Thank you for standing by, and welcome to the HMC Capital Limited FY24 half-year results briefing. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you do wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. David Di Pilla, Managing Director and CEO. Thank you. Please go ahead.
Good morning, and thank you for joining today's call. With me on the call are Group CFO Will McMicking and Group Head of Strategy and Investor Relations, Misha Mohl. Before we commence, HMC would like to acknowledge the traditional custodians of country throughout Australia and celebrate their diverse culture and connections to land, sea, and community. We pay our respects to their elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people today. I'll start on slide three with an overview of today's presentation. Our strong financial results for the first half of financial year 2024 are pleasing and demonstrate the momentum building across our increasingly diversified platform. I am particularly proud of the exceptional investment returns we are generating for our investors. This is also supporting our market-leading fundraising activity.
Today is an exciting day in our journey as we build a more diversified business. We're announcing three major initiatives which include our new energy transition platform, which will be spearheaded by Angela Karl, who joins us from QIC, the acquisition of a highly strategic digital infrastructure platform based in North America, StratCap, and the establishment of our capital solutions division led by Robert Van der Zeel. Importantly, we have been preparing for these strategies for some time, and they build on the key philosophy of the group to organically grow funds under management via strategies which are exposed to mega trends. I also want to reinforce that we continue to execute our strategy in a highly risk-controlled and disciplined manner. We look forward to hosting an Investor Day in Q2 2024 where we will share more information on these initiatives.
Before we move to the results, I would like to take a moment to recap on what we have achieved since IPO and where we are heading as a group. On slide 4, since IPO, we have clearly demonstrated an ability to execute large, complex transactions. This is a key point of difference for the HMC group. This has underpinned our market-leading FUM growth of 70% per annum since launching our first vehicle in November 2020. Since listing, HMC has achieved over 50% per annum EPS growth and total shareholder returns of over 150%. Looking forward, we believe the growth initiatives we are announcing today provide the building blocks to maintain this trajectory and grow funds under management well beyond AUD 20 billion over the next few years. We also believe these growth initiatives give us the base from which to continue our strong EPS and total shareholder return trajectory.
Now to discuss our strategy on slide 5. We've worked tirelessly over the past 4 years to build a more diversified, resilient, and scalable business which can thrive in all market conditions. The 20% ROE target we set ourselves is ambitious and highlights the operating leverage in our business model. As I highlighted 6 months ago, the companies we admire have the following common attributes: elite talent, diversified capital sources, high-conviction investment strategies, and global scale. The next phase of our journey will see HMC become more diversified. This will enable us to take advantage of attractive opportunities across a broader range of segments and geographies. Turning now to slide 7 for an overview of HMC's first half financial year 2024 results. HMC has delivered operating earnings of AUD 57.8 million or AUD 0.166 per share, up 100% on the prior corresponding period.
Total revenue for the period of AUD 90 million is up 85%. This is predominantly driven by 44% growth in management fee revenue and 125% growth in investment income. This includes the significant gain on our investment in HMC Capital Partners Fund I. However, you should note that this excludes fees which are expected in the second half of financial year 2024, performance fees, I should say. Funds under management grew to AUD 8.5 billion during the period, which is up 40% versus the prior corresponding period. You should note that funds under management are today over AUD 10 billion, including our AUD 1.6 billion development pipeline and the growth initiatives we are announcing today. Our balance sheet is net cash, and we have AUD 1.2 billion of liquid tangible assets and undrawn debt capacity to fund new growth.
As I highlighted earlier, the market-leading performance of our fund since inception is extremely pleasing and has been achieved despite difficult market conditions. Since inception, our Capital Partners Fund has delivered a 24% IRR. Our LML Fund has delivered a 23% IRR, and our Unlisted Healthcare Fund has delivered a 15% IRR. We are focused on building on this track record, which will ultimately drive continued growth in funds under management. Now to slide eight. I want to discuss our operating highlights in more detail. I'll start with our unlisted real estate platform, where we have raised over AUD 2 billion in new institutional funds over the past 12 months from a standing start. In unlisted healthcare, in December 2023, we completed the fundraising for the AUD 1.3 billion Unlisted Healthcare Fund, introducing four new domestic and global institutional investors.
I am pleased to confirm that the AUD 75 million underwrite from HMC into the unlisted fund has now been fully sold down to a domestic superannuation fund. This is a great example of our balance sheet being used strategically to grow funds under management. Our last-mile logistics strategy is also delivering strong investment returns to our institutional partner funds, SA. We remain confident that this is a very scalable strategy, and we are currently assessing a number of acquisition opportunities. You should expect to see the second LML fund launched over the next 12 months once Fund One is fully deployed. Our private equity strategy, HMC Capital Partners Fund One, is also outperforming. The fund now manages over AUD 600 million of assets, which is up over 80% versus the first half of financial year 2023, demonstrating strong investment returns and positive fund flows as a result.
A key highlight for the half was the significant re-rate in our portfolio company, Sigma Healthcare, following announcement of the landmark merger with Chemist Warehouse. The proposed merger brings one of Australia's highest-quality private businesses onto the ASX. We are confident our strategy with Sigma is highly repeatable. We are working actively with our other portfolio companies on strategic initiatives to unlock value. Our two REITs delivered very strong operational and financial results for the first half last week. Each has reaffirmed its full-year financial 2024 FFO and DPU guidance. Both entities are exposed to high-quality real estate portfolios in favorable subsectors, benefiting from compelling long-term structural demand drivers. Pleasingly, HealthCo was one of the only REITs that delivered positive valuation gains this half. The gains were driven predominantly by the HealthCo portfolio.
HDN once again delivered market-leading NOI growth and leasing spreads in its subsector and continues to prioritize its highly accretive development pipeline. Importantly, as we move into a more favorable interest rate environment over the next 12 months, we expect our REITs will trade more in line with their strong operating fundamentals. Now to discuss our funds management strategy on slide 10, where we provide an overview of our business. Our investment philosophy as a group is clear and built around high-conviction thematic trends. We've identified four major themes which will create enormous investment opportunities globally over the coming decades. Our business is evolving to take advantage of these compelling long-duration trends, which we believe will ultimately create long-term value for investors across the HMC group. In healthcare, we see this as a highly attractive sector with infrastructure-like characteristics and compelling long-term demand drivers.
This sector will need significant capital to support growing and aging populations, evolving consumer preferences, and rapid technological advancement in detection and treatment of illness. Importantly, we believe the private sector will continue to play a major and increasing role in funding these opportunities. We currently express our investment view in this sector through HealthCo, our unlisted healthcare fund, and our investment in Sigma Healthcare. Moving to decarbonization, we see this as one of the most significant investment opportunities of this generation. It is one of the fastest-growing sectors in the global private markets landscape. Global decarbonization is significantly behind schedule and represents a $275 trillion investment opportunity over the next 30 years. Australia is also behind schedule and represents a highly attractive market with over $900 billion of onshore decarbonization investment opportunities required. Today, we are announcing our entry into this exciting sector with the appointment of Angela Karl.
Angela will lead this strategy with the support of a market-leading investment team which is currently being established. Another major opportunity is digitization. The rapid advance of new technologies such as AI is driving exponential growth in the digital economy. The required investment in new physical infrastructure to support this demand is estimated at over $1 trillion by 2028. This means investors will need significantly greater exposure in their portfolios to digital infrastructure like data centers and towers. We are well-positioned to take advantage of this opportunity with the StratCap acquisition we are announcing today. And finally, deglobalization. We are now seeing a major reversal and structural shift away from decades of global trade and economic integration between countries. The growing push by countries to achieve greater energy and supply chain security will require major investment to modernize and expand critical infrastructure.
The onshoring of critical industries will also impact immigration patterns and demand for skilled labor. This will drive greater demand for residential housing and specialist infrastructure. We are currently taking advantage of this through our HDN REIT, our LML strategy, Sigma Healthcare, and our listed real estate and unlisted real estate platforms. Let's now move to slide 11 to discuss HMC's new organizational structure. Our new structure reflects HMC's continued evolution into a more diversified business. It's consistent with our stated strategy to build a large-scale and increasingly global fund management platform. Moving forward, HMC will operate across sector divisions with individual sector heads responsible for P&L outcomes. Sid Sharma, our current Group COO, will become the Head of Australian Real Estate with responsibility for our listed and unlisted real estate platform. This structure will enhance the operational focus and intensity across all of our real estate strategies.
I'm extremely proud of the growth of this business which started with the acquisition of the original master's property portfolio back in 2017. Today, we manage over AUD 8 billion of funds under management in real estate, and each of our strategies is performing well. I'd like to congratulate Sid on his appointment and am confident he can maintain the strong growth trajectory of this business into the future. Victoria Hardy will become the head of our private equity division. Victoria will continue to manage our Capital Partners Fund with a focus on growing the fund to over AUD 1 billion. She will also lead our expansion into new growth opportunities, including corporate private equity transactions which could be seeded by HMC's balance sheet and offered to institutional and wholesale investors through co-investment.
Importantly, this builds on the strong track record of the broader HMC group and our people in executing innovative and complex transactions. Robert Van der Zeel is now leading our capital solutions business. This business will take advantage of investment opportunities originated across the broader HMC platform. Importantly, this is not a new business as we demonstrated by underwriting the HealthCo transaction in early 2023 and more recently participating in and sub-underwriting Sigma's capital raising using HMC's balance sheet in December 2023. The solutions business will target a 20% ROE and operate within strict risk parameters. Now to discuss our other growth initiatives. Moving now to the economic flywheel. The flywheel is about using our balance sheet efficiently and recycling our capital base to fund the growth of our business.
We've demonstrated this by growing funds under management from AUD 1 billion to AUD 10 billion in three years, using our balance sheet strategically to warehouse assets for new funds. We believe our new AUD 20 billion fund target over the medium term is readily achievable with our existing capital base and significantly more diversified platform, which now includes energy transition and digital infrastructure. Importantly, given the large addressable market opportunities, these strategies can each be scaled well beyond AUD 5 billion. On page 13, you can see two recent examples of our economic flywheel in action. The AUD 1.2 billion HealthCo acquisition announced in March last year was a unique opportunity to secure a high-quality and large-scale portfolio for both our HCW REIT and seed, a new unlisted institutional fund. HMC's balance sheet played a critical funding role through underwriting support for the capital raisings.
We structured the transactions over 3 tranches which gave HMC up to 6 months to raise institutional capital for the unlisted fund and to de-risk its settlement underwrite. As I highlighted earlier, the fundraising was ultimately a great success, and today, HMC has fully sold down the equity in the AUD 1.3 billion unlisted fund. Our Sigma investment has been extremely successful to date. We started building the position on HMC's balance sheet in June 2022 as a seed investment for our private equity strategy which was established in August 2022. As Sigma's largest shareholder, HMC helps Sigma's board and management team unlock value, as demonstrated by the recently announced merger proposal between Sigma and Chemist Warehouse. HMC generates AUD 7.7 million of profit from participating in sub-underwriting Sigma's recent rights issue. In addition, the Capital Partners Fund is significantly outperforming its performance fee threshold.
The key takeaway from this slide is that these are unique proprietary transactions identified, structured, and financed by HMC to deliver attractive returns to our investors. Now, I'd like you to move to slide 14 to discuss our fundraising strategy. In the past 12 months, we created over AUD 2 billion of fund with institutional capital through the creation of our first unlisted institutional vehicles. This is a huge opportunity for our business, and we will continue to invest in our fundraising capability. We recently appointed Virgil Harris from JLL, who will support Nick Harris, Know They're Not Brothers, in expanding our institutional fundraising capability. The chart on this slide is based on a survey of global CIOs and shows their capital allocation intentions across different alternative sectors.
The three sectors which are expected to attract the most capital globally include private credit, infrastructure, and private equity, all target areas for the HMC Group. Turning now to slide 15 to provide more detail on our growth pipeline and our march towards AUD 20 billion of assets under management. Energy transition. With Angela Karl now spearheading our energy transition platform, we are currently establishing a highly credentialed investment team and advisory board to support her. We will announce further updates in due course. We're already looking at a number of attractive investment opportunities and expect to launch our inaugural energy transition fund in the second half of calendar year 2024 with an AUD 1 billion-AUD 2 billion target.
The fund will target large-scale utility infrastructure opportunities as well as innovation investments with private equity characteristics to accelerate Australia's energy transition. Digital infrastructure. Earlier, I touched on the acquisition of StratCap.
For the relatively small investment of $28.5 million, we believe this acquisition is highly strategic. This gives HMC a platform to build a global digital infrastructure capability. We've been particularly impressed by StratCap's origination capability in data centers and mobile towers. StratCap has over $1 billion of actionable pipeline opportunities, including a major data center development opportunity in Los Angeles and over $5 billion of additional opportunities under review. This is in addition to $700 million of fee-paying committed funds today. Our focus is on accelerating the growth of this platform. However, I want to reiterate that we are extremely focused on managing the risks of expanding into a new offshore market. In private equity, as I highlighted earlier, our private equity strategy is delivering exceptional returns, and we are confident about growing the fund to over $1 billion.
We are engaging constructively with our portfolio companies on value realization strategies which could unlock meaningful value and drive future performance fees for HMC. We have also recently started to build a position in our fourth investment, and we'll look to grow the portfolio to 5-7 positions over the coming months. The next frontier for our private equity business is to also undertake corporate private equity transactions with institutional Capital Partners. Once again, HMC's balance sheet may be used to warehouse the seed investment for a new fund. Let's remember, the original Masters acquisition in 2016/17 still today represents one of the best private equity transactions in Australia in recent memory. Capital solutions. I expect our capital solutions business will be active as our business scales across a much more diversified platform going forward.
As I mentioned earlier, Robert Van der Zeel is now leading this business, and will report directly to me on all investments. I want to reinforce the point that these activities involve a small use of our balance sheet and are largely a continuation of what HMC has been doing since we listed. Importantly, all investments will operate under tight risk parameters and control and will be around HMC Group originated proprietary transactions. This year, the HMC Group has already realised AUD 7.8 billion of pre-tax profit from participating in and sub-underwriting the Sigma capital raise, of which AUD 3.4 million was booked in the first half year result. Going forward, we think it's fair to assume this business will generate at least AUD 10 million-AUD 20 million of pre-tax earnings per annum. Now, briefly to touch on initiatives which are currently under evaluation. Global healthcare.
As I mentioned earlier, the capital raise for our domestic healthcare fund was highly successful. The HealthCo transaction connected us with significant institutional investors domestically and, in particular, offshore. We are confident about the level of demand for this asset class. We're currently evaluating a number of attractive portfolio opportunities to seed a new global fund. We will provide more details as this opportunity progresses over the coming months. In private credit, we think the fundamentals are compelling as non-bank lenders continue to capture market share from traditional lenders. Our focus remains on identifying a highly credentialed team with a proven track record which can leverage HMC's fundraising capability and balance sheet. I want to now focus your attention on our progress with sustainability initiatives on slide 16. Here, we highlight HMC Group's sustainability framework which was designed around our objective to create a healthy community.
I'm pleased to report on the following initiatives delivered over the half. They demonstrate the progress we are driving across our entire platform. Environmental. HMC's two REITs are both on track with our net-zero energy roadmap with a 30% reduction in scope one and scope two carbon emissions to be achieved in financial year 2024. This will be reached primarily due to our smart energy management program and ongoing investment in solar power infrastructure across our underlying portfolios. The establishment of the previously discussed energy transition platform will also provide HMC with further opportunities to advance our net-zero targets. On social initiatives, we are proud to announce that HMC Capital Foundation has been formally granted PAF status and has been seeded with a grant from HMC Capital. The foundation is now processing applications for four potential grant recipients in this current round.
Our Reflect Reconciliation Action Plan has also now been endorsed by Reconciliation Australia. With RAP initiatives underway across the group, these initiatives are centered around taking active steps towards advancing reconciliation through four core areas: raising awareness, supporting partnership, employment, and education. Our governance. We always strive to implement best practice in everything we do and are proud of the progress we are making. HMC achieved its 50% gender diversity target across the entire organization as well as across independent board director positions ahead of our financial year 2025 targets. We received a rating of AA in the MSCI ESG rating assessment. An independent HMC Capital board evaluation has been completed, and we are currently implementing the proposed recommendation. We continue to make great strides and tangible progress on our sustainability strategy and practical initiatives.
I'll now hand to Will McMicking to discuss our financial year results before we wrap and take your questions.
Thanks, David. Turning now to slide 18. HMC recorded operating earnings for the first half of AUD 57.8 million or AUD 0.166 per share, driven by the continued growth in funds under management. Management fee revenue increased 44% to AUD 41 million, which was driven by the contribution from the recently established Last Mile Logistics and Healthcare and Life Sciences Fund. Investment income increased by AUD 25 million to AUD 46 million, driven by a AUD 22 million gain in the carrying value of the Capital Partners fund investment. Capital solutions income associated with the announced Sigma CW merger generated AUD 7.8 million from sub-underwriting fees and investment gains. AUD 3.4 of the AUD 7.8 million was booked as of December, with the balance being realized in the second half.
Expenses of AUD 31 million are running below fund growth, and this increase includes the variable nature of asset management expenses which are linked to growth in the real estate funds. An interim dividend of AUD 0.06 per share has also been announced, which is in line with guidance. Moving now to the balance sheet on slide 19. HMC continues to leverage its balance sheet to support the growth in funds under management, with the period to December seeing this occur across two key events. HMC warehoused a AUD 77 million equity investment in the Healthcare and Life Sciences Fund, which was subsequently sold to a domestic institutional investor in December. As mentioned on the prior page, HMC also provided sub-underwriting support to Sigma in the first half, which was completed in January with a total cash gain of AUD 7.8 million and no residual underwriting exposure remaining.
Turning now to slide 20. HMC in December is in a strong position to continue to support funds management initiatives with nil net debt and undrawn debt and net tangible assets of AUD 1.2 billion. HMC also extended the term of its debt facility to March 2025. I'll now hand it back to David.
Thanks, Will. Now, turning to our outlook and guidance for financial year 2024. Today, we have provided more detail on our strategy and roadmap to grow fund beyond AUD 20 billion over the medium term. Our existing funds are outperforming, which is driving strong fundraising momentum. We are well positioned to repeat our success with Sigma with our other private equity investments. Our REITs are delivering strong organic growth and will benefit from more favorable interest rate environments. The new growth initiatives announced today in energy transition, digital infrastructure are both scalable.
And finally, we are actively evaluating opportunities to build new platforms in global healthcare and private credit. Our newly established capital solutions business is already profitable and well positioned to take advantage of opportunities originated across the broader HMC Group. Importantly, we are well capitalized to execute our strategy with AUD 1.2 billion of liquid investments and undrawn debt capacity. HMC clearly enters the second half of financial year 2024 with strong momentum, including generating additional investment gains since 31 December 2023. Assuming no adverse fair value movements over the balance of the year, HMC is well placed to deliver pre-tax EPS of no less than AUD 0.33 per share in financial year 2024. This includes a AUD 12.5 million performance fee from HMC Capital Partners Fund One, which is expected to be realised in the second half of financial year 2024.
HMC also reaffirms financial year 2024 dividend guidance at AUD 0.12 per share. This is consistent with our strategy to maintain the dividend and reinvest retained earnings into high ROE growth business opportunities. Thank you for your time, and I will now hand the call back to the operator for Q&A.
Thank you. If you do wish to ask a question, please press the star key, then one, on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the star key, then two. If you are on a speakerphone, please pick up the handset to ask your question. Thank you. Your first question is from Sholto Maconochie from Jefferies. Go ahead.
Thank you. Hi, David and Tim. Thanks for the preso and the update on the strategy, which is beneficial.
Just on the StratCap acquisition, how much equity stake did you take in that business? How much do you own of the business? 100%. Okay. And that pipeline of $1 billion near term, how much is the data center in that pipeline in L.A.? It's largely made up of a scale data center opportunity. Okay. And that's near term. And the $5 billion is more, is that under option or sort of identified in their land bank? Identified opportunities.
I think what we're most attracted with that portfolio and that organization is just the depth of experience they have. Had we sat here trying to organically build a digital infrastructure capability? I'd still be here talking to you about it in three years' time, Sholto. What we've done for $28.5 million, we've accelerated three years of business development.
Importantly, what we've got there is a very, very highly credentialed experienced team from some of the biggest players in the U.S. data center and telco space. So we're really confident around the team, the capability. What they needed was just a big brother that needed a shareholder like us to come into the picture with our balance sheet, our brand, our fundraising capability, and our team. We've got an elite team of investment bankers here at HMC, so we think combining that with the capability of StratCap, we're really excited about the outlook. Watch this space.
Right. Great. Thanks. Then just on the performance fee and obviously, the guidance, thanks for providing the guidance. This looks like it's up 25% on the PCP on that basis. How much impacted is that performance fee from Lendlease down about 15% in the last day and a half or so?
Is that guidance impacted a bit from Lendlease performance?
That was factored into our guidance, so it's all factored in. Would have been higher. And then just finally,
okay. And then just finally, on the call, I think you said you built a fourth was it? You bought a fourth position in a listed company at the moment that you haven't disclosed. Is that correct?
Yeah. Just on the Lendlease one, I want to go back to that. It was a very marginal movement in performance, so at the margin. And on the fourth investment, yes, we are deploying into it, and I'm not going to go and start speculating on that on this call.
Thanks for your interest. Watch this space. All right. Thanks. Thanks very much. Thanks, David.
Thank you.
Thank you. Your next question is from Richard Jones from J.P. Morgan. Go ahead. Thank you.
Thanks, David.
Sorry. Just to clarify that comment. So the performance fee, I thought it's stated, and maybe I read this incorrectly, that that was effective as of 31st of January? Correct. Okay. So it's not reflective of, obviously, the price move yesterday?
It is. So obviously, what we did is we did an update for the movement in the portfolio for the first 15 or 16 days of February. So we've given you a number, and there was enough buffer in the guidance when we were formulating it with our board last week that despite yesterday's movement, it was basically less than a cent in terms of impact to our guidance. So we had enough buffer in the numbers. So we remain at 33 and stand by that.
Janete, to put it another way, two of the other positions in the fund, if you track them from 31st to Jan to yesterday, the full LLC will see those gains. So there's no change.
Okay. And Will, can you just remind us how you realize earnings on your investment stake in HMC Capital Partners Fund I?
You're talking about management fees or investment?
No. The investment stake.
Yeah. I mean, so we account in line with AASB. So everything is fair value. Over time, investments will be realized, but it's fair value accounting. Richard, I think the other point I'd want to make is we continue to account for our investment in HMC Capital Partners the way we have last half, full year. The methodology remains the same as previously.
Yep. No. That's fine. I just wanted to clarify that.
Can you maybe just discuss, David, just how the digital infrastructure development acquisition opportunity came about and maybe touch on, is this a profitable platform at the moment, and what AUM would you need to get to before it becomes profitable if it's not?
What we would say to you is that the way it came about through wearing out a lot of shoe leather, and Simon Mitchell and I have made a number of trips to the US with it. So it's been a lot of work, a lot of effort. A lot of rocks have been turned over. So I think we must have looked at 50 different opportunities. This one happened to come across our desk and looked very exciting. What we would say is we believe that the StratCap acquisition will be accrued in financial year 2025.
So with the integration into our business, there'll be some cost efficiencies with that. And based on the revenue line that we see there today, we're confident that we'll get it to be accrued for the first full year.
Okay. Thank you. And then just in terms of the global healthcare opportunity, you talked about seeding some opportunities. Would they be on the HMC balance sheet?
No. They'll be exactly the same as the way we executed the domestic healthcare fund. So again, what we would say to you is that Nick Harris is in the room with me, and he's been walking in pretty much on a weekly basis since we closed the Aussie healthcare fund, saying he's getting a call a week from an institutional investor saying, "Have you got any more of that unlisted healthcare that we could buy?" And unfortunately, it's closed.
So what we have done is we've stirred up a lot of interest in that space. And so we've got both domestic and global investors wanting to invest in the asset class. So we remain really, really bullish on the outlook. And so we're confident that if we can unlock the right assets at the right valuation, the investor support is there.
Okay. Thanks, David.
Thank you. Your next question is from James Druce from CLSA. Go ahead.
Thank you. Yeah. Hi. Good morning, gentlemen. Just a question on just following up on Janete's comments. There's no other mark-to-market movements in the first half earnings, are there? It's just the HMC private equity stake, right?
No. There's two small positions on the HMC balance sheet that are fair valued as well. I mean, the approach that we've taken there is we're ultimately trying to reduce the adjustments to SAT earnings.
Given the continued consolidation of Capital Partners on the balance sheet, we've accounted for it that way. All right. What was the other mark-to-market movement over the half? It's about AUD 5 million. About AUD 5 million.
All right. Fantastic. That's it for me. Thank you.
Thank you. Your next question is from Grant McCasker from UBS. Go ahead.
Thank you. Sorry to just hop on the earnings. Just going forward, so Will, you did mention SAT earnings. How should we think about the key earnings measure to benchmark HMC going forward, thinking you're generating different pieces of value, both cash and non-cash?
I think the way that we've reported it today is exactly how you should be thinking about it, Grant. Over the investment term, you're going to have unrealized and realized gains. The intent there is to reduce the adjustments to SAT earnings.
So over time, it'll balance out, but clearly, you're going to have movements from one period to the next.
Okay. And then just on the energy transition space, I think you called out sort of private equity-style investments. If we think of, say, a AUD 2 billion target, what would be sort of private equity-style investments versus actual sort of more stabilized style investments?
Look, I think we're, at this point, viewing it as an opportunity-rich landscape. What Angela and the team will be doing is playing a role across the whole HMC group platform. So if an investment opportunity in a listed entity were to come along and it were to be suitable for Capital Partners, she'd be involved and we'd be getting her view on that. If it was a small opportunity that maybe could be put on the balance sheet, we'd consider that.
But I think the bigger objective here is really around building a diversified fund strategy. We'll be out on the road with institutional investors in the coming weeks and months. As we build that strategy out, we'll refine the investment thesis for the fund. But as I said in the presentation today, somewhere between AUD 1 billion and AUD 2 billion is our fundraising target.
Okay. Great. Thank you.
Thank you. Your next question is from David Pobjoy from Macquarie Group. Go ahead. Thank you.
Morning, David. Will and Misha, congrats on the strong result, and thanks for taking my questions. If I can just go back to StratCap, please, and maybe ask it in a different way. Can you provide the earnings multiple that you paid based on your forecast 2025 earnings?
Probably I don't want to get into that at this point, but it wasn't high.
So we're talking $28.5. So we're confident that the outlook for the business is very exciting. So for a very small amount of dollars with a fairly limited downside, we think the upside with that business is exponential. I just want to leave it at it'll be accrued in the first year.
Thank you, David. And just second one, you've provided quantitative earnings guidance for the first time. If you could just talk to the factors that give you confidence to do that now and then maybe any key moving parts that we need to think about or risks in the second half, please.
I think, as Will touched on, fair value movements are something you'll obviously need to get your head around and factor in. But what I would say to you is I see today as a pretty important moment in the journey of the group.
What we're really saying is we believe we've got a very repeatable business now. You should expect the core earnings coming out of our core funds to continue to just march along, continue to organically grow, continue to deliver a base level of earnings. And then what you should assume is some of those one-offs that you'll see at Capital Partners or some of the activities where we co-invest with the funds in opportunities to give us some of that recurring one-off. But I don't think you should treat it as a one-off anymore. You should treat that as an ongoing part of the business and an annuity part of the business as well. And as we've said today, we think that sort of solutions activity is somewhere in the order of AUD 10 million-AUD 20 million just using the balance sheet in a very risk-controlled way to co-invest.
So that's where we're looking to head. We think this year is sort of a really good baseline to sort of target. So that's 33% type range. And we want to keep growing the fund from AUD 10 billion-AUD 20 billion, and we want to see a corresponding level of underlying growth in earnings as well over the years to come. We think we've got a very scalable, very repeatable business that's very high margin.
Thanks, David. Appreciate it. Good luck for the remainder of the year.
Thank you. Your next question is from Ben Brayshaw from Barrenjoey. Go ahead. Thank you.
Good morning, David. I was wondering if you could just expand a bit on Angela's remit in relation to energy transition and just insofar as, I guess, how you're thinking about the focus for the next one-to-two years across, say, solar, wind, transmission.
Are there any areas that you would like to prioritize ahead of others?
Look, I think the investment opportunity there is significant, as we talked about. AUD 900 billion over the—it's a very foreseeable future. Seems like a fairly big investable market opportunity. How can I put this in the most adequate way possible? HMC is not a cut-paste organization. We're not going to go and do what everyone else is out there doing. We're not going and building solar farms, wind farms, and so on. That's not the game we're in. We're going to be looking for those mispriced opportunities that others can't see. We're very excited about this. What's this space? We're going to make an impact in this area. This needs some of the best minds in the country to solve. These are very complex, very major issues. There's a lot of dislocation there.
For all the winning stories you hear and all the good stories, there's a lot of bad stories in renewable energy in terms of wind farms with PPAs coming to an end that can't be refinanced. So we just see it as extremely opportunity-rich. And don't assume that we'll repeat what other people are doing out there. We'll come up with our own unique view of it. We'll come up with our own unique interpretation of what that can mean. And it's all going to be driven by, as you've seen today, adding value for our investors.
Yep. And how do you think about the overhead required to establish and build out that team? And do you have any expectations at this point as to when that will likely be break-even?
What we'd say to you is just with the scalability of this business, it's all built around people.
Our remuneration structures are very much incentive-based. We are very mindful and thoughtful around overhead and fixed costs. I would say to you that in the second half, we're not anticipating a very significant increase in overheads across the group. It'll be small but not significant. So what we would say is if the organization performs and the executives deliver, they'll get paid through variable remuneration. We feel as though we've got a very aligned model here. Everyone's an owner in the business. Everyone's a shareholder. Everyone behaves like a shareholder. It's a great culture that we're building here. You can only achieve what we've achieved by having that kind of organization. Those high-quality people are very incentivized.
Thanks, David.
Thank you. Your next question is from Lauren Berry from Morgan Stanley. Go ahead. Thank you.
Hey. Morning, guys. Another question on StratCap.
Are you able to just talk a bit about the investors in those funds? Is it any institutional? Is it all retail? And what the fee structures are like on that fund, please?
I'm precluded under FINRA regulatory rules from saying too much about who the underlying investors are. But what we'd say to you is it's a mix of retail and institutional capital.
Okay. And in your guidance, can you confirm if there's any establishment or underwrite fees assumed for the new healthcare or energy funds, please?
Nothing.
Nothing? Okay. And the performance fee for HMC Capital Partners, is that intended to be received in cash?
We can elect to take it as either/or, but at this point, it's assumed to be in cash.
And last one, can you please just talk about how equity flows into Capital Partners have tracked over the half, please?
I think we talked about an 80% increase. I think the number was probably about in the last quarter, but there was a very significant inflow in December. So in December, I think we raised AUD 76 million around the Sigma opportunity. The demand, what though, was in excess of that, and we scaled back to AUD 76 million because we didn't want to dilute the NAV impact to existing investors. So just in December alone, it was AUD 76 million. So what's HMC's percentage stake now in the fund? It's still just under 50%. Just under 50%, but you're still consolidating, recognizing all the uplift? Yeah. And backing out the non-controlling interest as well.
Yep. Okay. Cool. Thank you.
But of the AUD 76 million that we raised in December, the majority of that was from third-party investors.
Thank you. Your next question is from Fiona Buchanan from Morgans. Go ahead. Thank you.
Oh, hi, David. I'm just wondering if you can just touch on the opportunities in last-mile logistics. Just obviously, there's some capacity there and what the opportunities might look like.
Look, we're turning over lots of opportunities sitting at AUD 100 million. Really, really busy. Got a number of opportunities in diligence, and our institutional partner there's very happy with performance and very engaged. So we're confident that we'll deploy that money over the course of the next 6-12 months.
Thanks.
Thank you. Once again, if you do wish to ask a question, please press the star key then 1 on your telephone and wait for your name to be announced. Thank you. There are no further questions at this time. I'll now hand back to Mr. Di Pilla for closing remarks.
Great. Thank everyone for joining the call and your ongoing interest.
We look forward to catching up with analysts, investors, and other key stakeholders over the coming days. Thanks for your interest.
Thank you. That does conclude the conference for today. Thank you all for participating. You may now disconnect.