That is approximately €40 billion out of the €60 billion growth that has been achieved in the last three and a half years. Let me spend a couple of minutes on each of these platforms, starting with CVC Credit. We now manage €43 billion of fee-paying AUMs. nearly double the size of just a few years ago. Our consistent returns and very low loss rates have driven strong client inflows, and as Rob Squire just mentioned, we've now closed more than €10 billion of investable capital for our latest European Direct Lending Fund, making CVC a top three manager in European private credit. Thanks to the collaboration with our PE platform, CVC Credit has access to unique investment opportunities. And this is a real competitive advantage in a market with significant tailwinds, both in terms of client demand and deployment. Across our liquid strategies, we now manage 30 billion euros of fee-paying AUM, and we are the number one CLO manager in Europe. As well as diversifying our credit distribution across institutional clients, insurance and wealth, we've been actively working on the launch over the next 12 to 18 months of new products in high-growth areas of credit, levering the CBC network and addressing strong client demand. You'll be able to hear more about CBC Credit on Thursday 2nd October, when we will be hosting a deeper dive for analysts and investors here in London. Turning to slide 11 and CVC's secondary partners, growth fundamentals remain very strong. While overall trading of private equity LP stakes remains relatively low compared to broader PE, demand is accelerating as secondaries become a key liquidity and portfolio management tool. These market drivers, overlaid with our strong investment performance, have allowed us to scale significantly. and we're seeing a good interest for soft six from both existing and new clients, who are drawn to the repeated strong performance achieved across market cycles, the quality of our team, and the power of the CVC brand. Beyond scaling the flagship secondaries product, we are looking to widen the platform beyond PE secondaries, with the launch of credit and infrastructure secondaries funds, and a new evergreen secondaries product, underpinning significant future growth. Turning to slide 12, in infrastructure, we're the leading investor in the European mid-market, and we're benefiting from significant macro tailwinds. CVC's brand and client base are helping accelerate this growth, and we expect the current infra funds to be twice the size of the funds raised five years ago. As with credit, we're seeing significant benefit from our private equity and infrastructure teams working together and our ability to lever the CVC network provides a further driver of growth. Finally, we are also preparing to launch an infra evergreen fund in 2026. Turning now to deal activity and starting the deployment on slide 13. We delivered strong deployment across the platform, with 24.9 billion euros deployed over the last 12 months. That's up 22% year-on-year. Credit was the major driver of the growth over the last 12 months, with 10.3 billion euros invested, an 81% increase year-on-year, as we continue to scale that platform and build market leadership. Private equity deployed €10.7 billion over the same period, and we continue to invest at a pace consistent with a three- to four-year investment period across our PE funds. Secondaries and infrastructure also maintained their investment pace, with nearly €4 billion deployed in the last 12 months, and growth expected to accelerate, with market activity levels picking up and recent fundraising for both strategies providing additional dry powder. The new H1 investments shown on the right-hand side of the page illustrate the breadth of our sourcing and execution capability. A good example of this is Dream Games on page 14, where earlier this year we partnered with the founders to support their next phase of growth. The relationship was built over two years by our sports, media and entertainment team. This was a true cross-strategy collaboration across Europe-Americas, strategic opportunities and private credit, showcasing how our global platform and sector expertise help us source and scale unique opportunities. Thanks to this successful cooperation, we've been able to increase our commitment from 700 million euros up to 1.2 billion euros across those three strategies, as well as our PE evergreen vehicle. Moving to slide 15. Despite the market for realisations continuing to be challenging, we delivered a record level of €13.2 billion over the last 12 months. That's up 20% year-on-year, and we remain confident in delivering full-year realisations at or slightly above the 2024 level. Looking at the sources of those realisations, sponsor-led exits remain the largest driver, reflecting the ongoing subdued IPO landscape. But more encouragingly, we have seen a modest pickup in sales to strategics compared to 2024. We continue to generate highly attractive returns, with average realized gross returns of 3.3 times multiple of money and 27% IRR across our private equity strategies over the last 12 months. A key element to delivering these highly attractive returns is our focus on building better businesses, and I wanted to highlight just a couple of recent examples of this. Ethniki. We acquired Ethniki, a Greek insurance business, in March 2021 from the National Bank of Greece. Our financial services expertise, together with our local presence in Greece, put us in a leading position to make this investment. Under our ownership, Ethniki has been transformed into a modern insurance provider with improved customer experience, enhanced distribution capacity and greater capital efficiency. Building Ethniki into a better business increased its attraction to strategics, allowing us to achieve an attractive exit to Piraeus Bank earlier this year. We've made several attractive investments in India. since expanding the CBC network there in 2017. The Gujarat Titans, as you can see on the page, is another good example where long-standing sports expertise combined with our local presence in India enabled us to win the right to build a new exciting cricket franchise. The team we built won the Indian Premier League in 2022, our debut season. and we continue to build a world-class sports franchise on and off the pitch, enabling us to successfully sell the majority of this investment to the Torrent Group earlier this year. Driven by this exit activity, our private equity funds have returned more capital than they've called from our clients over the past three years, underpinning our future fundraising in an environment where our client base is ever more focused on distributions. I'll now hand to Fred to talk about fund performance and financials. Thanks, Fred.

Thank you, Rob, and good morning, everyone. Moving to slide 16, the underlying operational performance of our portfolio companies continues to be resilient, with LTM EBITDA growth of 10% across private equity. Over the same period, we delivered 7% value creation across our private equity and infrastructure portfolios, or 9% on a pre-FX basis. achieved despite a continued challenging market backdrop. Changes in FX rates in the first half, particularly the US dollar, were a notable factor given that we have approximately 20% of our Europe Americas funds invested in US dollar assets, which obviously experience a negative impact when translating valuation into euros. Conversely, our dollar-based clients will have seen a strong pickup in overall fund values given the relative strength of the euro versus the dollar. Moving to overall fund performance on the right hand side of the slide, all material funds are on or above plan and again despite continued macro headwinds, we remain confident in end of life multiples for these funds being within target range. Our focus remains on building diversified portfolios and that is a hallmark of our investment approach. This diversification underpins consistent performance for our clients across market cycles while supporting both our fundraising momentum and our ability to deploy capital at scale. This, together with strong DPI metrics, underpins the continued support we see across the client base. Turning to slide 17 and looking in more detail at our fee-paying AUM development. Fee-paying AUM grew 10% year-on-year to just over €140 billion. This growth was driven primarily by the inclusion of infrastructure following the completion of the DIF acquisition last July, which contributed €15 billion of fee paying AUM. Gross inflows were also a key driver of growth, amounting to approximately €20 billion over the last 12 months, or €9 billion in H1, mainly driven by strong deployment activity across private equity and credit, plus continued growth in commitments to SOF6 in secondaries. Before the impact of step-downs on FX, fee-paying AUM would have stood at around €151bn, reflecting the strong fundamental growth driven by inflows and the expansion of our platform. This growth was partly offset by strong realisations across private equity, step-downs for Europe, Americas Fund 6, Asia 4 and SOF 3 as they reached the end of their contractual fee-paying period, and finally negative FX movement with a conversion of US dollar denominated funds, mainly in credit, secondaries and Asia, into our Euro reporting currency. We expect to see growth in fee-paying AUM in H2, driven by continued scaling of our platform, with further deployment in credit, further inflows into secondaries and wealth, and the activation of our infrastructure funds. Turning now to slide 18 and the financials. We continue to see strong financial growth across the board, driven by our ongoing fundraising momentum, as well as strong operational performance. Management fees for the first half of the year were up 20% compared to H124, reflecting the first six-month contribution from Fund 9 in Asia 6, which were activated in May last year, obviously comparing, therefore, to only two months in H1-24. This increase in management fee revenues helped drive a 25% increase in management fee earnings, up from €317 million last year to €397 million in H1-25. MFE margin also remained within range at 56%, up from 54% this time last year. Performance fee-related earnings were €96 million in the first half, in line with our expectations, and we remain confident that 2025 full-year PRE will materially exceed 2024. Taking both forms of earnings together, EBITDA grew to €493 million, an increase of 14% from last year. Finally, profit after tax increased by 8% compared to H124 to €396 million, reflecting the increase in EBITDA, partially offset by higher income tax due to the impact of the new minimum tax rates, which were implemented for the first time in 2025. The overall effective tax rate for the year is expected to remain broadly in line with the first half. Turning now to operating expenses on slide 19. As mentioned earlier, we're continuing to invest in areas that will drive future growth. Headcount increased by around 10% year-on-year, driven primarily by targeting hiring in wealth, insurance, and technology. We added around 20 people in the past six months alone, and are on track to exceed 60 full-time equivalents in wealth by the end of the year. The full impact of this recent hiring is yet to show in the numbers, with H1 people costs increasing just 4% versus the prior year. At the same time, we're building out our operating infrastructure, particularly in AI and client service in support of the WEALTH and other initiatives, as well as an increase in fundraising costs, central costs in relation to the IPO, and an FX swing year-on-year of around €8 million, hence the growth in non-people costs compared to the first half of last year. Looking ahead, we expect full-year 2025 operating expenses growth to be in line with the first half, albeit with a different mix. as we expect people cost growth to reflect the additional hiring, while non-people costs are expected to remain broadly flat versus H1. We remain firmly committed to disciplined cost management, and notwithstanding the investments we're making to support growth, we expect MFE margin in 2025 to stay well within the 55% to 60% range. Let's now turn to our embedded carry potential, a key driver of future performance revenue. We remain highly confident in our medium-term carry potential and the total quantum expected from key funds, which remains at between €3.9 to €7.5 billion, assuming on-plan performance, of which €0.6 billion has already been recognised as at 30 June. Within this, first, we have funds already in carry mode, expected to deliver a further €0.2 to €0.7 billion in carry from Europe America's Fund 7 and earlier Asia Growth and StratOps funds. And we'd expect the significant majority of this carry to be realised by the end of 2027. Second, the next group of funds moving into carry mode representing between €1.4 to €2.8 billion, driven by Europe America's Fund 8, Asia 5, Growth 2, StratOps 2, and Selected Credit Funds. We would expect this carry to be realised over 2026 to 2030, with a significant majority of it being delivered by the end of 2028 or into 2029. Together, these two groups of harvesting funds are expected to generate between €1.6 and €3.4 billion in future carry, which we expect to realise over, say, the next four to five years. As you're aware, ERE represents recognized in an individual year can be variable and non-linear. Under IFRS, the timing of carry recognition can also be particularly sensitive when a fund is in its carry catch-up phase. Taking Asia 5, for example, where in a $4.5 billion fund, all it would take is slippage of $100 million in exit proceeds from 26 to 27 for close to 100 million euros of carry to also slip into 2027. with no change to the overall value of that carry. Bringing the conversation back to 2025, as we highlighted in March and again in May, we expect PRE in 2025 to grow materially versus 2024, though as we said previously, recognition will be weighted towards H2. Our current realisation pipeline for the coming months gives us confidence in our ability to deliver on this average. Turning to the next slide, we continue to run a capital-like model with strong cash generation and conservative leverage. This gives us real flexibility to build the platform and at the same time have the ability to make increasing distributions to shareholders. Given the strong cash generation, we've announced a €250 million interim dividend to be paid in October, up from the €225 million paid in June. That brings total LTM shareholder distributions to €475 million just over a year after our IPO. With that, I hand back to Rob for some concluding remarks.

Thanks very much indeed, Fred. As you heard from us today, we are very pleased with the strong performance we have delivered in the first half and with the excellent progress we're making in delivering on our plan. We're seeing strong momentum across CVC. with success over multiple fundraisers, the build-out of new distribution channels, and an exciting pipeline of product launches. Additionally, we're seeing increasing client interest in investing into Europe, from which we are very well positioned to benefit, based on our strong network and regional leadership. The most important message we want to leave you with today, as mentioned at the beginning of the call, is that while we are very pleased with the results announced today and remain committed to continued delivery, we never lose sight of our longer-term goals. Everything we are doing is designed to build a better business because that is how enduring value is created for our clients, our partners, and our shareholders. Thank you very much.

Thank you, Rob, Fred, and Rob. Before handing back to the operator, I'd like to highlight that in addition to our usual meeting with shareholders and analysts over the coming weeks, as mentioned by Rob, we will be also hosting a dedicated deep dive session focused on our credit business. This presentation will take place in person in London on October 2nd. We look forward to engaging with many of you there. Now, operator, let's please open the line for questions.

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Let's please start with the question to ask on the line.

Thank you. We do not yet have any questions on the line. However, we do have a written question from Oliver Caruthers. I'll hand back to you, Waleed, to take that.

Thank you, Oliver, for your question. So I read the question, which is probably for Rob Squire here in the room. So you've lined up several distribution partners for your upcoming launch of CBCPE in the U.S. in Q1 next year. Can you share any early indications of demand your partners are seeing in what is becoming an increasingly competitive market? And then second question, again, for Rob Squire. You mentioned the US retirement channel in his wealth remarks. Yes, so you did mention that. Can you expand on this comment, particularly given the recent executive order surrounding 401ks?

Yeah, please. Thank you. I'm happy to. Thanks, Oliver. So, look, in the US, I'm not going to comment on sort of individual distribution partners. But as I said, we're very, very pleased with the response that we've had. Again, they do obviously require that Delaware structure, as you know. What I would say, however, is that the feedback that we've got from multiple parties is that really Europe is a massive differentiator. Most of the product that is being distributed in those channels today is very, very heavily U.S.-orientated. And I think just given CVC's track record now over, you know, 35, 40 years in European private equity specifically, The view is that, you know, it will have a very good reception. I want to manage expectations, that it's these things always sort of start more cautiously and then build momentum. But as I said, at this point in time, we feel quite excited about the prospects. Your second question then on 401K, I think for CBC, my view at least, and Rob may jump in here as well, is that that certainly increases the total addressable market for the asset class broadly. But I would encourage you all to think about that more as a medium-term opportunity. At the end of the day, there needs to be much greater clarity from a regulatory perspective before some of the plan's sponsors will be comfortable allocating. And my expectations would be that initially, in the early years, a lot of those flows will go to domestic U.S. product. but that over time, as I said, in the medium term, that could be a very, very attractive market for us, just given our leadership position in Europe. And so for us, the number one priority when we think about that over the medium term is let's just get the performance of our wealth products, you know, as I said in my remarks, on par with that of our institutional products.

Thank you, Raoul. Okay, I'll move on. We have more written questions, so I'll read the next one, which comes from Arno Jibla from the NB-Vaiba exam. So, value creation seems to have slowed, and relative to what we see at some of your peers. Could you discuss some of the drivers of this? Thank you very much.

Thank you. Yeah, sure. Thank you, Arno. I'm not sure it has slowed relative to peers. I think we're all experiencing more volatile markets, changes in multiples, headwinds on the economic outlook. And of course, on top of that, in a European context, negative effects from assets that we have invested in the U.S., So, I think all things considered, we're pretty pleased with the underlying performance of the operating companies. That doesn't always translate into value for the funds for the reasons I've outlined. But, you know, at this point in the cycle, we're pretty pleased overall with the value creation we're achieving.

Thank you, Fred. We have two other questions from Arnaud. So, first on wealth, regarding U.S. launch.

given structuring of cvcpe can you talk about the capacity for this product even consideration around diversification rob are you okay to take that yeah sure i mean again i think if you look at what we've said previously we're very focused on putting together these products for the long term we do see this as a long-term structural opportunity for the firm. And so we'll be growing in a very considered manner. And we feel very, very comfortable making that representation today. That's what I'd say.

And then last question from Arnaud on credit and infra-secondaries. Can you comment on potential size of the first funds and more broadly on the capacity in the market?

Yeah, happy to. Sure, so again, I wouldn't want to comment on any specific size for a specific vehicle to be launched in the future. What I'd say is that when you look at CDC's track record, certainly in the 13 years that I've been here, you know, the main priority is raising a size that makes us relevant in the market in which we're operating and that we feel we can deliver attractive returns from relevant to that market. So directionally, when you look at our pass, that means usually a fund one of somewhere in the sort of $500 to $1 billion range. and then usually investing that over a two- to three-year period and coming back relatively quickly to then raise, you know, vintage too. And so that's how I would orientate you toward those sort of newer de novo product offerings. And in terms of the size of the market, you know, we are seeing – a real increase in volumes that have been traded in the private market assets other than private equity. So credit and infrastructure specifically for us, just given our makeup of businesses, we feel we can have a very, very interesting position within those markets.

Thanks very much, Rob. I'll move then to questions received from Hubert Lam from Bank of America. So first, on the outlook for realizations and exit. Can you comment on the expectations for the rest of the year and next year? Second question on cost outlook for 2026. And Hubert's last question is around PRE for 2026 and how it compares to mid-range, mid-term guidance.

Right, okay. Well, thanks, Hubert. Let me take the first of those, and then maybe, Fred, you could take Hubert's second points. In terms of the outlook for realisations and exits into next year, realisations and exits are always lumpy, as we know, and And they can move around a fair amount. Having said that, I do think that we are... seeing some signs of positivity in relation to the exit and the realization environment. And by that, I particularly mean we're just seeing the reemergence of strategics coming through. And clearly, we have had a very strong level of realizations over the last 12 months. And that we see continuing through in the second half of this year. In terms of the outlook and the macroeconomic environment, I think that we're still seeing a substantial level of uncertainty. um within the macro environment and we're still seeing as as we as we know levels of volatility within the within the markets um and you know i'm not sure that we see or predicting that to be changing uh dramatically as we as we look out all i'd say is that you know we are finding some very good investment opportunities um and we're continuing to be able to realize during the periods of uncertainty that we have had. So some signs of improvement and positivity on the realization front, but still lumpy.

Can I take the question about cost growth and about PRA? Yes, please. Thanks, Fred. Thank you. Hubert, thank you for your questions. Cost growth outlook for 26, I would say that we see what we would call BAU cost growth in single figures, maybe high single figures, as we've said before. But on top of that, We're really encouraged with what we're seeing in terms of the growth opportunity for wealth and insurance. And that's where we've been investing beyond that level this year. I'd see that carrying into next year, but in support of income growth and really encouraged by the start we're seeing there. So similar to cost growth this year, but supporting income growth from these new initiatives. In terms of PRE for 26, I was hoping earlier that I would illustrate the idiosyncrasies of IFRS accounting amongst other things. It's just too early to guide towards 26 at this stage. As we know, individual years within the range, as we see out in the medium term, will be up or down versus the average, but for 26 at this stage, it's too early to comment. But we are confirming the medium-term outlook for carry within the numbers today. And I hope you saw that in both the presentation and in my narrative.

Thank you, Fred. I'll move to a question from Nicolas Herrmann from Citi. So three questions from Nicolas. First one on secondaries. How are you thinking about timing on credit secondaries and infrasecondaries? And which client segments do you expect to be most keen to allocate to those asset classes? Second question from Nicolas on M&A. In broad terms, can you talk about how you see the M&A opportunity set today? And within that, with real estate valuation having reset, we're seeing a pickup in both activity but also demand. I appreciate you have been recently relatively more focused on credit for inorganic growth, but how are you thinking about real estate today? And last question from Nicolas on investment income. Why did your GP comment fall by almost 250 million euros? And at the time of the IPO, we talked about 15% to 20% returns on the GP commit. We have been tracking below that for quite some time. Can you comment on when do you expect to get to the 15% to 20% level?

Okay. Well, let's just maybe – I'll take the second one first in relation to the M&A opportunity. Maybe, Rob, you can talk about the timing in relation to the secondaries and Fred on the GP commit question. Just in terms of the M&A – As we've said previously, we remain very open minded about M&A and the two gaps that we have highlighted where we would look at potential inorganic development of the business are in the US credit arena and also real estate. But for each of those, it's about we're not under any pressure and we're not in any rush. And it's about finding the right opportunities. And so it's all about finding businesses, as I've said before, which are the right size for us. We want things that are large enough to move the needle, but not so large that they distort our organization or our culture. We want businesses that we can really scale across our platform in either area. And And we want businesses where the relationships and the cultures of the business are really complementary. And this is quite a high bar that we are applying to these, but it's very, very important in my mind that these criteria are right at the front of our minds. And so, yes, I think you make a good point about the real estate market. And certainly, in my mind, the real estate market is more interesting today from an M&A perspective than it was a year or two ago. But we will continue to look on both sides of that. And if we find an opportunity that really excites us and is the right opportunity meets those criteria, then we will look at that very carefully. Rob, on the secondary side? Yeah, happy to.

Thanks, Nicholas. So, look, our focus today on the secondary side is obviously wrapping up the sixth vintage at a great outcome. And I gave you sort of the update on that. I would say we're very actively working on all of the sort of building blocks to have a successful launch of both credit secondaries and infrastructure secondaries in 2026. In terms of your question about sort of where do I think the capital comes from, I think for credit secondaries, it's going to come primarily from insurance, primarily from sovereign wealth funds, and then the credit or opportunistic pools within the client base. I think what you're finding there is you know, quite honestly, a little bit of saturation with some of, say, the U.S. direct lending product. And so I think a lot of clients are looking for yield-orientated product that is a little bit differentiated and a little bit different. And so that's how I see that business evolving. you know, funding that business. Infrastructure secondaries is really everyone with infrastructure allocations, to be honest with you. And so really folks that have that real asset bucket, I think more and more people will look at this. I think, as I said in one of the earlier responses, it's a nascent market. We're seeing a nice uptick in trading volumes within that space. And so that probably looks more like sort of our general mix of which is obviously nicely diversified across sovereign funds, insurance companies, corporate pensions, and public pensions. So hopefully that answers your question. Thanks very much, Rob.

Fred?

Yeah, Nicholas. Hi, it's Fred. This was a question on investment income and why did our GP commit fall on the balance sheet and when do we get back to the kind of 15% to 20% return on our investments that we indicated. Taking a second look, I mean, we are confident that the way that we are selecting and investing in assets and the way that we are delivering returns to our client base, we will be at 15% to 20% range in IRR terms before long. We mustn't forget that the underlying investments that we've been making have been into one of the most difficult markets that we've seen for a very long time, both financially in terms of cost inflation that they've had to deal with, with headwinds in the economies. And as those investments mature and economies return a little bit more to growth, and we move more into the exit phase on those investments, we do see the ability to get back to those level of returns that we are confident in achieving. As to the GP commitment movement, you'll recall when we launched the wealth products, particularly the PE product, whilst it was always going to be ongoing, a product that invested alongside on a kind of deal-by-deal basis, it was important that we seeded that initiative with some existing PE positions to really seed that opening portfolio for that new client base. And we had... the luxury of having investments on our balance sheet that we could transfer to that PE structure to initially seed that portfolio. And that's exactly what we did. And so that's why you'll see the movement down in the GPE commitment being then deployed in the PE opening for the Wealth Channel.

Thank you, Fred. I now take the question from Angeliki Balaklari from JP Morgan. Angeliki has three questions. One on exit activity and PRE, a second one on wealth, and then the last one on infrastructure. So first, can you please provide some guidance on 2026 PRE? What are you seeing in terms of exit pipeline? Should we expect some exits out of Europe America's Fund 7? Second question, what share of the 2.5 billion euros aggregate value in private wealth reflects incremental fee-paying AUM outside of deployment in flagship funds? And then Angelique's last question, any scope for new infra funds to exceed the 8 billion euro target?

Okay. Well, thank you. Maybe we can just take those in reverse order. And, Rob, maybe you could just cover off the infra and the private wealth question.

Yes, I'm happy to. Right, reverse order. It doesn't matter. Number three first. Okay. So, look, I think, Angeliki, I think that for now we're just incredibly focused on as I said, sort of completing the first closings for both Biff 8 and Value Add 4. and just de-risk in that process, right? And so from my perspective, the $8 billion target is what we're focused on. And, you know, that represents a significant increase from the last round, which only closed, you know, within the last 18 months. And as Rob references his comments, it's twice the size of the round before that. So that's really what we're focused on delivering. Your question on wealth, if I've understood it correctly, all of that, is outside of the private equity fee-paying AUM. So it's absolutely incremental.

Very good. Okay, thank you very much. And Fred, just the first question.

Yeah, so Angeliki, I'm not sure if you heard my response to a similar question on 26 PRE. I think it is still too early to say on an individual year what individual amounts will be as we look forward. So I'll happily come back to that another time. But as I said earlier, we're very confident in the PRE that has still to come and is in the pipe, if you like. In terms of the exit pipeline, Should we expect some exits out of Europe, America 7? As we've seen in H1, we would continue to see Fund 7 producing exit flow later this year and into next. Thanks Fred.

Let me then move on to the next questions from Charles Vendit at Redburn. So Charles has three questions as well. First question, can you remind us of the typical timeline between fund launch and activation for Europe-Americas? Second question, you have early views on whether Europe-Americas Fund 10 is likely to target a step-up in size relative to its predecessor. And last question, still on Europe-Americas, So Fund 9 was the largest PE fund globally. As you consider scaling that strategy further, do you see continued headroom for a single transatlantic multi-sector vehicle? Or are you increasingly leaning towards sector or region-specific strategies within PE? Just keen to understand how scalable you believe these large flagship funds remain. Appreciating you've likely fielded similar questions at the 5 billion and 10 billion mark already.

Okay. Thank you, Charles. Let me just take the last part of that and then the slightly more detailed questions then Rob can cover off. I absolutely see continued headroom for a single transatlantic multi-sector vehicle, as you say. Yes, and we have, as you quite rightly pointed out, we've absolutely fielded similar questions at the sort of 5 billion and the 10 billion marks. And, of course, the whole point behind this fund strategy is is that it gives us great flexibility to select the very best opportunities. So we are a geographically focused, predominantly on the private equity side of our business, geographically focused operation. Now, we do have sector teams. We have very, very strong sector teams and obviously achieved a lot there. But predominantly, it's geography. And therefore, in terms of the Europe and the Americas focus. Those are very large areas with a huge amount of activity within them. And therefore, having a large multi-sector vehicle to embrace that, we think is absolutely the right way of doing it. And the critical thing to understand is that whilst we raise and whilst Fund 9 was the largest PE fund globally, we are not doing the very largest deals. We're still doing a very large range of deals within it. What we're doing is we're putting a large amount of funds together. into that fund and into predecessor funds. And so what it is, is giving us great flexibility to invest across the whole of that space, which our history and our track record shows is very powerful and very effective. And so we will be maintaining that as the way that we do. take that forward. And let's just go on to the sort of other two questions that you've raised in terms of the more detail, if we could, Rob.

Yeah, sure.

Happy to, Rob.

Thanks, Charles. So the first one, and Waleed, correct me if I go off piste here, is sort of the gap between fund launch and activation. So what I say is the way to think about this is usually for the flagship, and this has certainly been the case for Fund 7, Fund 8, and Fund 9. Usually after closing, we would look to activate within a six, maybe eight-month time horizon. Obviously, it's very driven by deal activity to make sure that the predecessor funds are fully invested. But that's usually the timeframe, as I said, over sort of the – the data for the last, say, 10 years back to Fund 7 in 2017. If your second question was sort of step up in size relative to predecessor, look, the reality, Charles, is we're still sort of 16 months out. And I think if anything that we've learned from the last few years is that a lot can change in the world within that time horizon in terms of the external environment. What we can control, obviously, in terms of the funds, the realizations, we keep delivering. And so the performance has continued to be very strong. You heard the numbers from Rob and from Fred earlier. The portfolios are incredibly well diversified by sector, by geography, by company. But also, Charles, one really important thing that I think clients will focus more and more on is also diversified by vintage year. And I think that's something that really CBC has sort of stuck to its knitting throughout. The other variable that I think is potentially quite positive for us over that sort of more medium-term view is to Rob Lucas's comments, you know, real uptick in institutional interest in Europe. And so I think that also bodes quite well for front-end. But again, I want to have some degree of prudence here in terms of sort of, you know, a process that is still, you know, 18 months out. Thanks very much, Rob.

Thank you. We just answered the last question. Julian, you had the From ADN AMO, you had two questions. I think we answered the first one. So we move straight to your second question. So if you look at PE realizations of €11.3 billion during the last five months, can you please indicate what share of exits was towards continuation funds? Also, can you please remind us what are the conditions for placing an exit investment into a continuation vehicle?

Okay, thank you.

Fred, do you want to... Sure. Well, to the actual facts of the £11.3 billion, less than a quarter of that was to one continuation vehicle that we exited into. We've only ever made two exits into continuation vehicles, and one was in the first half of this year. And from time to time, they are a useful part of the whole ecosystem in private equity exits. But the one we did exit into... Just to give you an example of it, the continuation vehicle was just one part of a very, very large external new equity going into that asset. So it was not the case where we were just putting it from one of our vehicles into another vehicle. It was a proper, well-run exit process where the continuation vehicle was a participant, but there was substantial new equity from other investors coming in alongside as part of that process.

Okay. Thank you very much indeed, Fred. And thank you very much indeed, everybody, for joining the call. I think we're leaving it there.

Yes. Thank you very much. Thank you, Rob. Thank you, Fred. And thank you, Rob. So this is all we have time for. So thank you again for your participation and for your questions and looking forward to speaking soon.

Thank you. This now concludes today's call. Thank you all for your participation. You may now disconnect.