Hello, and welcome to the Eurazeo Financial Information H1 2022 Results Call. My name is Courtney, and I'll be your coordinator for today's event. Please note that this call is being recorded, and for the duration, your lines will be on listen-only. However, you will have the opportunity to ask questions, and this can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any time, please press star zero and you will be connected to an operator. I will now hand you over to your host, Virginie Morgon, Chief Executive Officer, joined by William Kadouch-Chassaing, Member of the Executive Board, General Manager of Finance and Strategy, to begin today's conference. Thank you.
Thank you very much. Good morning. Thanks everyone, to join this half-year earnings call. It's my real pleasure with William Kadouch-Chassaing to welcome you all to our half-year results for 2022. Our accomplishments for the last six months highlights our very strong operational execution. As we are entering a more challenging environment, I feel you know, starting from a very strong position following not only the 2021 record year, but that very strong half-year set of results. Let me take you through some of the most important highlights and drive you through some perspectives. Successful execution of our strategy is really the main message. First, you continue to see that our asset management business is growing. Assets under management overall have been growing by 27%.
We are reaching EUR 32.5 billion. Our FRE, fee related earnings, are up also by 24% year-on-year. We continue to raise funds in line with our plan. The second thing which shows a very strong execution of our strategy for that first half is that you see very strong solid trends across our portfolio with top line and EBITDA growth. I share with you my conviction that our choice of sectors riding future trends has really paid off with strong performers and inflation-proof companies. Notably, just to highlight a few, biotech, healthcare, tech-enabled business services, and financial services. My third highlight of that strong execution is our, you know, very much on track exit program. We have sold up to now 14.14% of our net asset value, which is about two-thirds of the program for the year.
We achieved our latest exit in excellent condition. I'm very proud. It's 3.6 times average cash on cash multiple, and we'll come back later to the detailed returns, but north of 35% IRR. Prices have been above our latest valuation in our net asset value that we published in March. Fourth, and that's absolutely critical, we continue to build on the greatest investment opportunity of our lifetime. We are accelerating the decarbonization of our portfolio, and we are launching new impact funds with more to be announced in the months to come. Overall, our net asset value is slightly down at EUR 115.5 per share, two things. Despite very good operational growth in the portfolio, we reflected the fall in the market multiples in the Growth tech segment.
The markdowns we have applied are in line with correction on public markets in order to be on the conservative side. For the rest of the portfolio, we have set aside a contingency buffer, taking into consideration the overall uncertain environment. William will detail this later, of course. Let's start with fundraising. What we see today makes us confident about 2022 and 2023. First, how much have we raised? We raised EUR 1.8 billion in the first half. Several of our flagship funds have had a strong momentum. Just to mention a few, in the small-mid buyouts sector, our PME IV funds has closed above EUR 1 billion. It's a 50% increase from its latest vintage. The other example I can share is private debt.
Private debt continues to be in high demand with, again, more than EUR 1 billion already secured for EPD VI , Eurazeo Private Debt VI. Looking forward, we continue to see an acceleration of allocation towards private market and very strong appetite for our products. The market, though, are quite busy for 2022, especially on buyouts, due to the acceleration of deployment after COVID. That may lead to extending the timeline. The good health of the portfolio, the crystallization of value through recent exits, and our recent attractive new funds like Energy Transition Infra, and the very topical nature of our impact-proof product, all combine to make us confident that the fundraising momentum will continue in the coming months. All in, we are growing our assets under management and our management fees, and we continue to build a strong asset management platform. That's for the fundraising.
Let me deep dive a second, and tell you more about the retail performance for this year. We raised EUR 380 million from private clients in the first half. That's about 60% increase year-on-year. You can see it on the slide. Private client solution now represents about 13.3% of our third-party assets under management. I see this, you know it, as a major source of new growth in the years to come. 2022 should be another record year in the segment. We have very strong competitive advantage with 20 years of experience and an extended network of distribution partners. Our goal, and that's very critical, our goal is to have one private client fund on offer for each institutional fund that we launch. I give you the two recent example of the product that we launched for retail.
The first one is Eurazeo Principal Investments, which is a bundle of our two buyout activities, the mid-large and the small to mid, which we are offering for distribution for a much broader public. The second fund that we're launching this year is dedicated to real assets with a very much a value- add positioning for our retail investors. Now let's turn to the portfolio. My conviction, the conviction of the executive board is Eurazeo is extremely well-positioned to be embracing and facing a more challenging market environment. Let me deep dive into our current portfolio. We are for sure confronted today with an unusually high number of uncertainties. We're mentioning inflation, rising interest rate, geopolitical risk, and supply chain disruption to name, but a few.
We can't be sure how those risks will evolve, but my conviction is that Eurazeo is entering these more challenging times in a very strong position. I'll tell you why. First of all, and that's probably the most critical to remember, is our diversification plays to our advantage in full. We're building resilience, and we're protecting value. I think in volatile times, portfolio effects is obviously absolutely key. Let's go through a few highlights. We take first buyouts. You see buyout and private fund, which account for 36% of our assets under management. We have invested in market-leading companies in asset light sectors like business and financial services or like healthcare. These companies are able to pass on price increases, which provide a natural hedge to inflation. Remember, Elemica or Scaled Agile in tech-enabled business services, very strong pass-through.
Cranial and DORC in the Netherlands in healthcare, same thing, very strong pass-through. Second highlight in the portfolio of buyout, we see some acceleration post-pandemic with a rebound in the travel sector. We have WorldStrides in the U.S., and we have Planet as a global player in payment and DCC. Finally, we are monitoring closely the normalization and the rebalancing from direct to consumer to brick-and-mortar retail with a few example in the portfolio like Aroma-Zone or like Groupe Rocher as PME. Let's move on to growth and venture. Those investment represent 30% of our assets under management. They have structural tailwind, very strong revenue growth. We're certainly continuing to benefit from the digitalization of our economies, and those companies generate outsized revenue growth, are very well capitalized.
Our sector leaders, I'll just name a few, like Doctolib or Back Market or ContentSquare, continue to gain market share and extend geographically. We have conservatively taken some markdowns on valuation in H1, William will detail, but we are confident in the strength of our portfolio. Move on to real estate and infra, 6% of our assets under management. Real estate and infrastructure businesses benefit from the natural pass-through of inflation and from our strong position in hospitality hotels with Grape and the very strong and attractive energy transition sector, which is covered by our team, energy transition infrastructure funds. Finally, the private debt, which is 20% of our assets under management. Our private debt business is doing extremely well with a very strong portfolio, lightly leveraged, very secured, and benefiting from floating rates. This makes it a compelling investment in the current environment.
The third highlight is about the strong execution of our exit program. I have to say, I'm very proud not only of the decision which was taken more than 18 months ago in September 2020 to accelerate the rotation, but of course, the execution has been nothing but excellent, including during the first half. First, we exited around EUR 2 billion of assets year-to-date. In a tighter purchasing market, execution and timing are key. The remarkable 3.6 times cash on cash, an average IRR of 36%, delivering proceeds of more than EUR 1 billion for Eurazeo, reflect the pace of development we achieved at Reden Solar, Trader Interactive, that was our first investment in the U.S., Orolia, and Vitaprotech. You'll see more exits by the end of the year.
Regarding deployments, you know, the second leg of our asset rotation investment, the geographic and sectoral extent of our deal flow allows us to be very selective as we invest in tomorrow's successes. In H1, we invested a total of EUR 3 billion. That includes EUR 1 billion in private debt, half a billion in private funds, and EUR 1.5 billion in buyouts, venture and growth. Companies benefiting from very exciting and long-term trends with strong tailwinds. The core sectors that we're reminding you in terms of, you know, focus for us in investment, healthcare, consumer, financial services, tech-enabled business services, and energy transition. Those five sectors represented in H1 more than 19% of our deal flow, with a very strong focus on asset-light businesses.
Finally, before I turn to William to go deep into the review of our results, I want to highlight our strong inroads during the first half in terms of new steps towards a more inclusive and a more low carbon economy. You know our commitment to driving sustainability across the portfolio, creating resilience, and increasing the value of our companies in stronger than ever in that environment. In 2020, a reminder, we became the first private market firm to apply the science-based target for carbon neutrality, establishing that model for our portfolio companies to follow. In 2021, more than 80% of our active funds were classified at the highest standards of European sustainability regulation, namely Article 8 and Article 9. This figure is now 89%. In 2022, we're actively working on our next generation impact funds, focusing on themes of planetary significance.
I'm turning now to William for the full detail of our results for H1.
Many thanks, Virginie. Good morning to all. Thanks for the interest you take in our company. I will now guide you through our financial results, and let's start with the key drivers of our P&L. Let's start with the asset management. As Virginie mentioned, asset management continues to post strong growth. Total AUM are at 27% in H1 from a year ago to reach EUR 32.5 billion. The main driver, as mentioned, is fundraising, with AUM coming from limited partners rising thirty-two percent in the last twelve months to EUR 23.4 billion. The balance sheet component, as you see on the slide, has increased 16% compared to a year ago. Importantly, fee-paying AUM are up 31% relative to the same period of last year and amounts to EUR 21.6 billion.
Turning to the next slide, you see, stemming from the strong pace of collection, the strong double-digit growth in our recurring earnings from asset management. Earnings stemming from asset management grew at a double-digit pace as I've just said. Management fees were up 30% in H1. They reached EUR 231 million. Management fees from third parties grew at approximately 40% and now represent 77% of total management fees. This is to be compared to 71% in H1 2021. FRE were up 24% over the same period of last year, standing at EUR 50 million. During the first part of the year, we continued to invest in our platform with recruitments in our investment teams, sales and marketing, operations, and some key corporate functions. Turning to the portfolio companies.
As Virginie Morgon said, we have there a strong contribution. First, our consolidated portfolio companies delivered strong growth across the board, revenues and EBITDA. Consolidated portfolio economic revenue at constant Eurazeo scope and exchange rate increased 43% compared to last year. The portfolio EBITDA is up over 40% when adjusted for the base effect related to the insurance indemnification received by WorldStrides in H1 2021, which amounted to EUR 61 million. Second, our growth companies, which are not consolidated in our P&L, as you know, have also done very well with revenue growth of about 46% in H1. As Virginie Morgon said, we think we are well-positioned in a more challenging environment. One case in point is that we think we are very resilient in an environment of rising interest rates. Let me explain why. A few key facts.
At corporate level, as you see on the left-hand side of the slide, we aim for a structurally low gearing. Pro forma of the realized sale of Reden Solar and Orolia, Eurazeo has a net cash position of +EUR 21 million at the end of the first half. On top of that, we have a EUR 1.5 billion credit line with a 2026 maturity. Turning to the portfolio. Half our strategies have no or little leverage. In addition, private debts operate in a floating rate environment with low default rates. For strategies using some leverage, i.e. buyout or real estate, we take a very cautious approach. In buyouts, the level of leverage is moderate for the industry. It is, in fact, at less than 5x EBITDA in aggregate.
The average debt duration for the portfolio is 5 years or more, with very little portion under one year of maturity and overall with favorable components. In real estate, more specifically, we have a moderate loan-to-value of about 60%, and I'd like to stress that nearly 90% of rates are hedged. As Virginie said, we are well on track to execute the investment company exit plan. As we mentioned during our full year's results presentation, we aim in 2022 to exit roughly 20% in value of our balance sheet assets. We've executed 14%, which is more than two-thirds of this target. To date, we announced or realized four exits for EUR 1.1 billion of proceeds at a 3.6 average cash-on-cash multiple. All these transactions were done at or above their value in our net asset value.
Due to the timing, this transaction did not impact H1, but will provide approximately EUR 750 million of net capital gain group share in the second part of the year. That is EUR 530 million capital gains related to realized exits, Reden and Orolia, EUR 220 million capital gains on announced exits, i.e., Trader and Vitaprotech. In addition, realized transactions will generate approximately EUR 66 million of performance fees for the asset management company, which will be booked in the second half of the year 2022. Turning to the profit and loss figures. Our net results group share for H1 stands at -EUR 96 million for H1. Pro forma for the realized net capital gains, i.e.
The EUR 530 million I just mentioned, net group result share would have been EUR 437 million, plus EUR 437 million in H1. If you look at the asset management line, i.e. the EUR 44 million contribution, which is here solely associated with the FRE, with no PRI accounted for. If you add back the EUR 66 million I just mentioned that will be booked in the second half, you would find that the asset management contribution would have been up 18%, standing at EUR 110 million. To finish, let's look at the net asset value. At the end of June, our net asset value was down 1.9% at EUR 116.5 per share. The value of our investment portfolio represents EUR 89.5 per share, it is down roughly 4%.
The value of the asset management activity is up 5.5% at 26 EUR per share. You may have noticed that there is a slight difference in the percentage of decrease in the net asset value between what you find in the tables in the appendix relating to the absolute amount of NAV versus the per share amount. The difference stems from the share buyback which has an accretive impact of roughly 50 basis points. Looking more at details for the investment portfolio first. There are four main blocks to consider here. First, positive variations in the valuation of our portfolio excluding growth assets. This results from the following factors, which you see on the slide. The realization of Reden Solar at a superior net asset value to that was marked at the end of 2021.
This accounts for EUR 1.1 per share, the effect of a strong U.S. dollar on our US assets. This is another EUR 1.7 per share. The strong performance in revenues and EBITDA of our companies in H1 2022, as I mentioned earlier. Let me stress that for this portfolio, we kept a constant methodology using last twelve-month figures and average multiples. We only checked that the multiples that we were using are in line or below spot multiples for comparable companies. Again, this remains a fairly conservative approach to valuation that translates into positive variations. Second, we marked down the valuation of our growth portfolio taking into account several factors, as Virginie already highlighted. On the plus side, we have the strong performance in revenue growth of those businesses. As mentioned, +46%.
New rounds of financing for some companies, like ContentSquare, which were done at very valuations above the last mark we had in our NAV. On the downside, we applied an average 25% haircut on the rest of the portfolio, excluding ContentSquare, in line with the decline in market indices for tech companies such as the Nasdaq. Note that we have already largely anticipated this markdown with a contingency of roughly EUR 270 million we have taken at the end of 2021. Third, we applied a discretionary contingency buffer of EUR 500 million related to the non-growth portfolio. As Virginie mentioned, this is purely linked to the level of uncertainty we see in the market, which may or may not materialize.
Fourth, variation in the cash position essentially linked to the distribution of the cash dividend in 2022 for an amount of EUR 3 per share, as you know. The NAV of the asset management is up 5.5%, you see, to EUR 26 per share. This reflects the continuous strong growth with FRE last twelve months, up 31% at the end of H1. We applied last twelve months figures as well for the asset management as we do for the portfolio companies. To value FREs, we use a multi-criteria approach based on LTM numbers and cautious multiples. This translating to implicit multiples which are below those of our peers, as we've already mentioned a few times, and at the low end of our DCF.
On PREs, our main approach is a DCF with a 12% WACC or 6x multiple, which again is fairly conservative. I will now hand over to Virginie for the conclusion.
Thanks very much, William. Last line, in conclusion, you know, to project ourselves for the year to come. 2022 is proving more ambiguous and challenging than 2021. The key growth drivers of our business model remain strong for the future, as we demonstrated in H1. These include growing our asset management business, delivering strong asset rotation, and maintaining a disciplined approach of investments in promising sectors. The half year set of results show that our fundamentals are strong, that we are responsible investor in terms of deployment, exits, and valuation. As we are facing more challenging time, our group first is resilience. We're building a diversified model in terms of asset classes, sectors, and geographies. We are also prudent in how we value our assets and our asset management activity over time, especially today. Also our group is fit for growth.
We continue to demonstrate the strength of the portfolio. We create value through successful exits, and we invest in the right sectors to create value in the years to come. We have gathered over time a very significant investment capacity in addition to our own resources, with investment commitment given by our investment partners. That gives us more than EUR 5 billion to be deployed in new opportunities over the years to come. Finally, of course, we continue to invest and innovate in ESG and impact, consolidating our leadership and competitive edge. Thank you very much for listening to our half-year results. Of course, we're now ready to answer any of your questions. Thank you very much.
Thank you. As a reminder, if you would like to ask a question on today's call, please press star one on your telephone keypad. Please ensure your line isn't muted locally and you will be advised when to ask your question. That was star one on your telephone keypad. Our first question comes in from the line of Mourad Lahmidi, calling from BNP Paribas. Please go ahead.
Yes, thank you very much. Mourad Lahmidi from BNP Paribas Exane. I have three questions, please. The first one is on fundraising activity. So you raised EUR 1.8 billion in the first half. If we compare to the same period last year, it was EUR 2.4 billion. So could you please comment on the context in terms of fundraising activity? Has it been more difficult to raise funds due to the context? Do you see any extension in the closing of the programs? What do you foresee for the current year? Could you elaborate maybe, not necessarily on the number but compare it with the record year that you had last year?
The second point is on the buffer that you applied to your NAV of EUR 500 million. Could you please explain the rationale for this EUR 500 million? Why EUR 500 million and not a number above or below? And finally on performance fees, the EUR 66 million that you mentioned, can you give us the share of the balance sheet out of the EUR 66 million? Thank you.
Good morning, Mourad. Thank you for your question. I'll start with the fundraising and William will cover buffer and performance fees, balance sheet versus third party. Listen, fundraising, you know it because you're very knowledgeable about our industry, always extremely difficult to compare, you know, H1 to an H1 of previous year, because it's about the timing of our own fundraising and which funds we have in the market from one semester to another. That's my first comment. Don't take the EUR 1.8 billion compared to last year as a change and a difficulty of raising. It's about the product we have in the market. Which product do we have in the market? I mentioned private funds. Sorry.
I mentioned small to mid buyouts, which we have successfully announced, you know, reaching EUR 1 billion. I mentioned private debt which is ongoing, but the first half has been, you know, pretty active. We'll continue to be very active for the second half. Second half, what you should expect is private debt to continue to fundraise. We have a target of EUR 2 billion. You should also expect, you know, the start of the mid-large buyouts coming to the market second half. In terms of big, you know, big program, you have growth and venture. Venture is already in the market, only starting, and growth will be in the market during the fall.
There are other, you know, team which are fundraising, like Infra, you know, going very well, great products, green economy, energy transition. That's the first sort of highlight to your question. Second, which is more about the market sentiment and what has happened. I should say for us, you know, H1 is very satisfactory. We're in line with our, you know, expectation. There's been a few months during which the institutional investors, and that was right after, you know, invasion of Ukraine, March and April were softer for institutional but came back to the market. Institutional investors are not willing to play the market. They're willing to deploy regularly and consistently with alternative asset managers that they trust. Retail has never stopped, you know, the collect of retail.
As you could see, EUR 300 million year to date is very strong. I would actually say no stop in March and April, but even some form of acceleration. The fund program for H2 2022 and for 2023 is quite strong for us. Retail will continue to be very strong with new products, as I highlighted in my presentation, both buyout and real estate, and with more partners coming in and partnering with Eurazeo to distribute our product. For institutional funds to be launched, I mentioned growth. We have great ambition for growth. There is this big scale-up called Scale-up Europe at the European level with EIF and a number of strong institutional investors backing the large player in Europe, north of EUR 2 billion of size.
That's a European initiative that you should compare to the Tibi initiative, which was at the French level. We have mid-large, I mentioned. We have real estate, we have infrastructure and private debt, which is continuing to raise money. We have very good pre-marketing, you know, positive. I did say in my presentation earlier that it's about being, you know, our eyes wide open, that it may be a bit more timely to raise the money in, you know, notably buyout. Let's see. Time will tell.
It's a lot of moving parts as some of the funds, some of them are very tactically positioned, meaning that when you have on offer Article 9 products in healthcare, in green economy, in digital transition just to name a few, there's a lot of need and a lot of attraction in the market, including for U.S. LPs, who have been a little bit on the back foot and late to the party in terms of their own deployment. That's what I can share with you, Mourad, as to the highlight of H1, some of the perspective for H2, and as you know, we never comment on and never give guidance on, you know, full year fundraising, but I hope it's helpful. Buffer and performances.
On the buffer, Mourad, if you look at the table, we provided the detailed table for the NAV in the press release or on the appendix. You'll find the way we've calculated it. We've decided it's about 7% roughly of the value of the portfolio ex-growth. Deduct the asset management part from it, deduct the growth component from it. That's a bit judgmental, I have to say. The rationale again is that we consider that there's no reason to mark down that portfolio line by line today, given the strength of the performance, the quality of the assets, and a few factors as mentioned, be it realization of a NAV, sorry, or the foreign exchange.
As Virginie highlighted, there are uncertainties and this is sort of an uncertainty buffer. 7% looks to us conservative enough. Let me stress that we may have or may not have usage of it in next year, so the end of the year. Performance fees. The amount of 66 is largely related to balance sheet performance fees and the reason being that Reden Solar was only held by the balance sheet. There's no LPs owning a stake in Reden Solar, and this is the chunk, the largest chunk of the net gain in the first half. This is 62 balance sheet, EUR 4 million related to LP money.
Let me say, without giving you a number of performance fees, that the ownership of Vitaprotech and Trader is much more balanced between balance sheets and LPs, and you should expect that the balance of performance fees that will be associated to this transaction will be more geared towards the LPs.
Okay, thank you very much. I have a follow-up on fundraising again. Can you give us some insight on the origin of the money in terms of geography?
I mean we tend to give highlights of you know, geographical origin of the money rather at year-end, but for full year. You could assume that from the French market, about 40% and 60% is rest of Europe and rest of the world.
Okay. Thank you very much.
Again, take into account the fact that depending on what's in the market and, you know, not to get into too many details, but a Eurazeo PME funds of EUR 1 billion would probably tend to raise more money towards France or with French clients, while a private debt EUR 2 billion funds would be way more balanced. Actually, France would be quite a small amount of the private debt fundraising of EUR 1 billion so far. It would be Asian, it would be European with big clients in other, you know, outside France. It would be Middle Eastern to give you a few examples. The geographical source of resources also absolutely depends on which products are in the market. Sure.
Great. Thank you very much.
The next question comes in from the line of Joren Van Aken, calling from Degroof Petercam. Please go ahead.
Yes. Good morning, everyone. I have two questions on the very strong reported NAV. First one, if you look at investment companies throughout Europe, like Investor AB and Sofina had already reported, when they report about the private equity segment, they can only report the Q1 NAVs of these funds. Now, of course, I know you have a lot more visibility on the valuations, but if you look at your 115 NAV for the private equity or for the whole portfolio, should we look at it as you're using Q1 NAVs or are these already updated for Q2 NAVs? The second question is, if you look at the overview of the NAV in the appendix in the table, you see a net cash and others line of minus EUR 1 billion. We know the net cash is EUR 21 million.
Could you explain which items constitute the -EUR 1 billion then? Thank you.
Thanks for your question. I'll take the first one, and William take the second one. We are reporting on Q2. It's not Q1 performance. Portfolio performance is at the end of June with all updated, you know, results, top line, EBITDA, net debt, you know, every even post-event, post-closing events. Every valuation, line by line that William was describing for all the portfolio from buyouts to venture and growth are as of today. Like, literally as of last week, last Friday. I don't know why our peers stayed on Q1, but we're definitely on Q2. For every investment strategy that you see, although it may be different vintages, like, take the example of the mid-large buyouts, which you see as, you know, one investment strategy, there's actually two funds in there.
There's actually three funds in there, three, four and five . The reporting to our LPs will be made on these valuations for end of Q2 results, and they will receive their full reporting completely consistent with what you see there as a sort of synthesis of our performance at the latest 45 days after closing, so at the latest on the fifteenth of August. That's for your first question.
To the second question, which relates to the very bottom of the NAV and what we call the cash and others. I mean, starting with the main factor, which is the net debt or net cash position of the company at the end of the quarter. I mentioned EUR +21 million pro forma for the sale of Orolia and Reden Solar. Remember this transaction has been completed on early July, 6 July for the first. That means that the cash came in our account after the 30 June cut-off date. In fact, you find it in the press release in detail. The net debt position of the company at the end of the H1 was EUR 726 million to be precise.
Logically, in the cash position we have in the NAV which is dated 30th of June 2022 as Virginie just reiterated, you have this net debt position. In addition, you have a few factors which are usual and they may fluctuate, but you have things such as the provisioning of taxes, tax liabilities that will be then spent over time, which are related particularly to the sale of assets. That's this point. Overall, it doesn't change much, particularly the net cash position in the NAV because usually what you spend you'll find at the upper end of the NAV in the form of change of perimeter and new assets on the balance sheet.
Overall, this is not necessarily a material difference in the NAV.
Does that answer your question?
Thank you very much. Very clear.
Thank you.
Yeah, very clear. Thank you.
Thank you.
The next question comes in from the line of Christoph Greulich, calling from Berenberg. Please go ahead.
Good morning, Virginie and William. Yeah thanks a lot for taking my questions. Three from my side, please. I would like to start with a follow-up question on the buffer. Is it fair to assume that you will going forward adjust that buffer upwards or downwards depending on your market outlook? Is there a clearly defined framework in place according to which you will adjust that buffer? The second question is with regard to the debt financing of new buyout investments. If you maybe could describe the changes you have seen there since the start of the year.
Lastly, when we look at the demand from LPs, given that you cover a range of different strategies and asset classes, have you seen any shifts in demand between the strategies and asset classes in light of the changed macro outlook? Or would you say the demand trends are rather uniform across the group?
Christoph, can you rephrase your last question? I want to be sure that I u nderstood it well.
I'm just wondering, given that the macro outlook has changed quite significantly since the start of the year, have you seen that translating into a shift of demand that maybe some asset classes are kind of seeing increased demand at the expense of others? Or would you say the trends are rather uniform across all the strategies that you cover?
Okay. That's very clear. Let me try the buffer because you all have a lot of questions and I'd like you to understand that, you know, how would you feel if we had published a net asset value at EUR 121 per share growing from the 117, which we publish in March. You know, a big question mark in the current environment, you know, CAC 40, most of the public market index are down like 15%-20%. There's been significant market correction in the Nasdaq that we already anticipated back then in March. Listen, it's a prudence. It's a contingency. We have no detailed analysis, anticipation behind it. You know, could we have taken less? Yes. Could we have taken more? Probably not.
I mean it's already EUR 500 million. We are talking EUR 6.5 per share of contingency buffer. It wouldn't have been professional to come with a much bigger number because then you would have said it must be allocated some ways in some special situation, and it is not. It's just that you would not trust me if I was telling you I had, you know, a lot of visibility for the future. So it's not, you know, William will complete, you know, my answer, but I'm trying to share my that approach, so you feel it rather than, you know, you understand it. It's about, you know, being more conservative so that we are protecting the months to come. You know us, we always want to publish, you know, good results and overperform and not oversell. So it's us.
It's a conservative approach, and we are hoping that by March next year, when we publish our next net asset value, you know, we're not disappointing the market, and we have a sufficient, you know, runway in the portfolio growth and some of those contingency buffers, so we continue our path of growth for our net asset value. William will complement that.
No, I mean, that's like exactly that. Just the thing I wanted to add is relating to your question as to what could we do and how with that buffer depending upon what we see and in which timeframe. The timeframe obviously, we can't control, but it's clear that we will monitor the situation in the coming quarters. Again, as Virginie stressed, some of the risks you see in the economy and the broader environment may not materialize or may not have a negative impact overall. They may be transitory. Some may and at this stage, we have to be humble. We don't know.
To your point, if they do not materialize or do not have an impact on the performance of our companies and the valuations overall, this EUR 500 million is an upside. It may be written back in other words. If they materialize, it limits any downside to the shareholder because it would have been already priced in. That's the way you should look at it.
On the financing environment, which was your second question, we can do two voices with William. Large buyouts, large transaction probably are facing, and it's sort of an understatement, headwinds in terms of financing because the capital market financing is closed. And the large sort of financing is probably going to be with banks or with some private debt operator, a little bit more complicated. However, as far as we're concerned, you know, operating in the mid-market segment and, maybe it's about also, you know, the quality of our companies, the strength of the sectors in which we operate. But both on the exits, you know, Vitaprotech has been very well financed, and it's been acquired by a private equity buyer. Orolia is a different play. It's been acquired by a corporate buyer.
In mid-markets, we think we're going to be sort of a little bit more protected in terms of financing availability because there are banks which are still, you know, willing to finance good mid-market companies in Europe, if, you know, it's not over-leveraged. There are private debt players which are very much there because they understand, and it's good business there. Overall, that's how I would characterize the current market environment. You know, slightly more tight overall and probably quite complex for larger deals in terms of putting financing together.
Maybe just on the pricing side, 'cause, you know, not to repeat what Virginie said, we probably are in the right segment where we're not dependent on either the high-yield market, which is closed, or as a result, the bridges from banks which are full in the underwriting commitment. Plays to our advantage in a sense. The direct lending space is still available. There is some tension on the spreads and some repricing, but as of yet, not very material.
Your last question was about do we see in terms of demand from our clients some sectors or some geographical or some trends which are more looked for than others? Yes, a little bit at least, you know, seen from our standpoint. I don't mean to give you an overall view of the market 'cause, you know, I'm just talking about what we see at Eurazeo based on who we are. Private debt, there's a lot of appetite. I think LPs are seeing this as a good risk-return profile. And at least for us, we have, you know, great diversification of companies that we finance. The returns have been very strong. Are we talking sort of 7% net IRR?
You know, you make up your judgments, but for a good risk return, you know, no defaults, large diversification, good European companies across different sectors, not too high leverage, good returns. Private debt, big clients coming in with, you know, large investments in terms of size. We clearly see, you know, bigger amounts of LPs investments in our fund, which is a great thing. We see great attraction for healthcare related products, healthcare companies, healthcare funds. That is a trend which has not changed, and quite rightly so, 'cause when you look at the performance of all our companies across the board in healthcare, from venture to growth to midcap, they're growing very strongly.
I mentioned also Cranial and in healthcare and DORC in the mid-large buyouts strongly, you know, performing. Every product and funds related to energy transition and green would be impact Article 9 are very much looked for. It's a few private funds is growing very strongly as well because it's a good diversification and strong results. I think it's more where it may take a bit more time and we have to maybe anticipate some timing, you know, delay. It could be in the buyouts 'cause buyouts was very crowded in 2022. We have to expect 2022 and 2023 to be maybe the horizon of some of the buyouts fundraising. Thank you for your question, Christoph.
The next question comes in from the line of Alexandre Gérard calling from CIC. Please go ahead.
Yes, t hank you. Good morning, Virginie. Good morning, William. Thank you for taking my questions. Three on my side. My first question is to your portfolio management. You mentioned a good diversification of your portfolio. Besides that, do you intend to take any particular measures to protect your portfolio from any impact of the harsh economic crisis? Can we expect, for example, an acceleration of your disposals? Can we expect from Eurazeo the fact of maybe putting your investments on hold on the second half of the year? Can we expect fewer investments? That's my first question. Second question, it's related to the impact of inflation on your EBITDA. I mean, the EBITDA of your portfolio companies. Have you maybe realized any sensitivity analysis to that risk?
Also, the third question, sorry, is related to the retail segment that you mentioned. What weight should the retail segment represent, let's say in five to seven years time? What are the pros and cons of being more exposed to that type of retail? Are their assets more profitable? Are they more sticky? Thank you.
It wasn't super easy to understand everything Alexandre, but you know, sorry, there's one that we didn't get. I think we got one and two , maybe not one and three , maybe got two. I'll start with retail, which is your last question. Very strong momentum. Yes, it's very sticky. I mean, it's not, you know, institutional is very sticky as well 'cause you know, they come in closed funds. Now remember, we're not an asset management with open funds. Most of our relation with clients being retail or institutional would be very long-term, like 7-10 years. You know, that's the choice they make when they come in. I think what's happening these days is that we have more products.
We have built on 20 years of experience. We have more partners distributing our products, and we're offering very strong returns compared to a very volatile public market. There's many reasons why retail comes to private equity and to us in particular, being also a public company with full transparency, you know, reputation and, you know, inspiring trust and ethics. Also, I think you could, in terms of your question on is it the same sort of economics for us? Exactly, yes.
There's no difference for us between retail money or institutional money. Finally, there's this specificity that we as an asset manager, we're offering to retail the exact same product at an entry investment, which is very affordable, very low, which could be EUR 3,000-EUR 5,000, the exact same product than an institutional investors which would put EUR 150 million in our institutional funds. That structure of having that size retail money investing into the exact same product and the institutional funds, I think has shown great attraction. On, you know, your question about what are you doing in your portfolio and how are you reacting to this, you know, volatile and uncertain environment. Well, we are very close to our portfolio company on many fronts, Alexandre.
We are reviewing, and it's been the case since the beginning of the year. Every financing has been reviewed, you know, timing, interest coverage, covenants, renegotiation when needed, since probably early February. We reviewed across the board every of our buyout company in mid-large and small to mid pricing power. Pricing, you know, review of, you know, what can we do about pricing depending on what's happening in our supply chain, our raw material costs. Taking into consideration, you know our portfolio well. There's about 15 companies in mid-large, about 15 companies in small to mid. You've known those companies. They have strong pricing power. The companies are, you know, category leader. You know, we've seen more than 90% of our companies are very much inflation-proof.
They are passing on, you know, price increases. We have very few companies which are asset heavy. We like tech-enabled business services. But still, since early February, we have, you know, in a different way than what we did during COVID, but we have, you know, come back very strongly end-to-end with every of our portfolio company to come all the way across every level of operation, pricing, top line, supply chain and financing. I think that answers your, hopefully, your first question. The second one I didn't get, but maybe William can -
Inflation impact on portfolio, which I think you already answered.
Okay.
I mean, we monitor all specific situation, but in aggregate, as Virginie mentioned, in the presentation, the bulk of the portfolio is quite well positioned in the inflationary environment, given either the leadership position which allows for price increases or the fact that it is fairly asset light and less dependent on prices, input prices of use. Obviously, it's not immune, and this is a situation we monitor for the companies which would be more exposed. Overall, we consider that the buyout portfolio particularly is less exposed to real estate and infrastructure have natural hedges, and the debt is a different story, evolving in a floating rate environment. You already answered.
Yeah.
Okay. Thank you. Maybe a final question on my side, if you can hear me well. On the fundraising side for the full year, can we expect a fundraising that will be at least at the same level as last year, easily above EUR 5 billion?
We're not commenting on fundraising. We never did, and we're certainly not going to comment in such a volatile and uncertain environment. Everything that we could tell you, we did. The slide is giving you a lot of highlights and explanation. You just go back to the slide and we won't comment. You know, there's a few questions online as well that we won't sort of answer. You know, how much do you expect fundraising for 2022, 2023? David Cerdan, you know, unlikely that we give you any forecast. Same thing on Dry Powder. I know you're dying to know it, but you know, it would be quite unusual, as we never did it, that we would, in that environment, share any sort of forecast. There's a question on growth strategy.
We understand multiples are now more conservative. How is this evolving recently in the market? Last fundraising from private companies. I thought we sort of covered that, but you should assume that every of our growth companies are now, you know, valued in line, and consistently with markets, as it stands now. Yes, there has been, I think well communicated on a very recent one. There's been some transaction recently which shows that it's not just one market trend where you know, people, investors think that every growth company is down 25% like Nasdaq. I mean, look at ContentSquare. I mean, they just raised $600 million on a $5.6 billion post-money valuation, which was way higher than what we had in our NAV at the end of December.
This is new money coming in, new investor. It's a real market check. It's not just re-up. It's a mix, and I think what we have today in our net asset value absolutely reflect the best update and knowledge that we can share with you guys as to the growth portfolio.
Mourad, you have a follow up?
We've got a question coming through from the line of Mourad Lahmidi, calling from BNP Paribas. Please go ahead.
Yes, thank you. I have a follow-up on can you maybe refresh our memory on the way you mark your portfolio companies? Because to my recollection, you take into account five years historical multiples and last 12 months earnings. If you look at the market today, most of the companies are trading below five years historical multiples. Maybe you can help us on that. Thank you.
Sure. Let's start with the buyout to which you refer, I think. Depending upon the portfolio, we would use one year or five years average. Typically for small size companies, we use five years. For larger size company, we use one year average. We apply it to, as you said, in vast majority of cases, to last 12 months multiple. We do, of course, apply some judgment to it. Some judgment as to the positioning of the company relative to its peers. Sometimes, you know, there are no exact peers, or we consider that given the size of the market position of the company, it deserve a discount or premium to market multiples.
More importantly, as I said, we also check that the implicit multiple that we get, that we apply to the for the valuation, is not disconnected from what we see with spot multiples. Usually by spot we mean one-year one-month average. Again, at the end of H1, the very vast majority of the portfolio was valued on the basis of multiples that in the end are at or below spot multiples. That's for buyouts. Then we mentioned before the growth portfolio. The growth portfolio, typically, this is the way the industry does.
We're using the last mark stemming from the most recent rounds of funding for a company to the extent of course that it is material enough, a significant amount enough relative to pre-money valuation. But here again, with our traditional cautious approach, we apply some judgment and we cross-check what type of valuation we have, particularly for companies for which there was not a recent round. We cross-check with market multiples, and that's translating to this 25% in aggregate discount that Virginie alluded to.
I think we have one last question from Patrick Jousseaume.
The final question comes in from the line of Patrick Jousseaume, calling from Société Générale. Please go ahead.
Yes, good morning. Can you hear me?
Yes, very well, Patrick.
Okay, perfect. A lot of my questions were already responded, but I have two additional. First of all, regarding the contribution of the investment activity, I understand that capital gains will be recorded in H2 this year rather than H1, but why - EUR 151 million in H1? Second, regarding the buffer coming back to equity, I just wanted to check that the EUR 500 million are all on portfolio excluding growth, or is it only the additional EUR 230 million of H1? Still on the buffer, do you intend to monitor it on a quarterly basis, on a half-year basis?
Okay. I mean, your first question is related to the loss in the investment company.
Yeah.
I mean it stems, you know, from two facts. I mean, logically, you have a plus in the asset management. You have a plus in the contribution of companies. Then the third layer, which is investment companies, I mean, the usual big plus stems from net capital gains. As you don't have net capital gains here, you have, on the one hand, a negative coming from, you know, the costs that are located in the investment company. You know that we allocate the cost to the asset management company that are linked to its activity, but we keep some cost in the investment company, including some transaction costs related to balance sheet investment. Then you have some mark-to-market variation.
As I think, we've been explaining in the past years, that's related to minority stakes. In this case, you have the variation of the minority stakes held by ING Global, which, you know, would go through the P&L when they are marked down, and this was the case, they've been marked up in the previous quarters, some of them. The stakes have been marked down there. That's fundamentally what happened. You don't see specific
I mean Patrick, you're just basically missing, you know, had we been able to close, and there were some regulatory sort of delay. Had we been able to close Reden on the first half of June, and Aroma-Zone, you would add back to that EUR -161, which is essentially a base management fee paid to the asset management company, and investment-related expenses, which is related to our, you know, activity. You add back EUR 530 which is about, you know, It's about the capital gain that we would have had, which we had, of course, but just a few days later. Then you would find approximately a very similar investment company results for H1 2022 compared to 2021. That's really it.
Yeah. Then to your question on the buffer, you're right, Patrick. The way you think, you should think about it is we have EUR 217 million related to, sort of, to largely the growth companies. We wrote it back in a sense because, you know, we adjusted the value of the portfolio directly line by line. Then we opted for EUR 500 million related to non-growth companies at the bottom. The net amount, 500 less 270, is an increase of 233, but they're not related, they're not relating to the same bucket. We clearly have a EUR 500 million, but the net is the difference is, as you said, 233.
That was the last part of your question. We don't do published NAV each and every quarter. Next time you should see the NAV adjusted computed full year. It would be the full year results. Of course, we will monitor the valuation of our companies through the year. I mean, remember that we have some LP reportings to do, and anyway we do a daily not valuation, but daily monitoring of our participation.
Patrick, I mean I know it's not completely simple, but you have nearly EUR 300 million of markdown in the growth portfolio, of which EUR 260 million was sort of anticipated. I mean, not anticipated, but accounted for at the bottom of the NAV in December, so about EUR 380. The other EUR 500 million, as we largely discussed, contingency buffer at the bottom, which excludes growth companies and could be a positive going forward, you know, if we don't need it. I hope it's clear.
Yes. Yeah. Thank you very much.
Thank you. That was the final question in the queue, so I shall hand the call back across to yourselves for any concluding remarks.
Thank you very much. Have a great day and a lovely summer. We'll see you soon.
Thank you. Bye-bye.
Thank you for joining today's call. You may now disconnect your handsets.