EQT AB (publ)

Good morning, everyone, and welcome to IKIT's quarterly announcement. Good morning everyone and welcome to EQT's quarterly announcement. Today we're joining you from EQT's London office. Together with Christian, Kim and Gustav, we will reflect on the first quarter for about half an hour before opening up for Q&A. As always, if you've registered ahead of the call, you should have received an email with your personal PIN code to participate in the Q&A. And with that, I'll hand over to Christian and ask for the next slide, please.

Thank you, Rolf, and good morning, everyone. We just finished our global partner summit with 125 partners from around the world, and we're excited about the future of our platform. In the first quarter, we had to pick up an investment activity with more than 10 new investments announced. Deal flow remains strong across the platform, and we're seeing buyers and sellers getting closer to each other. even though it is still an uncertain market out there, and exits do remain muted. The fundraising environment continues to be challenging. Flagship fundraisings are taking longer to raise, and for the smaller and more recently launched strategies, it's also more work. Importantly, equity 10 is expected to be materially completed during the summer, and infrastructure 6 is expected to have a first close during Q2, with a majority of the fund to be raised this year. All our key funds continue to perform on or above plan, with valuations flat or slightly up in Q1. We continue to prepare for launching semi-liquid products, which will cater to private wealth investors. And the main BPA integration is complete and has been quicker and better than expected. The investment teams have aligned processes, working now together on a global basis. And we're already driving best practices in investing, value creation, and exits together, as well as actually creating true global sector and subsector teams. The number of employees remained largely flat in the quarter, and while we have slowed down the hiring pace, we see many interesting growth opportunities ahead, and will continue to hire selectively. Markets are volatile, and the economy is facing some headwinds. But in light of our long-term investment strategies, we view these challenges as being more temporary. And we continue to manage equity for future growth based on a laser focus on delivering performance for our clients. The market for actively managed alternative AUM is expected to grow to 15 trillion by 2030 and 30 trillion by 2040, driven primarily by private markets delivering higher returns compared to public markets across relevant time periods. As such, private market allocations are critical for our clients to meet their return targets. And underpinning a long-term trend of clients gradually increasing allocations to private markets, in particular within private wealth and sovereign wealth funds. Next slide, please. As private markets grow, there are five broader trends that we expect to continue to shape our industry. First, companies are staying private for longer, while the investment universe in public markets is shrinking. According to analysis in the U.S., there are more than 10,000 P.E.-backed companies, while there are fewer than 5,000 listed companies. Over the past two decades, the median age of a company going public has increased with more than three years, and the number of IPOs has decreased with more than 60%. Thus, a large part of value creation takes place in a private setting. And we have the ability to support companies all the way from ventures to mature companies. Second, we have a governance model and the capital required to catalyze change. We take swift action, yet have the ability to take a long-term view in our investment decisions. We also see a trend where clients want to remain invested in certain assets for longer rather than having to reallocate capital. We therefore have an opportunity to create products to remain invested beyond a typical fund life. Today we do this in Exeter, for example, where clients acquire portfolios of stabilized assets from us and we continue to manage those assets. We also see a preference to concentrate relationships with fewer managers. In this context, we expect that larger managers with an ability to offer different products to clients will continue to gain share. And in fact, Bain estimates that megafunds, those that are greater than $5 billion, their share of total global buyout capital raise in 2022 was 57%, up from 43%, for example, in 2021. At the same time, individual investors are looking to increase allocations to private markets from a low base. We see four principal drivers for long-term growth of our firm. First, we'll continue to scale our flagship funds with larger funds, and we increase the number of investments somewhat in those, but we're also able to do larger deals and larger underwritings. Today, we have a global infra flagship fund raising $20 billion, and our buyout fund in Europe and the U.S. is also raising $20 billion, whereas our private equity fund in Asia is currently sized at $11 billion. Looking across the world, of closed-end funds, the largest single fund in the world is $30 billion. Thus, we have several vectors from which we can grow our flagships over time. Second, we plan to scale our recent new initiatives, such as equity growth, and our longer-hold strategies, such as infractive core. This will be done over fund generations and likely also to involve more open-ended structures over time. We'll also extend funds with a European focus today to cover North America and or Asia. For example, we recently launched the mid-market growth strategy in Asia, and that's going well. Unique to Exeter, we see potential to grow across regions from what today is mainly a North American and to some extent a European business. Third, we see significant potential in providing access to our funds for private wealth clients. You get a lot more on that from Gustav in a minute. Fourth, we plan to launch selective new initiatives. These could be thematic or geographically focused funds. Next slide, please. So IKITI does things differently. And this is why I'm confident that we will continue to outperform also during these more challenging times. It's really about delivering true value creation in our investments for our clients by being active owners. For example, we're creating our next level value creation playbook now per subsector across the world. We're continuously refining our thematic investment approach, and we're developing our world-class network of industrial advisors and boards to support our companies. We aim to make our companies and buildings more resilient for the long term through our integrated approach to sustainability and digitalization. And now, generational AI will help propel our own mother-brain AI forward. We're local with locals. in countries now representing 80% of global GDP. And having these local teams means that we can build long-term relationships with potential investments and truly understand the local operating environment to drive better returns. And this of course is quite different than flying in teams from a central location somewhere else. Next slide, please. During the quarter, fee-paying AUM increased to 119 billion euros and our total AUM to 216 billion euros. Some reflections. First, our AUM is quite diversified across strategies and across geographies. Also across clients, with no client constituting more than 5% of total committee capital. And in terms of bank and other financing relationships in the portfolio companies and real estate. Each fund is also diversified in terms of its number of investments and sectors, and we maintain a quite strict thematic focus on companies and assets, which are supported by long-term secular trends rather than the economic cycle. With a combination with BPA, we can identify trends and source the best investments on a global basis. Take India, for example. This is our largest market in our Asian business, and it's the fastest-growing major economy in the world. It's supported by favorable governmental policies and a young, digitalized population. And here we see very interesting growth opportunities in sectors that are at the core of EQT's long-term strategy, like tech services. 2023 is a year of execution. First and foremost, this means driving continued performance for our clients. The integration with BPA and other combinations and acquisitions have progressed well and are substantially complete. On the fundraising side, we're making good progress, but it's taking longer and requires a lot more work. We continue to future-proof EQT for long-term growth. And as part of that, during Q1, preparations for the launch of semi-liquid structures intensified, which we're quite excited about. And with that, I hand over to Gustav. Next slide, please.

Thank you, Christian, and good morning, everyone. As we talked about in the last update, we continue to see very interesting opportunities in the private wealth space. The segment has historically been facing difficulties investing into our industry due to the large required ticket sizes, multiple drawdowns and long lockup periods. However, this is changing and we expect the allocations to increase in the coming years. Today, individual investors' average allocation to private markets stand at around 2%. And to active managed strategies, where we are focused, it's only 1%. In comparison, institutional investors' average allocation are around 8%. The expectation is that individual investors' allocation to active managed strategies will go from $1 trillion today to $4 trillion by 2030. Therefore, we are very excited that we expect to launch our first semi-liquid strategy during the coming months, where individual investors will be able to get exposure to our funds in private capital and infrastructure. More to come on this in the H1 update. Next slide, please. So, continuing to the fundraising update. We are, as we've said previously, and as Chris said, in a more challenging fundraising environment, driven mainly by the lower liquidity among our clients. Despite that, during the quarter, we have raised more than 5 billion euros across the platform. In EQT 10, we have now closed out more than 17 billion euro. And as Christian said, we continue to expect the fundraise to be materially completed during the summer. In Infra 6, we had closed out around 6 billion euros as per the end of Q1. And in the first part of April, we have received commitments of close to another 1 billion euros. We're yet to have the first close in Infra 6 and expect to raise the majority of the fund in 2023. Finally, for IKT Exeter Industrial Value 6, we're in the last part of the fundraise. We will significantly exceed the $4 billion target, being at $4.8 billion by the end of Q1, which is also where we expect the fund to end up around. As a benchmark, Fund 5 was around $2 billion. Next slide, please. And with that, I'll hand over to Olof.

Thank you, Gustav. In Q1, we saw a slight pickup in investment activity as we announced more than 10 deals, or the equivalent of 5 billion euros. This compares to just over 3 billion euros in the fourth quarter of last year. We are seeing buyer and seller's expectations gradually converging, and the financing is available for the deals that we are pursuing. In Infra 6, we announced two deals, SK Shields and LaserSpot. EQT 10 completed the acquisition of Vacutech and had an acquisition for EnviroTainer. And EQT Active Core Infrastructure made both its first and second deal in the quarter. We had two interesting investments in equity growth, and on the exit side, activity remained muted during the first quarter, but there were some deals, including sell-downs that were done by BPA7, and we also had a sale of Bloom from Infrastructure Fund 2 and 3. In real estate, activity remains muted and we see a continued slowdown in leasing and construction development given the current macro environment. We focus on leasing vacant space and we will be looking to deploy capital selectively in a repriced market at attractive yields. We have significant dry powder and we are continuously evaluating new investment opportunities. Despite the volatility, our intention is to keep investing at a measured pace. Our objective is not to be market timers, yet many of our best deals were done in volatile times, which proves the value of investing across cycles. We continue to see debt financing being available for the deals we are pursuing. The all-in cost has doubled since rates started to rise, and we have always maintained a conservative approach to leverage. The higher cost of financing may result in somewhat lower leverage targets yet for new deals. The sources of financing have evolved from having used banks as intermediators to us going directly to lenders, including commercial banks as well as private credit providers. Throughout the bank turmoil in late Q1, our debt providers continued to signal appetite to finance our deals, and being long-term, relationship-driven, targeting conservative financing structures and, importantly, being invested in thematic sectors which are less cyclical, means we are in relatively strong position to finance our new investments. Next slide, please. During Q1, Infra 6 was the main driver of the increase in fee-paying AUM, with approximately 6 billion euros of closed-out commitments as of the 31st of March. And the continued fundraising for EQT 10, which was at more than 17 billion by quarter end, contributed to our AUM development as well. ICT active core infrastructure is generating management fees based on invested capital. And as I mentioned, they have made two investments. Exeter also had some inflows, largely from ICT Exeter US industrial value six. And however, this was largely offset by FX effects and some small step downs. Gross inflows over the last 12 months, as you know, includes the AUM from BPEA. And with that, I'll hand over to Kim. Next slide, please.

Thank you, Olof, and good morning, everyone. Fund valuations remained flat or slightly up during the quarter, with small increases in most of the key funds, despite volatility across markets. Strength could be seen in several infrastructures, such as transport and logistics, energy and environmental, while private equity sectors that showed strength were services, healthcare, consumer goods and technology. Operating performance remains healthy across the portfolio despite inflationary headwinds and rising interest rates. Our portfolio companies are well prepared to handle challenges. The infra portfolio is broadly in line with their budgets, with some overperformance by the energy and environmental companies. Within private capital, we see healthcare portfolio companies generally outperforming versus budgets, which is a sign of the resilience in the sector and in our business. In addition, industrial technology companies have been experiencing strong growth, and so have our technology companies in general. Next page, please. Our conservative hiring pace during the last few quarters shows up as a largely flat headcount for the quarter, with only a few net additions and total FT plus just shy of 1,800 persons. Hiring in general continues to be very selective, but as previously discussed, we will be strengthening our strategic growth areas such as private wealth, North America and APAC. And as a result, headcount will grow this year and the flat development in Q1 should not be extrapolated to the full year. A core element of EQT's growth journey has been our ability to win, retain and develop the best talent globally. This will always be critical for our model. Next slide, please. We have repeatedly said that our business model is long-term. Being long-term is especially important in times of short-term volatility and perceived risks in the market. Our management fees are contractually recurring, uncommitted, or invested capital, and more than 50% of our AUM was raised in the last three years. Our funds generate fees for 10 years or more, so we know we will have meaningful revenue streams in the years to come. Exit markets may be volatile and uncertain, but our fund performance continues to be solid with long-term carry potential. If our key funds are all on plan, equity AB is entitled to more than 8 billion euros of carry. And all of our key funds have generated carry historically. And all of our current funds continue to develop on or above plan. Our portfolio is young and thematic, averaging about three years. We're not in any hurry to realize assets. This means carry may be booked later, but our objective is always to maximize returns for our clients over the lifetime of the funds. Our approach to financing is structured and conservative. Some hedges are being renewed in the portfolio companies and thus higher interest charges will materialize, but refinancing risks are limited with 97% of the portfolio company debt maturing in 2026 or later. With that, I hand back over to Chris for some concluding remarks.

Thank you, Kim. To summarize, EKG is truly diversified across strategies, geographies, clients, and counterparties. We invest in market-leading companies with thematic tailwinds. We continue to execute on semi-liquid structures, allowing the private wealth segment to access our investment strategies. We saw deal activity pick up somewhat during the quarter, but there are uncertainties in the market, which means our investment pace may be measured in the near term. But our deal flow is strong and we're active. Looking beyond the current challenges, we operate in a long-term growth market with significant potential for future growth. Our development will always depend on our ability to generate returns for our clients. And that is why we remain intensely focused on performance. And with that, we'll open up for the Q&A. Thank you. Operator, please activate.

Thank you. We will now begin the question and answer session. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A roster. We will now take the first question. One moment, please. It comes from the line of Ermin Kerik from Carnegie. Please go ahead. Your line is open.

Good morning. Thanks for the presentation and for taking my questions. So first off, maybe about leverage and how you see that developing in new deals. You mentioned a little bit that you might be using a little bit less. Could you quantify that anything? And also, do you expect that to have any impact on the net IRRs you can deliver to your investors.

Thank you for the question. If you look at the global financing markets, they are, let's say, partly open and a little bit better than they probably were a quarter or so ago. That means that in Europe, we can finance deals probably up to around $2 billion or so. In the U.S., probably $4 billion. And like we mentioned before, in infrastructure, there's a deeper market because it's an inflation-protected asset class and with long-term resilience. If you look at the effect of interest rates, what's that actually done to, I think, the capital markets and to us? Of course, it's brought some valuation of some sectors down, particularly higher growth sectors. which we think actually is healthy. And it means that in the investments that we're making in private equity, in infrastructure, for example, that we're focusing even more on fundamental long-term value creation, so a combination of growth and cash flows from the companies, which actually also is pretty healthy because we're making the company stronger and better and more resilient. The effect on net IRR is difficult to quantify because there are so many factors that drive value creation. And if you look at our long-term value creation, it's driven primarily by sales growth, margin expansion, strategic repositioning, etc. So it's rather something that we build into the models, and we're not changing our long-term return targets.

Thank you. And then moving on to the semi-liquid products you mentioned that you are looking to launch, do you expect them to have any material contribution already for ECT 10 and Infra 6? And does that change anything in the guidance you've given before, or your expectations at least, for how much retail or private wealth will kind of be of your flagship funds generally? Thank you.

I would say that we were not changing, let's say, the guidance that we were given previously. We would expect that the semi-liquid structure that I talked about will invest in EQT 10 and infrastructure 6. But as we also said previously, this is a long-term strategy for us, so it will not have a material impact in the beginning.

Thank you. Then one last question from me. I think at least by the time of the IPO, you talked about current interest accounting for maybe 25 to 30% of your top line over time. When could we expect that you approach that interval again, if you would do, I guess?

Yeah, Armin, it's Kim. I guess what we have said is that that would be a number over a longer time period rather than in any specific accounting period. And as you know, we have actually been in excess of that for some time here before. So that... Rule of thumb may remain, but it's not a target or goal that we are specifically sort of steering at. It's a consequence, rather, of us creating value for our clients and exiting companies. So it's a round answer. I recognize that, but that's a fact. Thank you. That's so insightful. Thank you.

Thank you. We will now take the next question. It comes from the line of Arnaud Gibla from BNP Paribas Exxon. Please go ahead. Your line is open.

Yeah, good morning. I've got three questions, please. Firstly, on deployments, in your results, you had indicated that the duty was roughly on a three-year cycle from a deployment point of view. Do you stand by those comments, I suppose, in light of what's happened with Credit Suisse and SBB?

This is, of course, something that... is hard to be very precise around. If you look at our history since 1994, we've been on a three-year average cycle. When it's very hot in the market, like it was in equity four or, let's say, equity eight, nine, then we're on a shorter cycle than that. And during the financial crisis, a longer cycle. so the way we think about it is around three years but whether it's whether you know it's it's it's not an exact science so whether that's going to be three and a half or 2.9 or whatever and is not something we actually plan for because it's that the way we build our funds is actually slightly different you know we we are we're trying to diversify across sectors and themes across vintages across types of companies that were owning And since we're working in the non-liquid world, that portfolio takes time to construct. So I don't think I'll be more precise than that. But for right now, I think that gives you some guidance.

Okay, thank you. I have questions on private wealth. Some of the, I suppose, the larger private market players who've got significant presence in the private wealth segment, indicate that they have up to 100 or more people supporting distribution networks across various private banks and various distributors. What stage of development are you there in terms of supporting distribution networks, and what are you aiming for? Good question.

Gustav can take it. Yeah. So as we said previously, we are in, let's say, the early innings of this long-term opportunity. We have a number of people today that are focused on it, and that number will continue to grow without us having a specific target. Of course, a lot of this is dependent on how this scales when we get to the new strategies. But, of course, our clear ambition is that this will be a key growth area for us going forward.

Okay, very clear. And finally, on the underlying portfolio companies, I think growth there was for EBITDA, organic EBITDA growth were in the high teens. Is that still the case today?

If you look across our total portfolio across private equity and infrastructure globally, we're still growing significantly, both the top line and the bottom line. We typically don't show that on the quarter. It's more of a half-year number that we provide. But like I've said before, and if you look at the overall portfolio, still performing well. pretty well because our investments are supported by these longer-term secular trends. But we do have pockets of underperformance here and there, whether that's because of inflation or some challenges with some of the supply chains or whatever it might be. But overall, performance remains solid.

Okay, thank you very much. Thank you.

Thank you. We will now take the next question. It comes from the line of Bruce Hamilton from Morgan Stanley. Please go ahead. Your line is open.

Hi, thanks for taking my questions. Morning guys. A couple from me. So in terms of the sort of financing markets, obviously it sounds like things are gradually improving, though I guess given the setback in the last month, I'm wondering whether you think in reality exit activity is going to be more of a kind of 2024 event. I mean, could we see anything in the second half of this year? Or do you think it's going to be very, very tough? Second question around, I guess, sort of vintage concentration. I guess a lot of your peers sort of talk about the need to be very disciplined across vintages and LPs are increasingly focused on that. Given that you take a slightly different approach, are you feeling pressure from your LPs to maybe spread investments and be a bit less aggressive, given that you deployed a lot in 2020 or 21? I'm interested in those conversations. And then finally, on the private wealth opportunity, obviously agreed, significant opportunity there. In terms of managing the liquidity risk, the sort of mismatch risk, would you expect to do anything different to some of your peers, or does it really come down to investor education and just making sure people are aware of what gating risk under duress and that sort of thing? Thank you.

Thank you, Bruce. When it comes to exits, what we're trying to do is focus, really continuously focus on the long term for all of our investments, driving, let's say, long term fundamental value creation within the companies. strengthening their resilience, investing in and out on acquisitions. You've seen some of those announced, and innovation, et cetera. And I think that this year, the exit market is going to be a little bit lumpy. And if you look at, for example, very large IPOs, That's a market which is probable, which for now is closed. And hopefully it will open up again after the summer. We don't know. But for medium-sized IPOs, the market remains open. So we have some of those in the pipeline. The private markets are active, as you can see. So in certain sectors that are not that cyclical, let's say certain software sectors, tech sectors, and healthcare, tech-enabled services and infrastructure, renewables, for example, There is deal activity and interest in buying, so I would expect that we're able to execute on some exits. But the way we think about it is that if we can create more value in the companies and for our clients by keeping the business a little bit longer and going out into a more robust market, we'd rather do that. And that's also positive for the fund long term. So it's something that we manage very carefully. In every single fund, we have something called an exit liquidity committee. So we follow this up very carefully, company by company, fund by fund. And I think that probably covers how we try to drive our exits. Of course, given that there's less cash flow coming to our clients, we would like to create monetization opportunities. There are also other ones like partial sales, continuation of vehicles, and other elements that we're looking into. And we'll see how the year turns out.

And then on the private wealth side, I would say that, as I think we talked about in the Q4 update, we actually think that this is a pretty good time for us to start with these structures because the investor education, as you talked about, will be more clear going forward in that these are not liquid structures, but they are semi-liquid structures, which mean that investors need to have a more of a long-term perspective than you would need in a liquid structure. I think when comparing let's say our product and products going forward compared to others, I would say that they are fairly similar, but of course that each individual product will probably have some elements where there can be small differences in order to cater for the needs of each individual structure.

And when it comes to vintages, if you look at the average across the industry since its beginning, vintages are typically closer to four years, while our vintages are typically closer to three years. So our clients, and we have a thousand institutional clients across the world, they understand our cycle and our way of investing and our way of diversifying. So I don't feel that there's any pressure. But I would say that during this cycle where there was a two-year type of deployment, that created a lot of pressure on us and our clients, as we've talked about before, because you're almost then continuously in fundraising. And so the three-year cycle for us is more natural.

Go ahead. Thank you.

Thank you. We will now take the next question. It comes from the line of Hubert Lam from Bank of America. Please go ahead. Your line is open.

Hi, good morning. Thank you for taking my questions. I've got three of them. Firstly, on Infra 6, how confident are you that you can get the majority of it done by year end? So from today to where your target is still seems like there's a way to go. So how dependent is this on markets or exits and returning capital back to investors? to get their liquidity for them to commit to the new fund. So that's the first question. The second question is on Exeter. Just given the market focus on real estate in general as well as commercial real estate, can you talk about exposures of Exeter and how performance has been recently on the Exeter funds? And lastly, on hiring, hiring was slower this quarter. You only had modest headcount growth this quarter. How should we think about headcount growth by year end? Anything, like, what should we think about in terms of growth around headcount? Thank you.

Thank you for the questions. I'll take the first one. In for six, what we say is that it will be materially concluded this year, which means that some channels will continue into the beginning of next year, as we have for all of our funds, actually, in particular the private wealth channels. And when it comes to the momentum, if you take a step back and look at infrastructure, last year was the only asset class in private markets that grew fundraising year over year. It's very thematic, driving both the digitalization of society and the energy transition. So there is a lot of interest from investors to invest in that. We have not yet had a first close, so it might be confusing from the way that it's communicated. We've had rolling smaller closes until now. We will have a first close sometime in Q2. So I would say that the indications that we're communicating here in the report are pretty accurate. And second question, probably Gustav.

Yeah. So on IKT Exeter, I would say, of course, they're part of the real estate market and hence are also impacted by the turbulence that we see in that market and the increasing interest rates. I would say that in general, just given the underlying exposure that we have with over 80% being in the logistics sector, the very small exposure to more traditional commercial real estate. And also the fact that we completed over 10 billion euros of exits during 2021, just as we were going into this, let's say, longer downturn. We think that we're in a fairly good spot. So out of the around 50% of the AUM for IKT Exeter is dry powder. And a lot of it is also, the rest is in fairly newly invested real estate. So we feel comfortable, but of course we continue to be very, very focused also in IKT Exeter on making sure that we have the best possible performance for the clients.

And on hiring, yes, the net additions in the quarter was a low number, and that's obviously a function of hirings that have taken place one or two quarters earlier and started increasing. started now. I think we're trying to be clear in that you should not extrapolate that kind of flat number for the year. There will be growth. We will be investing in private wealth. We will be investing in the U.S. further. We will be investing in AIPAC, for example. We are not giving exact headcount forecast for the year. There was a question around Q4 as to whether the increase in Q4 was a reasonable estimate of the annual increase for 2023, to which I said that that's not an unreasonable way to look at it. And I still think that's the right... way to look at it.

Great, thanks guys.

Thank you. We will now take the next question. It comes from the line of Magnus Andersson from ABGSC. Please go ahead, your line is open.

Yes, thank you. We covered a lot already, but two questions for me. First of all, I note that the exits you have announced during Q1 were in Asia, in BDA, and your mid-market Asian fund. Is that just by coincidence, or is it the fact that the exit market is a bit more active in Asia than in the U.S.? ? Europe generally. And secondly, just on that slide you have on your four main avenues for future growth, I didn't see M&A in there, but given the current challenging market environment, couldn't there be a consolidation and would you still be willing to participate or are you basically done with your M&A efforts?

Thank you. Good questions. The Asian market, yes, it is because of demographics. I think we talked about last time also lower interest rates, lower levels of inflation, and an overall growing economy across many of the countries. of the countries there when China reopening, there is more momentum there. And therefore, the exits that we drove were more sell downs of companies that are public. And given that the markets are healthier, that was possible. So, yes, you are right, but that does not mean that we're not looking at exits across all strategies or all the major strategies in other markets as well. When it comes to M&A, I think that's a great question. We probably should have said organically on that slide. When it comes to M&A, we've done the combination with Exeter in real estate and two smaller out-on-acquisitions in real estate to complement that. And, of course, the combination with BPA, which made us now one of the top five players in the world in private markets. So that's been superb. As I mentioned, the integration is now more or less done, and we're looking towards the future. So this year we probably are not going to prioritize M&A because we want to make sure that we really – integrate everything also from a people and culture and values point of view, which is also going well, and have razor focus on performance in the existing funds for our clients and on fundraising. But as we look forward, yes, we will look at M&A, and I do believe if you look at the long term of this industry, it will continue to consolidate globally.

Okay. Thank you.

Thank you.

Thank you. We will now take the next question. It comes from the line of Angeliki Bayraktari from JP Morgan. Please go ahead, your line is open.

Good morning, and thanks for taking my questions. A couple of follow-ups, please, from me. First of all, I think you mentioned, if I heard correctly during the opening remarks, that you have launched the Mid-Cap Asia strategy. So could you give us some more color with regards to how that is progressing. And also, can you remind us of any other strategies outside of the semi-liquid private wealth targeted funds that you have on the pipeline for the first half of this year, please? And second question with regards to the exits. The exits were pretty low in the first quarter, but the exits announced in the fourth quarter last year were quite sizable, 5 billion. So I was just wondering, given that there is typically a lag between the day of announcement and when those actually close and are visible in carry, does the fact that the exits in Q4 were quite high mean that carried interest could still be better than the second half of last year in the first half of this year. Thank you.

Thank you. Gustav, you want to take the first one and then Kim the second?

Yeah. So you're correct in that we're also raising a mid-market strategy. It's not on the slide that we saw, but it has a target fund size of below 1 billion euros, which is the threshold that we have for that. But I think in general what we can say is that it's progressing, it's doing well. We think that we will end up in a good spot, so to speak. It will continue to take throughout at least this year before it's completed. But I think over the longer term we see that as a very good complement to the large cap strategy that we have in Asia.

You had a question on other strategies in the pipeline. I think we comment on most of them. There are some smaller real estate funds that we're also launching or raising, as well as some smaller funds within life sciences as a result of our acquisition of life sciences partners. And as we develop those platforms, we're going to build on those for more sizable strategies, and we'll come back to that at a later date.

And with regards to exits and carry, on a general note, I'd first say that sort of one quarter is a very, very short time period in our industry, and drawing too far-reaching conclusions based on what happens in one quarter should be avoided. Carry from an accounting point of view is a function not only of exits, and you're right, it's mainly on closed exits, but also, of course, on valuation performance and the time effect there because you have the... the return to the clients as well that has to be above a certain level. So it's not a linear relationship and I wouldn't draw the conclusion you mentioned there based on the Q4.

Thank you. That's very clear.

Thank you. Thank you. We will now take the next question. It comes from the line of Oliver Caruthers from Goldman Sachs. Please go ahead. Your line is open.

Morning. Thanks for the presentation. Just one question from me. So given your comments on semi-open financing markets, you know, $2 billion available in Europe, $4 billion in the U.S., and also your general comments on leverage targets coming down. How much of a differentiator is your ability to bring in sizable equity co-investors when you think about your near-term deal pipeline and the competition that you see relative to other investing market participants?

Thank you. Olof, do you want to take that one?

Sure. So, co-investors, I think we, of course, have a very strong long-term relationship with our clients. And for sizeable deals, co-investment is always a strategic tool for us, both from the client perspective, who very much appreciates investing and deploying capital directly together with us. And for us, it's an efficient tool to have an efficient construction when it comes to portfolio construction. So it's for sure a tool that we use. I'd say in this market environment, the co-investor structure is probably slightly more sensitive to market conditions in the sense that it's a decision for a particular deal, which is slightly different to the commitment that you do to a fund. where you want to continue to invest across fund generations together with EQT. So slightly more sensitive to market conditions, but it's for sure a tool that we are very actively working with as part of the investments that we do. And also, to some extent, with our clients when we think about exits that we do in our assets. And part of us strengthening a bit the focus on our capital markets activities is also to be working slightly more actively in this regard when it comes to realizing assets together with our clients.

I'll be very clear. Thank you.

Thank you. We will now take the next question. from Nordea. Please go ahead, your line is open.

Thank you and good morning. Just two quick questions please on the exit question before I carry. Kim, could you maybe just remind us what the deals that were closed towards the end of last year, have they all been closed now or what's the progress here please? And my second question is There was a question earlier about impact of interest rates and Exeter. Could you maybe give us a bit more detail on what are the debt structures here and the covenants, maybe also some security hedges in place, please?

Yeah, a significant part of the transactions that were made end of last year has now closed. I can't remember the exact number, but we should have it on our website. So I would ask you to have a look there or give me a call afterwards. and there are no transactions which would not have closed because of any other reason than the normal time lag between signing and closing.

Olof, do you want to take the financing question?

Sorry, would you mind repeating the financing question, Jacob?

Yeah, of course. So I guess I was just... Would it be possible to just give us a bit more detail on what debt structures you have in place in Exeter, just so I know the rate sensitivity?

So I would say that in general, we're talking about, let's say, traditional real estate financing structures in place. It's a little bit different depending on which fund we're talking about. So in the value-add funds, you have a little bit lower levels compared to some of the more core-like structures. But I would say in general that it's fairly market standard.

And you have previously, I think, said that you had hedges in place on the interest rate call. So what's the duration in Exeter on the interest rates?

I don't have that top of my head. So I think we'll need to come back to you on that one.

Fair enough. Thank you. Thank you.

Thank you. We will now take the next question. It comes from the line of Nicholas Herman from Citi. Please go ahead. Your line is open.

Yes, good morning. Thanks for taking my questions. I do have a few outstanding, actually. Just one quick one on Infra 6. So you're raising about a month, a billion per month. um is that a good run rate or i mean that's assuming that you'd expect an acceleration into the first close um secondly we have seen uh blackstone rep 10 close at 30 billion i guess that is a global fund rather than a u.s fund but do you see that impacting the pace of deployments in exeter um and actually on exeter um could you just remind you you're raising three funds currently Could you just remind us how many dollars are outstanding to complete the fundraisings for these strategies and the timeframe? And I guess also just with respect, given that you have 50% of the AUM in Exeter as dry powder, once these fundraisings are done, should we basically assume a fundraising hiatus for the next year or two? And then I do have one last one on carry or on PRE. Your PRE has long been weighted towards carry rather than investment income. Obviously, you just talked about how it carries dependence on a number of factors, not least timings. But how should we be thinking about investment income for this year and next?

Thank you. Thank you. I'll take the first one. No, it's not a – the fundraising in private markets is not – It's not kind of a monthly rolling type of structure. It's actually pretty lumpy. So you build the book with investors until they're ready to commit. And then you have closings. You build up towards the first close, which is important because it involves certain rights, I guess you could say, and sometimes certain small discounts on the management fee. And then from the first close, then you build towards subsequent closes. And then the final close is dependent on, let's say, either the slowest channel or sometimes some clients might need an extra time period towards the end. So it's actually... It's kind of a it's a wave where the majority happens during like like in for six. The majority will happen this year, a little bit next year. But during the year, it's going to be quite lumpy. We, you know, given that as a key fund that we will announce when we have the first close. And I think you'll then see a little bit more about how that rolls together.

Great. And I'll take the Exeter question. So I think in general, the direct impact of Blackstone's $30 billion fund, I would say that there is very limited. I think the way, the structure here for Exeter is fairly different from Blackstone, given that we work with regional funds in a specific sector. So when we talk about the equity Exeter U.S. logistics, it's $5 billion purely in the U.S., purely in logistics. And as I said, the previous fund was $2 billion. So I think it accounts for the continued ability for us to scale our real estate platform in that sense. That of course also means that when we think about, let's say, the fundraising in the coming one, two years, the way that this operates, given we have three regions, given that we have a number of sectors, We will continuously be in the market with different funds. Right now, as you said, we're in the market with three funds, one being the value six, the other two being multifamily in the U.S. and a core plus fund in logistics in Europe. Those are still, let's say, early on in their fundraisings. We have, let's say, the majority of the capital to be fundraised over the coming 12-18 months. And then we will see at least one fund start to be fundraised during this year. And you should probably expect a couple of funds per year also in this environment.

And on investment income, just a reminder first what our investment income primarily is. For each fund, we would typically invest 35% of 1% to 3% of that fund. in order to both to be able to have our share, the house share of carry and in order to show commitment to the fund to our clients. So it's basically fund investments and therefore the investment income is fully dependent on the performance of the fund. So if you see that in Q1 they were slightly up as you can see That's what has happened so far this year and what the rest of the year will look like we'll see in due course.

And maybe to add, as you know, in our year-end and half-yearly reports, you will find a note where you can see the sensitivities and the commitments that we have outstanding in our existing funds and our future commitments to those funds.

Excellent.

Thank you. We will now take the next question. It comes from the line of Sharaz Kumar from Deutsche Bank. Please go ahead. Your line is open. Sharaz Kumar, Deutsche Bank.

Hi. Sorry, my line was on mute. Am I audible now? Yeah. Okay. Thank you. So most of my questions have been answered, but there is one pending. So I had one on the investment marks in particular in your EQT-9 fund. I saw that the fund marks went up marginally from 1.3X to 1.4X. So within this, is it possible to comment on the effect of liquid investments on the markups, say, for example, by Jareef? Just as one example, which is up more than 30% in the first quarter, just to get some color on the effect that this particular investment had on the markup. Thank you.

No, we would not typically go into that level of detail about the valuation levels per company in a specific fund. The level of detail is what we give here. In some cases, there are public companies, in which case we mark them to market, and in other, we mark them to market based on other methodologies. So I wouldn't like to go into that level of detail.

Sure. And then one last clarification on active core. I noticed that you've already made the investment, but in terms of it being reflected in AEM, I believe it is not yet because the transaction is officially not closed. Would that be a right understanding?

We have made two investments now in ActiveCore and in this case it is not a function of the closing but rather of us having committed fully to that transaction and so part of the deal is already reflected in AUM, but not fully as of yet.

Okay, very clear. Thank you. That's it from me.

Thank you. We will now take the next question. From the line of Hailey Tan from Credit Suisse. Please go ahead, your line is open.

Thank you very much for taking questions. Just a few quick follow-ups for me. Firstly, the comment about fundraising taking a lot more work. Can I just check whether that's just a comment on the amount of time it's taken to fundraise, or whether there are any impacts we should infer to the EBITDA margins this year? I know you have a long-term target of 55% to 65%, which I guess is going to benefit this year from some of the larger scale fundraisers in terms of emergencies, but any comments would be helpful. And the second thing, just to help me understand, the valuation has been very resilient um in your flagship funds you sort of flagged that feature the strong underlying performance of the investments and supportive valuation benchmarks i think you said that for a year that market was mostly down about 10 percent so i just wanted to keep any color and some of the fashion i can't hear you now could you speak your line is pretty weak could you repeat the second half of the question there sure let me let me try again is that better If I think about the valuations in your portfolio, we can see the MOICs have been flat or up. I think you said the underlying performance of investments was good and the public market valuation benchmarks have been supportive. And I think at the full year, you said that most of the multiples were down 10%, so I just wanted any similar numbers to give us a cue on. Thank you.

Very good.

No, I don't have an exact number like that to give you either, about the exact multiple, how that has moved in the quarter. It's a portfolio that changes over the quarter, etc. So there's a number of challenges in giving such a number, and the reason we gave it was just to provide an example of how things have changed at that point. It's not something we will do on a continuous basis. But you can see that the marks were up, the performance was okay, and the resulting MOIC or evaluation and thus MOIC is in the books now.

And then on the first question, it's not a margin question, really, that it's a lot more work to do the fundraise. It's rather that in the best cycle, raising a flagship fund takes six to nine months, the majority of it, and then there's a shorter tail. while now it probably takes 15 months plus a shorter tail. So it's a time, and during that time we're having meetings, we're traveling, we're providing a lot of information to our clients, we're interacting, hopefully we're also doing some transactions with them with co-investment, etc. So just the whole effort to do it is bigger, but it's primarily a result of that time factor rather than having to hire more people or anything that's impacting our margins.

And maybe worth reminding also that economically for us, the clients start paying fees from when we activate the fund. So ultimately, you know, the duration of the fundraising process is not really going to matter to the fees that we generate from a certain fund.

Thank you.

Thank you. There are no further questions on the line. Please continue.

Okay, thank you very much for excellent questions today and for your support. Have a wonderful day.

Thank you. Thank you. Thank you.