EQT AB (publ)

Good morning, everyone, and welcome to EQP's Q3 announcement. A quarter where we've continued to deliver on our priorities. We maintain focus on exits and returning liquidity to our clients, having realized 19 billion euros across the globe over the past 12 months. We continue to deliver on our fundraising agenda with good momentum in our flagship fundraisers and certain other strategies. We launched a European long-term investment fund to complement our Nexus product suite, and we launched a successor fund within our active core infrastructure, our first open-ended structure for the institutional segment. All while continuing to deliver returns for our clients with half of our key funds performing on plan and half performing above plan. Finally, the nomination committee has proposed that Jean Salata becomes chair of EQT as our founder and chair, Connie Johnson, expects to step down from his role at our AGM in May 26. And with that, I'll hand it over to you, Per. Next slide, please.

Thank you, Olof, and good morning to you all, also from myself, and thanks for joining us. It's now more than nine months into the year and eight months post the announcement of the CEO transition. So let me quickly reflect on where we stand in terms of our priorities. Over the last couple of months in the executive committee, we've taken a number of actions to maintain a firm-wide focus on excellence in deal-making and value creation across everything we do. We continue to build a client-centric firm that creates the most compelling client experience in the private markets. The actions taken will also ensure that we stay true to our values, that we remain that entrepreneurial and fast-moving organization that we want to be so that we can continue to attract and retain the best people in the industry. And that we run ETT with an effective and efficient operating model. Over the past few months, we've made great progress reducing complexity and driving simplification. merging a number of platforms such as our capital markets and client relations platforms, combining our ventures and our growth teams, and integrating our value creation capabilities further into the investment organization. This enhanced and near-term focus on efficiencies will be materially concluded during this quarter, And, yeah, but having said this, of course, working smarter is really part of our DNA. And in this context, we've made and will continue to make significant investments into our Bengaluru and Warsaw operations, also into our tech platform, our AI capabilities, and we will leverage all of those capabilities to find new ways of working smarter also in the future. So I'm confident that also going forward, we will be achieving productivity improvements in our organization. At the same time, we will continue to invest into our alpha generating capabilities, our value creation functions, and into growing our presence in our target geographies to ensure that we continue to deliver for clients. As long as we maintain our strong performance, we see very attractive growth opportunities in all of our existing strategies. We also see a significant opportunity to broaden and strengthen our client base, and we have strong momentum in our newly launched private wealth products. Going forward, we will continue to participate in the ongoing consolidation of the industry and we remain committed to delivering on our margin targets. We have a number of ongoing conversations with well-performing firms in the private markets that want to become a part of EPT, and we are looking to build both existing business lines and to potentially also fill gaps that we have in the platform. Next slide, please. We want to continue to build EGT to be the most attractive client-centric platform in the industry. We want to be the most attractive counterparty for institutional and individual investors in the private markets, focused on delivering global alpha. Today, EGT is the largest private equity firm outside of the US and the second largest private equity firm globally. This gives us unique advantages offering investment opportunities across the US, Europe, and Asia for our clients. The first nine months of the year illustrate the advantages of that diversification. Taking the public markets as an example, Europe outperformed in the first quarter, the US came back in the second quarter, and now Asia has outperformed global markets quite significantly in the third quarter. In Essex, we've seen the dollar depreciate approximately 10% versus the Euro this year, and that means that in US dollar terms, the European and Asia outperformance year-to-date is quite significant. In the third quarter, we continue to make progress on our exit agenda, realizing a further 2 billion Euros for fund investors. another 2 billion euros for ETT co-investors. Over the last 12 months, exits by the ETT funds amount to 19 billion euros. including co-investments, we realized closer to 25 billion euros of proceeds on behalf of our clients. And geographically, 75% of our fund-based exits were in Europe and Asia and 25% in North America. Within equity, which is a strategy that sits in our private capital, business line, and this is our oldest and most well-established strategy, we're currently raising the next flagship fund, ETT11. Over the last 12 months in this strategy, realizations have corresponded to approximately 30% of net asset value. three times more than the industry average. So a remarkable outperformance of the industry, in particular also if you take into account the growth that we've had in fund sizes in this strategy over the past couple of fund cycles. As we continue to monetize assets, we expect to increasingly also generate real cash for EPT and our shareholders from carried interest. EGT8, a fund where we've recognized carry in our financial statements for some time already, is now fast approaching the hurdle for when cash carried interest payouts happen. And once EGT8 reaches this hurdle, we enter a so-called catch-up phase whereby all proceeds are distributed as cash carry until we have a true 80-20 split of the profit. As a result, assuming market conditions remain broadly unchanged compared to where they are today, we expect to receive approximately 500 million euros of cash from the EGT8 fund in the near term. In total, assuming a gross MOIC of 2.5 times for EGT8, EGT8 alone, an 11 billion euro fund would generate cash carry of approximately 1 billion for EGT-AB over the lifetime of the fund. In our ongoing fundraisers, we're also focused on improving terms related to carried interest, which is expected to shorten the time by when cash carried interest is paid out in the future. And Kim will talk more about this shortly. Our exit track record is really also a testament to the quality of our portfolio and our differentiated exit capabilities. As a result, we continue to have strong DPIs across our key funds, and that puts us in a differentiated position when it comes to our fundraisings. But performance is really not enough to be able to secure client commitments in today's market. Investors are continuing to consolidate their GP relationships. And with the remaining core relationships that they keep, investors really want to build close strategic partnerships. They want to have counterparties that can help them achieve their strategic objectives. EQT is well positioned, also in this regard, being one of a few of truly client-centric scale players in the industry. We want to provide our clients with the best experience, offering attractive new thematic investment strategies, producing the most attractive co-investor opportunities in the industry, and finding new innovative ways to stay invested together in our winners. Thanks to our global scale, we can also help investors rebalance their portfolios and we can offer global diversification and access to international alpha. There's been a real mindset shift among private market investors to focus again on portfolio diversification. And given that investors today are significantly over allocated US dollar based assets, this presents a real opportunity for private markets platforms that can offer attractive investment opportunities, attractive alpha in Asia and in Europe. Being one of the largest private markets firms across private equity infrastructure and real estate in Europe and Asia with a strong investment track record, we're benefiting from this trend. In Europe, a good example is the ongoing fundraising of our Real Estate Europe Logistics Value Fund, where investor demand has exceeded our most optimistic assumptions. In Asia, we're currently investing the largest pool of dry powder, and Asia is a very attractive region for private market investors. The Asian buyout market is expected to double by 2030 compared to 2023. Average allocations to alternatives are expected to increase significantly from the current 8% level and get closer to the levels that we see in North America, which are at 37%, and Europe at 26%. The strength of our global deal engine also positions us nicely for the private wealth opportunity. In the last 12 months, EGT has created co-investment opportunities of more than 17 billion euros across strategies. This makes us the most attractive provider of co-invest deal flow in the private markets industry. Our co-invest to fund commitment ratios over the last 12 months are significantly above really any player in the industry. And this means that the deal flow already exists today to provide attractive investment opportunities to private wealth and retail investors. We don't have to manufacture deals or opportunities specifically for this client segment. Instead, we will maintain the same underwriting standards as we have in the institutional part of our business. And we will simply offer private wealth clients access to the attractive investment opportunities, that attractive alpha that we're producing in our fund products and in the co-investments that we provide already today. Next slide, please. During the third quarter, we've remained focused on executing on a range of prioritized organic growth opportunities. For instance, we launched the second generation of the active core infrastructure fund. This will be an open-ended active core infrastructure fund. Actually our first open-ended structure targeted to institutional investors. This is a natural evolution of the first active core infrastructure fund, which was a longer hold strategy that we launched in 2022. We're excited about this opportunity to introduce more perpetual institutional capital into our fee-based assets under management. During the quarter, we also continue to build and strengthen our franchise and to strengthen our geographical presence. A very good example of this is Japan. Japan is really a strategic growth opportunity for EQT. We launched two public tender offers, Fujitech and Care Net, having followed those companies for several years. Japan is today one of the most attractive opportunities for IKITI. Governance reforms and structural shifts in the market are creating highly attractive investment opportunities for our active ownership focused private equity strategies. In addition, We also see an attractive opportunity for IKITI to significantly strengthen our private wealth investor base in the country. In the context of private wealth, in the third quarter, we added another attractive product to the portfolio, the Nexus Private Equity ELTI product that Gustav will now talk more about. Gustav, over to you. Next slide, please.

Thank you, Per, and good morning, everyone. We continue to make progress on our ongoing fundraising in the third quarter. BPA9 raised $1 billion in the third quarter and has $12 billion of commitments today. Including closed and pending commitments, the fund has exceeded its $12.5 billion target size and we continue to expect the fund to reach its hard cap of 14.5 billion USD upon final close in early 2026. Following the launch of IKT 11 in June, client reception has been very good. Third is supported by the strong exit track record for IKT private capital Europe and North America during 2025. As previously communicated, EQT 11 has a target fund size of 23 billion euro. We continue fundraising for two of our first-time funds in EQT transition infrastructure and EQT healthcare growth. Between these funds, we expect to raise north of 4 billion euros, of which more than half has been closed to date. And as Per mentioned earlier, During the quarter, we also launched fundraising for the successor fund within Active Core Infra, our first open-ended structure for the institutional segment, where we're seeing very encouraging dialogue with our clients. Furthermore, we continue to raise capital for IKT Real Estate Logistics Europe 5, for which we had a strong first close in July at 1.7 billion euros. The fund will become fee generating after activation, expected later this year, hence not included in the gross inflow for the quarter. As a reminder, the predecessor fund was closed in 2021 at 2.1 billion euro, and we expect a fairly significant increase of fund size for fund five. We currently have dry powder of approximately 50 billion euro, and with around 10 billion euros still to become fee-generating upon deployment. Next slide, please. We're continuing to develop our Evgreen platform. Earlier in the year, as previously communicated, we launched IKT Nexus Infrastructure, providing access to our infrastructure platform to clients in EMEA, Asia, and Canada. We also launched our U.S. Evergreen vehicle, investing into EQT's global private equity investments, where we have raised some $350 million since the start in June. And we have just launched EQT Nexus PE LTIF. The LTIF offers a new way to access private markets for non-professional individual investors in Europe. with a lower minimum threshold than our Nexus suite. We're seeing very promising initial signs from both distributors and end clients on Deltif. We're also expecting to launch a U.S. evergreen structure for infrastructure around year end with several strong distributors lined up. In total, the current evergreen strategies have attracted around 1.2 billion euros in subscription year to date. And we expect to raise around 2 billion euros across evergreen vehicles during 2025. We think that the expected inflows for Q4 is likely a relatively good quarterly benchmark looking into 2026. However, adjusted also for the fact that we will have a US infrastructure vehicle coming live. Of that, you should expect that approximately two-thirds are incremental AUM, and one-third will be invested through the underlying funds. As Per mentioned, we're also seeing a change with distributors. which so far has been very focused on U.S. managers, and now they're shifting that mindset to include more Europe and Asia, which we expect will benefit us. We feel that we're in good position to win in this channel, as we can provide a true global exposure through locally anchored products. And with that, I will hand over to Olof. Next slide, please.

Thank you very much, Gustav. Let's next turn to the investment and exit activity. So over the past 12 months, we have announced about 16 billion euros of investments across our global platform, of which about 5 billion euros was announced in the third quarter of this year. Looking at the past 12 months, Europe and North America each represented about 40% of the investments and APAC some 20%. And in the last quarter, APAC represented just like a higher share of the volumes invested. At the same time, we provided about 2 billion euros of co-invest opportunities for our clients in the quarter, or 17 billion euros over the last 12 months. Investment activity was primarily driven by private capital during the third quarter, as EQT 10 announced three significant investments across healthcare and technology, taking the fund to an investment level of about 60% to 65%. In the third quarter, BPA 9, as Per previously mentioned, also announced its public tender offer for Fujitech, which marks EQT's largest buyout in Japan since 2009. The office was established in Tokyo in 2006. And in real estate, we continue to invest selectively with total investment volumes of just over 2 billion euros over the past 12 months. The pipeline for new deals continues to be strong across the platform. We continue to expect that IKT 11 and Infrastructure 7 will be activated during the first and the second half of 2026, respectively. Next slide, please. Looking at the realization volumes, they continue to exceed the investment volumes on an LTM basis. With 2 billion euros of announced exits in Q3, realization volumes exceeded the investment volumes, as I said. Over the past 12 months, we have realized about 19 billion, roughly 45% of this was in Europe, a quarter in North America, and about 30% across Asia. And these exits have delivered a weighted average gross MOIC of about 2.3x. Notably, none of these exits were through continuation vehicles. This is an area we are exploring that will allow our clients to retain exposure to our winners. Approximately 40% of the exit volumes in Q3 were from funds in carry mode. And as you may have seen, we were particularly active realizing our lifted assets. Over the first three quarters of the year, EQT was once again the most active private markets firms globally when it comes to ECM activity. being almost twice as active as the number two in terms of transaction volume. Recent exits also include AI-powered portfolio companies such as Telus Digital by BPA6 and the sale of Sana Labs and ETT Ventures 2 investment to Workday north of 1 billion euros. In September, Sana was one of two ETT Ventures portfolio companies to reach unicorn status along with smartphone brand Nothing. Two highlights in the European tech ecosystem. Let me lastly also highlight that we have finalized the remaining syndications for North Anglia. In total, external capital was close to $9 billion across over 80 investors. If we look ahead, we remain focused on executing on our exit agenda. Equity capital markets are strong, we think. Credit spreads are tight, and M&A activity is picking up across the globe. In particular, corporate confidence is improving and the appetite for corporates to engage in M&A and other corporate actions is picking up. Having said that, we continue to face macro and political uncertainties, including around global trade, as we saw last week, which can create pockets of volatility. In recent quarters, exits have been paced by private capital, and our exit pipeline ahead is more tilted towards infrastructure. Finally, and as a reminder, we had several large exits in H1, and H1 is therefore not necessarily a good proxy for H2 in terms of total exit volumes. And any exit activity in Q4 would most likely only close in 2026, and thus does not impact carry for 25. But more on this from Kim on the next slide, please.

Thank you. Thank you, Olof, and good morning, everyone. All of our key funds continue to perform on or above plan. And during the period, key funds valuations increased by on average 3%. The more mature vintages, which are at the later stage of their value creation journey, showed healthy performance. The 2020 to 21 vintages had a strong quarter driven by strong underlying operating performance and supportive multiples, although with some pockets of underperformance. equity infrastructure funds across the board showed strong performance in the quarter. The most recent vintages, which are currently being invested, continue to perform according to plan. And as a reminder, new investments are added at one time's gross . Year to date, key fund valuations have increased by just north of 3% on average. The first half of the year was heavily impacted by the weaker US dollar versus the Euro. And adjusting for this FX, key fund valuations are up more than 8% from the start of the year. Next slide, please. In Q3, the number of FTEs amounted to 1,941, equivalent to a net increase of 33 FTEs during the quarter. Hires were primarily made within the infrastructure and capital raising teams to support EQT's growth agenda. We will continue to invest to capture future growth opportunities, both in the private wealth space and in selected geographies of strategic importance, primarily across Asia and the US, but also in Europe. At the same time, actions are being taken and implemented during the third and fourth quarter to ensure we remain a streamlined and high-performing organization. As a result, by year end, we expect the number of FTEs to return towards the number we had at the start of the year. And in addition, we expect to reduce the number of contractors working for us by approximately 80 roles, or about three quarters of the roles. Let me also recap a few points as it relates to our outlook cost guidance for 2025. Our outlook cost guidance for 2025 is unchanged. We expect total OPEX growth rate in 2025 to be at least at a similar level as 2024. In our H1 update, we stated that we expect H1 carry to be a reasonable proxy for H2 carry. with the Q3 exit activity, we have de-risked this statement, and we expect H2 carry to be at least in line with H1. As previously stated, we do not expect infrastructure 4 or equity 9 to be in carry mode in 2026. As Per mentioned, if we continue to realize investments, our larger funds will gradually approach cash carry mode. And let me go through this in some more detail on the next page, please. As you know, we currently have four key funds where we are recognizing carried interest in our financial statements. ITT 7 and 8, Info 2 and BPA 7. The total carry potential in these funds is about 2 billion euros, of which 1 billion has already been recognized in our financial statements as of H1 2025. The rest is expected to be recognized over a multi-year period. Infra 3 and EQT 7 have generated around 500 million of cash carry in total to EQT AD. But EQT 8 and BPA 7 have not yet generated cash carry. In other words, expect another 1.5 billion euro of cash carry for EQT over the lifetime of these four funds. About 1 billion of this is related to EQT 8. IKIT 8 has primarily a whole fund carry component. And once we reach the hurdle on a cash basis, we have a catch-up phase until cash returns are distributed 20% between carry holders and 80% to our fund investors. IKIT 8 will be the first major flagship fund, so above 10 billion euros in size, since our IPO in 2019 to enter cash carry mode. This is a fund that is currently marked at 2.4x, and we expect the fund to generate above-plan returns, i.e. more than 2.5x gross moit. We expect EQTA to soon enter the catch-up phase for cash carry, and based on our current exit plans, we expect to realize cash carry of up to 500 million euros over the near term. Today, most of our funds are predominantly whole fund carry, which means cash carry tends to be quite back-end loaded. For BPA9, we will move to a deal-by-deal basis. For EQT11, we expect to have 50-50 deal-by-deal and whole fund carry. And this means that cash distribution related to carry will come earlier for both funds than with what otherwise would have been the case. With that, I hand over to Per for some concluding remarks.

Thank you, Kim. So to summarize the key takeaways from today's webcast, in the third quarter, we stayed disciplined in our investment pacing and in continuing to monetize deals, managing cash flows on behalf of our clients, and significantly outperforming the industry. Over the past 12 months, the vast majority of monetizations have been achieved in the private capital business line, and in the next couple of quarters, we expect a pickup in realizations in equity infrastructure. We continue to execute on our fundraising agenda. We see very healthy momentum in our flagship fundraisings in BPA9 and EQT11, and we're also making excellent progress in our other strategies. We continue to grow the number of open-ended investment strategies and build the evergreen offering both for institutional and private investors. We launched the active core infrastructure fund and the EGT Nexus PE LTF product. And this year we expect total inflows of 2 billion euros across the five private wealth focused EGT evergreen products, implying a significant step up in momentum in this part of our business during the second half. When it comes to our organization, we're delivering on the priorities that we set out in the first half, streamlining EQT to ensure that we stay that fast-paced and entrepreneurial firm. This is important for our ability to continue to build the most attractive platform in the private markets and also to continue to scale EQT in the right way. It also puts us in the best possible position to participate in the ongoing consolidation of the industry, and our reputation as a consolidator has never been stronger. All in all, we remain focused on building the most attractive client-centric scale platform in the private markets industry. With that, I'd like to open it up for Q&A. Operator, please.

Thank you. 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 1-1 again. We will now take the first question. From the line of Hubert Lang from Bank of America, please go ahead.

Hi, good morning. Thanks for taking my questions. I've got three of them. Firstly, on headcount and cost, So, where are the headcount cuts being made in Q4? Is it mainly consultants or any other areas? And how should we think about 2026 headcount growth and what's the read across that to cost growth guidance in 2026? That's the first question. The second question is on cash. Just given that you have more cash coming through from the carry, What do you plan on doing with the cash you'll be generating? Does this increase the possibilities for more M&A, or will you also consider special distributions? And lastly, a question on evergreens. So for this year, you're expected to probably get around $2 billion of inflows into evergreens, but that's still some ways off the $10 billion you're targeting over the next fundraising cycle, which is 10% to $100 billion you spoke of previously. So how should we bridge the gap between what you're getting today and what you're targeting in the future? Thank you.

Can I pick up on the headcount? Well, on the headcount reductions that are being made, it's a trimming. It's across the organization. So it is in all parts of the organization. Then in addition to those FDEs that are actually on our payroll, we are also in the process of, I should say, reducing the number of contractors, consultants that are sort of working for us in other means. They would typically be in sort of other parts of the organization, mainly in tech, if you sort of take one part of the organization that has more. What we said on cost guidance is that this year we expect to have at least the same level of cost growth as last year, whereas next year that cost growth is expected to be lower in the single digits.

Thank you, Kim. And then Gustav, maybe you take the one on the evergreen question now.

Yeah, so I think as I talked about, I think what we said is we are at 1.2 for the year. We think that we will be at 2 billion. So you have a gap of 800 million expected for Q4. And as I said, I think you should see this as a pretty good quarterly benchmark and then adjust it also for the fact that we will launch the U.S. infrastructure vehicle by the start of the next year, so to speak. I think that those components will give you kind of the rollout to 2026.

Should I comment on cash? Yeah, maybe I'll just make like a general statement. Of course, it's always. better to have a stronger balance sheet that will give us more flexibility. We're constantly, you know, evaluating how to leverage our balance sheet in the best possible way, whether it's for continued strategic growth investments or adjusting our dividend policy.

Kim, anything you want to add? That's a fair comment. And we've said that we want to have a continuously growing dividend per share. We want to stick to that. And we have not ruled out any extraordinary distributions to shareholders should we be overcapitalized at some point in time.

Just a quick follow-up on the headcount. So how should we think about the six headcount growth?

I know you gave the cost growth, but... I think the cost growth is probably a better way to think of it than the headcount growth. There's a very broad set of costs associated with heads in our organization. Okay. Great. Thank you.

Thank you. We will now take the next question. from the line of Angeliki Barkatari from JPMorgan. Please go ahead.

Good morning, and thank you for taking my questions. If I can just go back to the CARI guidance for the second half of the year, can I please check, is the SANA Labs exit that you mentioned, which sounds like it's a pretty good exit, going to contribute to that? The second half, and is that sort of the reason why you now feel that the guidance has been erased? Then a second question with regards to the exit and IPO pipeline that you're seeing for 2026. Can you perhaps give us a little bit more color? I mean, this year you said you're on track to reach the 30 exits that you had planned in the beginning of the year. What is your expectation for next year, also considering that we have seen an acceleration in IPOs also in September? And third question with regards to M&A, which areas would be of interest to you now? I think last year we were talking more about liquidity solutions and secondaries. Is that still sort of the primary focus, or would you consider doing something in another asset class? Thank you.

Maybe I'll start with... the exit environment pipeline for the second half of this year and what we're seeing also first half. And then Kim can comment further on the carry guidance for this year. So when it comes to the exit environment, as you rightly said, we've seen encouraging signs of a pickup in activity levels in the IPO markets. really globally, but certainly also here in Europe, a number of sponsor backed IPOs, larger ones have been done and the aftermarket performance has been very encouraging. And we're seeing that also now positively impacting the pipeline in particular of activity in the private markets. For us, we have a very healthy pipeline. of exits that we are working on in the next couple of quarters. I'd say it's maybe a little bit more tilted now towards the infrastructure, as we mentioned earlier in the webcast presentation. But also in private capital, we continue to stay disciplined in our monetizations. And in terms of the routes that we're pursuing, it's really a mix of IPO-led exit processes and trade sale-based exit processes. So we feel good about the market environment. If anything, today it's slightly more positive compared to Q2, and we continue to feel good about executing on our pipeline of monetization opportunities. Kim?

Yes, on carry, as you know, we typically don't comment on specific deals, but ventures, Ventures 2 is not in carry mode, so this is not the reason for us being more comfortable with our carry forecast. Having said that, it's amazing to have two unicorns on the same day, and it has been a very, very attractive transaction.

Yeah, exactly. And so given the exit pipeline that we're seeing, also all of the exits that... that we completed and the sell downs that we had during the third quarter, we feel good about the carried interest guidance also that Kim gave earlier. When it comes to the strategic priorities for IKITI, As I think I mentioned in my presentation, we see this industry continuing to consolidate. If anything, it's accelerating. And what we're focused on is just continuing to build the most attractive client-centric platform in the industry, the areas where we see opportunities for us also to accelerate our growth inorganically. It's both in existing business lines. but also to fill gaps that we have in the platform. And as we spoke about, I think last time in the Q2 webcast, one area where we do think that we need to strengthen our capabilities and also alluded to it earlier on in the presentation is around solutions and secondary. So this continues to be a space that is of interest to us. And we feel good about sort the conversations that we're having, and also our reputation as a consolidator in the industry.

Thank you very much. If I may, just a small follow-up on Ventures, too, because, you know, we don't have a lot of details on this smaller fund. When, approximately, should we expect this fund to get in carry mode?

No, we don't give that kind of detail on the smaller funds. It will not move the needle for the firm as a whole. Ventures is an amazing business because it helps us to be smarter investors across the board in our other funds, but it doesn't really move the needle for the group as a whole.

Thank you. Thank you. We will now take the next question from the line of Ermin Karik from DMV Carnegie. Please go ahead.

Good morning. Thanks for taking my question. So maybe first if you could provide any kind of size expectations you have for the active infra fund and if you have any additional comments on kind of when we should expect the target for infra seven. and how we should think about hard cap for ETT 11. And maybe just if we generally talk a little bit about the active infra kind of return targets and how the revenue model will look for that one. Then question two would be just if we look on the rolling 12-month investments, we see them trending downwards. Is that by coincidence or do you see less opportunities than you did, I don't know, a year ago or so? And then maybe just lastly, on the value creation, we're seeing the 8% adjusting for FX. It's still quite a bit down from your historical value creation. Does that seem to attribute to a challenging market, or do you see any challenges with kind of repeating what you've created historically? Thank you.

Okay. Maybe you should start with the active core infrastructure question now.

Yeah. I'll do that. So Infra7, we haven't set, let's say, a timing of when we will go out with the fundraising of Infra7, so to speak, specifically. But I think you should probably think about it. Of course, as we said, activation is expected to happen in the second half of next year. So we will go out before that, so to speak. I think that's the guidance that we can give. And then when it comes to ICT 11, a little bit same answer, so to speak. We haven't set the hard cap yet. When we do, we will communicate it. And I think you should probably expect it to be in, let's say, around a connection of the first close of ICT 11. When it comes to ACI 2, as we said, it's going to be an open-ended structure. So, of course, it's hard to give a guidance on size because it will be evolving every year, so to speak, and will take in money continuously in that structure. ACI 1, as you know, was around 3 billion in a closed-ended form. So if you think about that on a year-by-year basis, it was kind of invested 1 billion per year, so to speak. I think that's some form of guidance. Of course, we probably think that with an open-ended structure that we will be able to take in more money than we would have done in a closed-ended format, I think. So that probably gives you a little bit of a sense of the expectation of it. When it comes to the fund terms, I think you should think about it as that the percentage charged is lower than what we see in general, but it's charged on NAV, so over time it will grow. And that's, I think, in line with the core plus market that we see in general, so to speak.

And maybe I'll take the one on value creation. Value creation across our funds is never linear. and there's always a little bit of volatility around it. I'd also add that many of the more mature funds are really materially de-risked, right, and we have locked in very, very attractive returns, net IRRs, and all of the key flagship funds that are more mature are really or continue to be on track to reach or exceed our base case guidance in terms of gross MOIC. Also, the post-pandemic 2020-2021 vintage funds continue to make very good progress on value creation, both the Infrastructure 5 fund that saw a 6% value increase in the quarter, but also ETT 9, and we feel increasingly confident also about the outlook of those funds and that they will deliver the targeted MOICs. And then the funds that we're currently investing, what's important to keep in mind here is that, of course, we've been quite active in the last couple of quarters putting capital to work in particular in IKITI 10. And all of that, those investments that we make, they remain valued at cost for the first couple of quarters and that has an overall negative impact on the value creation in any single quarter. So we stay very close to all of our portfolio companies and all of our investments and remain confident about our alpha generating capabilities also going forward. In fact, we've also had a third party provider look at this, and that third party provider was particularly impressed by our alpha generating capabilities and how they've also improved over the last couple of fund cycles. And then in terms of the pipeline of deals going forward and the investment activity, again, a little bit the same comment. investment and deal activities is never linear. There's some lumpiness to it. We were very active in our infrastructure strategies, putting capital to work in the infrastructure six fund, and we are at the targeted investment levels there, really six months post the final close of that fund. And in ETT 10, we also had a healthy activity level during Q3 and continue to feel very good and confident about the pipeline of opportunities that we see ahead. Very clear. Thank you.

Thank you. We will now take the next question. From the line of Arno Gibla from BNP Paribas Exxon. Please go ahead.

Yeah, good morning. A few questions, please. Could I start with the exits? So quite a lot of exits going on, yet limited value creation. I'm just wondering what sort of uplifts you're seeing on the exits you've had this year, and how should we think about the potential for uplifts in Q4 and H1? I think you're talking about a strong pipeline there. Secondly, on the evergreen vehicles, I mean, the guidance is very clear, so I don't need further explanation there. But I'm just wondering, how should we think about capacity of these products in the long term? I think you've talked a lot about investing in Paris-Passu and wanting the vintage diversification, et cetera. Does that impact at all the capacity of these products in the longer term? And if so, do you just grow the Evergreen channel then by launching incremental products? And finally, on the 9 billion of overall carry in slide, I think, sorry, 12. I'm just wondering which funds are included there. Is that including, I suppose, the three flagship funds that are being raised now? Thank you.

Thank you for those questions. I'll start with the first one on exits. Again, it's never linear, but overall the statement I would make is that the vast majority of the exits that we've had over the last 12 months have been in line with or above where we had marked those investments in our books. And that also explains part of the value creation that you have seen in many of the funds during that time where we have achieved those exits. It also depends on during a quarter what type of investments you monetize. Of course, if you monetize a larger share of publicly listed investments, you will not have a direct positive impact in the value creation in a fund. Sometimes it can actually be the opposite, even though you're doing the right thing in terms of locking in returns and de-risking the funds and managing cash flows on behalf of investors long term. And then, of course, what you're also seeing is that we're preparing a number of our assets and investments for exits. We feel very confident about the performance of those assets and those investments, and you're seeing some of that also reflected in the value creation or in the value uplift, in particular in the infrastructure strategies. A second question on the capacity in the evergreens. I'll start, and Gustav, maybe you fill in. As we spoke about in the webcast presentation, right, we're in a slightly different position compared most other players in the industry that are focused on this private wealth opportunity. Our deal making engine is so strong today and we generate a co-invest to fund commitment ratio that is, you know, way above, way, way above the average of the industry. So it means that really we already built the capacity in our existing organization to create attractive opportunities and to offer private wealth investors to participate in those investment opportunities. So a large part of the cost related to tapping into that opportunity, relatively speaking, we've taken a larger share already because we've already built that deal engine, if you will. Gustav, anything you want to add to it?

No, I think that's the answer, so to speak. It's always going to be performance first in this, so to speak. So I think what's crucial for us is that we create vehicles that can really generate strong performance. We think that's going to be an increasing, the first generation of private welfare was really focused on brand. the second generation is really going to be focused on the ability to create long-term sustainable returns in those vehicles. And we think that that move is also going to benefit us from a size perspective in it.

And I can comment on the technical question there. the 9 billion includes all the active funds, all active key funds, sorry. So BPA9 is included, but not the EQT11, for example. But also remember about that number, that it is in order to give you and the market a sense of order of magnitude. It's not an exact calculation. There are simplified assumptions behind it, and we've footnoted those, and we can talk about them offline if you'd like.

That's very helpful. Just a very quick follow-up. Very simple one. Do you have any exits for EQT9 and Infra4 in the pipeline?

The answer is yes, quite a few. But I don't think we want to provide more guidance than that. Thank you.

Thank you. We will now take questions. The next question. From the line of Jacob Haslebik from SED, please go ahead.

Good morning. So two questions from my side. The first one is on AI implementation. You write you have made AI a strategic priority both internally and in portfolio companies. Can you articulate the expected impact on your operating model decision making and competitive positioning and what's a realistic timeline for any material benefits from AI. Second, on the European defense and critical infrastructure themes, given the significant increase in EU spending commitments within cybersecurity and infrastructure needs, you mentioned Germany and UK in the report, does ECT see an opportunity to create a dedicated fund focused on these defense, cybersecurity, and infrastructure investments in Europe, or will these teams rather be invested in using Infra7? Thank you.

Good. I'll start with the first question. So, AI implementation is definitely a strategic priority for us, both in our portfolio companies and internally. In fact, we're really putting AI at the center of any new investment underwritings that we have. It's always the number one topic that we start and I see discussion with. And then, of course, we also follow up on it in our portfolio review committees. And whenever we're not comfortable that it's more of a value creation opportunity than a disruptive threat, then we would decline an investment opportunity. The same mindset we apply to how we're future-proving ETT, so we're making significant investments in this area into our tech stack, making sure that our TechStack is set up to leverage all of the global data that we sit on to apply, you know, tailor-made AI tools in our sourcing, in our portfolio review processes, in how we run our business in the best possible way. I don't think we're in a position today to quantify exactly, you know, what that potential is in terms of how we will manage our FTE and costs going forward. But, of course, we are tracking this in terms of KPIs in our executive leadership team. And this is just an attractive opportunity for us, a little bit what I referred to earlier, to just continue on this journey to improve our operating model and to achieve productivity improvements over time. In terms of the defense opportunity and critical infrastructure opportunity, we are not planning to raise a dedicated fund for this. We are seeing an attractive pipeline of opportunities, both in more tech related, in the more tech related part of that segment in our early stage strategies. So that's something that we're looking at there. And then, of course, also, in the infrastructure business. But we would be investing out of existing funds into that opportunity.

Thank you.

Thank you. We will now take the next question from the line of Nicholas Herman from Citi. Please go ahead.

uh yes morning guys um constructive call um three questions for me please um one on cost one on evergreens and one on uh the open-ended um aci2 um on costs um this is like quite a relatively material optimization of fc in the fourth quarter um i think the market expects 2026 to be the low point of your um of your uh operating margins given given the nature of your fundraising cycle um but do you think you can say about the 50 fee related to the margin next year um on the evergreen on the evergreens um we're talking about moving from i guess uh 0.4 billion per quarter of evergreen subscriptions to eight billion per quarter um this is pretty clear i mean but just what i'm interested in here is I appreciate you've broadened your range, but where is that step up coming from, please, both by product and region? Just interested whether you're seeing that biggest uplift in the momentum. And then finally, on ACI 2, which institutional client segment has shown notable interest in ACI 2 in that open-ended format, please? And the very difference in fee rate versus ACI 1. Thank you.

If I start with the first one, Niklas, we do not give sort of year by year fee-related EBITDA margin guidance, as you know, but we have been very very firm about this, though, that we expect to reach our 55% target during the course of this fundraising cycle. So that stays, and I think we reiterated it again in this report, and you will have to But it's, of course, not a linear sort of road from where we were to the 55%.

But having said that, of course, today we've put us in an even better position to deliver against that target with the actions that we've taken. Gustav, do you want to take the other ones?

Yeah. So I think on the green side, so I think in Q3 here, we have around 500 million of inflow. And as we said, we think Q4 is going to be around 800. I think the step up in between is really related to the LTIF launch, as well as, let's say, building more and more momentum in some of the other products, as we said. Nexus infrastructure was launched in Q2. The U.S. evergreen vehicle for PE was launched at the end of Q2. So I think all of this is just building momentum here, having a broader base, more countries to access from, let's say, the Nexus suite, and on the U.S. side, just adding more distributors to it, so to speak. I think you'll You'll continue to see that buildup here in Q4 and going into 2026. And as I said, in 2026, we're then also launching the U.S. vehicle for infrastructure. So I think you'll see that being fairly broad-based and with a good diversification on a global basis. And when it comes to ACI 2, I think you should think about the margin or the fee rate somewhat in line with what we have on ACI 1. The institutional interest is really broad-based. It's a global fundraiser, and we're seeing global interest for it. I think everything else being equal, we'll probably see more interest from North America in the open-ended structure compared to the closed-ended structure, which was, from a U.S. perspective, a little bit trickier to access for them. So I think that's probably where we see the biggest upside versus what we had in ACI 1.

So very strong interest, really, in ACI 2, and I think also benefiting a little bit from private market investors wanting to diversify away also from only having credit exposure, so to speak, right, and focusing again on that diversification. So ACI too also benefiting from that.

That's very helpful. Thank you. If I could just have a quick follow-up on the evergreens question. Have you also seen any benefits in some of these strategies if you come out of, let's say, an exclusivity period and then it starts to really ramp up? And I guess in that context, are there any kind of exclusivity periods that we should be mindful of from your U.S. products beyond which there could also be a material ramp up thereafter? Thanks.

I wouldn't say that there is a significant ramp up due to exclusivity. I think it's more in general just broadening the base. I think there is probably going to be some form of exclusivity for the U.S. infrastructure product. But at the same time, the distributors that we've lined up is also global and sizable. So I don't think that you should expect that to be, let's say, different from what we've seen on the previous launches.

Very helpful. Thank you.

Thank you. We will now take the next question. from the line of Hayley Tan from UBS. Please go ahead.

Morning. Thank you for taking my questions. I have three, please, if I can. Firstly, on Nexus. Secondly, on maybe some knock-on impact from other things happening in the market. And then, certainly, just the clarification on the fundraising and activation. So, just firstly on Nexus, can I confirm, Am I right in thinking that in the first two years after investment has been made, that investors cannot redeem from the fund? And is this also true for the LTIF structure, just so we can try and understand how to think about that? I also wondered, are there any specifics in terms of placement fees or fee holidays in the early stages of a fund, evergreen fund life, which means that potentially the revenue uplift going forwards could be a lot higher than the fee-paying AUM growth? Second question, just in terms of knock-on effects, I mean, there have been a lot of private credit concerns in the market, and I just wondered, are you seeing any knock-on impact for your exit environment, the availability of credit perhaps, or perhaps even just in terms of appetite for your evergreen funds versus maybe those in other asset classes like private credit? And then the third and final question, just on fundraising, so I just understand the semantics of this. Have those both activated already? So the fundraising you're talking about, are we already seeing that in prepaying AUM growth? And then similarly with the real estate for this year at five, you mentioned you had a strong first close, but we won't see that until it activates later this year. Can you give us any guide as to is that at the end of this year or into next year just to understand how we should think about that flow? Thank you very much.

Maybe I'll start with a question just on the broader private credit market dynamics. And then I'll hand it over to Gustav to comment on Nexus and also the impact that we're seeing on the evergreen side. So in terms of private credit as an asset class, what I would say is that margins and spreads remain very, very tight, very attractive, certainly from an issue perspective. when it comes to our business, access to financing is readily available, and it's really also fueling deal-making and activity levels across the platform. And we've seen no signs of that dynamic changing in any way. We're closely monitoring, of course, what's happening in the broader private credit market, but as of today, we see no change in dynamic, and we also certainly see no systemic changes risks or issues for the broader industry. So maybe in that spirit, Gustav, you want to comment on Nexus and Evergreen?

Yeah, I'll do that. And maybe I'll also take the fundraising questions on that. So I think in general, you should think about all Evergreen products that we have, that they have either 18 or 24 months soft lockup, so to speak, meaning that investors can redeem, but it comes with a cost associated with it, which means that in practice you will see fairly limited redemptions in the first 18, 24 months, so to speak. When it comes to fee holidays, I would say that for the U.S. products, you would see somewhere between a six to 12-month fee holiday normally in the market. So that's also true for our products. So you will see a ramp up in terms of fees. in terms of revenues in that regard being a little bit delayed for those launches. For our European products, there is, European and Asia products, there is no free holiday as such. And then when it comes to healthcare growth and transition, correct, they are activated. And as I said, the guidance is that they will reach north of 4 billion and that we have raised a bit more than half of that, so to speak. But that number is included in the fee-paying AUM. And when it comes to the European Real Estate Fund, the guidance is that that will be activated in Q4.

Very clear. Thank you.

Thank you. We will now take the last question. From the line of Oliver Carruthers from Goldman Sachs. Please go ahead.

Hi there. Good morning, everybody. Oliver Carruthers from Goldman Sachs. Thanks for the presentation. I've got three questions left, please. The first question, on having this high co-invest to commitment ratio that you spoke about, interested in your thoughts on how it could affect it. You know, really, if nexus vehicles continue to scale, and effectively become your biggest co-investors, is there the potential for this to shift the economics of co-invest for your institutional LPs, given that this has become fee-free by industry norm? You know, effectively, is there potential for you to start charging some of your institutional clients for this, or at the very least for this to become more of an exclusive part of your client offering on the institutional side? So that's the first question. The second question. On the back of what you're doing with ACI 2, can we expect ECT Future to go down the open-ended route for your institutional clients as well so that you have a longer-dated, open-ended PE product as well as infra? And then the third final question, sorry to come back on the consultant's point, but just trying to map out the spend associated with the AT consultants or the 75% that you're looking to fade. If I go back to your half-year report, you showed $50 million of costs associated with external services and consultants for the first six months, are you able to give us a rough proportion or indication of what chunk of this is consultants? Thank you.

Good. Thank you, Oliver, for those questions. I'll start with the first two, and then I'll hand it over to Kim. So when it comes to our co-investor deal flow, Yes, there is an opportunity to monetize this also more as we are growing in with our private wealth and retail clients and investors. Of course, we will continue to offer the most attractive co-investor fund commitment ratio in the industry to our important institutional investors, and we're committed to that. But just given the deal engine that we have today, you know, we feel very, very good about our ability to create the win, win, win, if you will, between those two client segments, as well as IKT over time. And then in relation to the ability to potentially monetize even more of the institutional co-invest deals over time, and our longer hold strategies and riding to winner strategies. What I'd say is what we've discussed in the executive leadership team and also with the board is that this is a huge growth opportunity for us. At DTT we sit on many of the most attractive scaled assets in the private markets that operate in the most attractive parts of infrastructure and healthcare and technology. So there's clearly an opportunity for us to become more sophisticated over time in terms of how we monetize these investments and how we enable our clients, our investors to stay invested in those businesses, right? And as Olof said earlier on in the presentation, we're probably the only scale player in the industry that hasn't done a continuation vehicle yet, right? And of course, it's in the interest of ETT. and also our clients, our investor base that we build those capabilities. And once we do that, and when we do that, that will also help us monetize those opportunities and those amazing assets in a much better way going forward compared to today. And then when it comes to private equity, a long-haul strategy specifically that we have today in the pipeline and whether we would consider sort of making some of those or turning some of those also into more open-ended structures. This is something that we are evaluating and discussing. We will be launching a second generation of our long-haul strategy in private equity next year and exactly then how we design that product will also depend on the feedback that we're getting from clients so we will keep you updated on that and revert to you on that question over time.

And on the course topic the vast majority of the 50 million you referred to is external services so it's services we buy from accounting firms and fund administrators and law firms, et cetera. So less than a quarter of it is for consultants. That's as much guidance I can give.

Okay, very helpful. Thank you.

Thank you. There are no further questions at this time. I would like to hand back over to the speakers for closing remarks.

Okay, excellent. Thank you very much for joining today. Thanks for your time. Thanks for your interest, and thanks for excellent questions, and see you next time.