Hello, everybody. Thanks for attending this 2024 annual result. As always, we'll be quick to make sure we answer all your question, live and on the webcast. I start with few slides about the industry. As you know, we are operating an alternative investment asset manager. 15 years ago, you had only 4 listed alternative asset manager, 2 in the U.S., 2 in Europe. You've got now 15 pure listed alternative asset manager. As you see, market cap of the largest in the U.S. and the second in Europe have been multiplied by 10.
But more important, the size of the market is becoming really gigantic because there are more and more savings from around the world, and more and more company to finance, and more and more transition, from energy transition to digital transition. And Tikehau is just sitting in the middle. And as you know, we are entrepreneur in the financial industry, so we started this firm 20 years ago. We are celebrating this year our 20 years anniversary around the globe in our 17 offices. We started with EUR 4 million. We publish EUR 43 billion AUM, close to EUR 130 million of core FRE for 2023.
We remain with the same guidance, but I think more important is that the trend and the trajectory, as I said, will continue to grow thanks to the sector, which remain very appealing in the financial industry, and also thanks to the platform we put together. We generate management fees that we translate into FRE. Same target for 2026, 250, and Henri will be giving you detail on the FRE. But our core FRE for 2023 is at EUR 123 million, as I said. We generate performance fees, carried interest and performance fees. Now, we have EUR 20 billion AUM, generating in the future year, performance fees and carried interest.
For the first time, we'll give the detail of what we have now booked in the 2023 account, which is close to EUR 180 million of carried interest that we'll receive, and obviously, that will increase massively. The third engine is our balance sheet, and it's a key weapon. We have a very heavy balance sheet that generate us, that, that enable us, sorry, to launch new strategy, but more important, to have real skin in the game. As cycle are changing, we think that it's critical to have skin in the game, and we'll detail that a little bit later. Also, we decided to release a target for net income because at the end of the day, shareholder, you know, are receiving dividend coming from net income.
We put this new target of EUR 500 million of net income for 2026. I will let Mathieu comment 2023.
Thank you. Thank you, Antoine. Good morning. Good morning, everyone. Very happy to be here in London for this new set of 23 results actually. I think we said 24. You know, we're always trying to think forward, but it's 23 results. So, let me spend a bit of time on this slide, which is relatively simple, but actually fairly important. We keep delivering on all fronts, I mean, Antoine mentioned that to you, and more importantly, we keep a very strong consistency in this delivery. Starting with the capital formation in this, you know, first box here, which is our capacity to attract new sources of capital for asset management strategies, there are three things you need to remember. First, it's complementarity. Our platform is broad with complementary asset classes.
Our growth model combines flagship strategies that are scaling rapidly, but also some innovations that are tomorrow's flagship. The second one is the global reach. We are truly a global firm, but we are local in each country where we operate. Our offices around the world are ramping up quickly, but so does, you know, our client base, which is increasingly global. We'll, we'll come back to that, and the internationalization is at the core of our development. The third point on this capital formation is the forward thinking. We've been a pioneer in Europe, I guess, in tackling the democratization of private market with many innovation and strategic partnership. You know, Antoine will elaborate on that a bit later. And nonetheless, we remain laser-focused on the asset liability management.
The second point I'd like to draw your attention on this slide is that we remain first and foremost investors. That is balance sheet that Antoine was referring to. There is no compromise whatsoever on investment discipline within our strategies, and that, you know, despite the change in cycle that we've been experiencing over the past few months. 2023, in that respect, was no exception, with a very high level of selectivity across our asset classes. We are taking a long-term view on our investments, as evidenced by these mega trends. Antoine, you know, came back to that. Decarbonization, cybersecurity, Regen Ag, you know, very important topics where we, as asset managers, want to grab asset owners' allocation, you know, into those fields.
We're managing mostly long-dated funds, as you would know, but also, you know, closed-end a nd as a consequence, you know, we're generating sustainable performance, which is core to our DNA. Our most critical asset, you know, we really believe, and for those of you who've been following us since we went public, you've been hearing us again and again talking about the value of the liquid and compounding balance sheet that Tikehau operates with. We use this balance sheet in priority to invest in our own funds, and then, you know, to align interest. Antoine, you know, stressed that, and it remains critical. With such skin in the game, you know, the asset selectivity within our portfolio is critical because we remain our first, our funds' first clients.
Last but not least, on this slide, there are, you know, strong operational dynamics that we'll be coming back on, and that resulted in a solid financial performance in 2023, which takes me to the next slide. Our operating model proved once again very resilient in 2023. We have delivered both top-line and bottom-line growth on the asset management side with the strong operating leverage. Our portfolio keeps evolving positively with a growing contribution from our own funds, the Tikehau funds, within our realized portfolio revenues. And so let me now deep dive into the capital formation dynamics. So we are positioned on fast and growing markets, and our industry is more and more supported by strong secular tailwinds.
We had the opportunity in the past to highlight that, and every year that goes by, industry reports evidence, you know, this, this trend. And that, if I may, you know, digress for a minute, is not only, you know, remember that we had all this accommodating monetary policy that had driven some asset owners to move into private assets, but as we get into higher interest rates, we can witness that this trend is continuing. Investors intend to keep allocating more capital to alternative. That is proven, you know, every year, and this is a clear trend. We've been at Tikehau, you know, positioned on this asset class for some times, and we, where the demand, you know, remains, you know, very high and the value proposition is the most appealing.
Second, as I was saying, the macro backdrop is not deterring LPs to allocate to private markets, quite the contrary. For those willing to change their allocation, they either look to reallocate within private markets or even increase their allocations. In other words, investors are more looking to change the mix of their asset allocations rather than reducing them, and we're experiencing that every day. You know, we'll later. So in that context, you know, if I move on to the next slide, page 10, for those on the webinar. In that context, we remain convinced that offering a complementary asset class is critical.
LPs are looking to reduce the number of relationship they have with the managers, but to increase the amount of capital that they allocate, you know, to those managers. And here, again, we are experiencing that every day, all the more in the new markets that we've been entering. And so, as a consequence, you know, the capacity to offer a variety of asset classes and investment solution is becoming increasingly critical, and we like, you know, this concept of investment solution. You know, we're not trying to push a fund to an LP, but we're trying to pull an LP to us and address, you know, their investment investment needs. I believe, I'm somehow a little bit biased, but I believe that we've built, you know, the right platform to do that.
For example, we do have the capacity to deploy capital in strategies, offering a compelling hedge against rising rates and inflation. This is infrastructure, this is private credit. But also, liquidity is becoming critical for our clients, and it's highly probable that secondaries will be able to benefit from a very strong deal flows. We'll come back to that. We launched secondary private credit a couple of years ago, and it's proving to be an extremely, promising asset class as well. We will get back, to that later, but as I said, the democratization of alternatives is a growing theme in the industry. An increasing number of, high-net-worth individual, private clients, and family offices are willing to access alternatives.
We have built a successful platform to address that demand, and we have onboarded strategic partners with us to deliver, you know, a really tailor-made approach, you know, to this asset class. We're making announcements today also that we're beefing up our private wealth services platform, and that's an area where you will see an increased growth in the Tikehau journey. Let me now give you an up-to-date overview of our global footprint. That's the first time that we're holding this event here in London. We've been in London for more than 10 years now, and that was together, you know, with our Brussels office, you know, our first extension outside our domestic Paris in France.
So looking at this map, you know, today, 20 years after starting and 10 years after expanding outside Europe, we feel pretty good about having mapped accordingly to serve institutional investors, as I was saying. There will be 2 new announcements, you know, this year. One in Asia, with the opening of Hong Kong. Great entry point for us into the wider Chinese market, which is a relatively recent LP base that we are tapping. And in North America, an extension into Canada, Montreal, where here again, you know, we've been developing a very promising and solid relationship with LP in the region.
But I think, you know, beyond these offices and these, flags, these field flags on the ground, I think what is important for all of you to realize is that the organization is also increasingly global. 47% of our investment professionals are in our international offices. So each time we expand, you know, in a new market, it's not only to develop a dialogue with the local investors, local LPs, develop some partnerships, but also to have boots on the ground and make a real difference in our origination, in our origination channels. So it's both fundraising and deal-making. So speaking of fundraising, let me take to the next slides.
I think, you know, you all had the opportunity to see these numbers that we released a few weeks ago, so I will not, I will not spend too much time there. But, I think what we'd like to stress is that our strategy has been validated by a very high level of client demand, and 2023 was a record year for Tikehau, despite, you know, all the recurring theme and noise around the challenging fundraising. I'm not telling you it's been easy. I'm telling you that we delivered a record year, and that's by putting maybe twice as much intensity, and that's, you know, something that we should give credit for the overall team at Tikehau.
So best year ever, both in gross and net inflows, and that's a testament to the relevance of our strategies, of our positioning, and of course, first and foremost, our track record. Today's performance is tomorrow's fundraising. Keep that in mind. What drove fundraising in 2023? Well, basically across our asset classes, I mean, all of them contributed to this strong performance. From credit, CLOs, direct lending, capital market strategies, special situation, obviously, you know, we're entering, you know, a new cycle where, I think Tikehau can thrive, you know, on these strategies, and obviously, private equities around the mega trend that Antoine was referring to.
Beyond these asset classes, we're making also constant progress in the internationalization of our franchise, as I was saying, and 50%, actually more than 50% of our inflows in 2023, came from international and non-domestic investors. This proportion keeps increasing year- on- year, which once again is a testament to the merit of the strategy we implemented. On the private client side, you know, going back to that, almost a third of our inflows came from private clients. Remember that the inventory is closer to 25, so we see that we are diluting these stocks by getting access directly to the end, to the end investors, and we'll have a slide on that specifically. So let me maybe dive into the local operations, you know, just covering now by a continent, if I may say.
So in Europe, our domestic market, our home market, a market where I really believe we made a difference by having boots on the ground ever since we started expanding outside Paris, in London, in Brussels, in Madrid, in Milan, more recently in Frankfurt, Amsterdam, Zurich. And you know, you heard me many times saying, "Good deals have no wheels," and more than ever, you know, that we make a Tikehau model. This multi-local presence that we've been building in Europe is proving to be critical, I mean, in terms of sourcing and access to clients. And now that we're talking more and more to global investors in Asia, in North America, that's something they give us credit for. The flying fly out of London, you know, to cover Europe, I think is long gone.
The solutions that our clients need, you know, are extremely local and across our asset classes. Today, this investment we've been making across Europe are really paying off, and on the fundraising side, you know, we had the opportunity to detail that. Moving on to North America, so I personally, you know, moved there in 2018, so it's been five years, pandemic included, you know, we've been in the U.S., and as I said, expanding into Canada this year. We're now operating around, you know, four local strategies in the U.S. CLOs, expansion of our very successful platform here in Europe.
Credit secondaries, secondary private, private debt, which is an extension of what many of you have witnessed over the past 20 years of the secondary private equity. The trend of the market will be a multiple of what we experience in private equity, for a very simple reason. In any given buyout, you might have a third, maybe 25% of equity, and twice as much of debt. So we're going to see, you know, an expansion of this strategy, where the supply-demand imbalance for 100 available in capital, you're seeing 1,000 of supply. Those are not distressed sellers. Those are people rebalancing their portfolios, people who are effectively reallocating, and it's a technical imbalance that we will be we will be benefiting from.
We added as well, more recently, some private equity expertise to focus on the energy transition, where we have developed a real legitimacy, globally. And, you may remember we added some infrastructure expertise in the U.S. We didn't have that here in Europe, which we found the market extremely competitive, and in the U.S., we added this expertise around mid-market, PPPs. But we're not only present through the asset management business in North America, but also through our balance sheet investment and our ecosystem, and the ecosystem we have built, which enable us to enhance our relationship, to increase the performance of our portfolio, but also to generate market intelligence.
So, here we are, you know, through our balance sheet, we can be either an LP in third-party funds or strategies, or use this capital to create a very differentiating approach. Now, moving east, and I should have started there maybe because Antoine and I, and many other colleagues just came back from Singapore, where we started celebrating our 20th anniversary, as you were saying.
After 10 years on the ground in Singapore and now in Korea, in Japan, soon to be in Hong Kong, having spent a fair bit of time also in Australia and mainland China, the progress that our colleagues have made over there are extremely encouraging, and you should see Asia as a key driver of growth of Tikehau in the coming years. In 2023, I believe it's been a pivotal year during which we initiated a partnership with Nikko Asset Management in Japan, which is one of Asia's largest asset managers and extremely promising partnership for us on the ground. This partnership articulates around 3 components.
One is the distribution of our funds, a creation of a co-GP to launch Asian private market strategies. More and more asset managers are trying to penetrate these private markets. And third, cementing that by having Nikko becoming a shareholder of Tikehau Capital. More recently, announced last week, as a matter of fact, we launched an Asian private credit strategy. And we partnered with the one of the largest Singaporean brokerage house, UOB Kay Hian.
This new private credit strategy, which you would appreciate, is at the core of the Tikehau journey ever since we started, seeks to you know, we're looking to provide financing to mid-sized company in Asia, which is an underserved market, extremely local here again, and we thought that we had come to the stage where we could address that. These two partnerships, extremely promising for the Tikehau franchise. And then finally, I would expand a little bit on what we've been doing more recently in Israel and the Middle East. We opened our office in Tel Aviv two years ago, and in Abu Dhabi a year ago.
These two hubs, if I may say, have been huge contributors to the growth of the fundraising lately. They've been, if you really know, very accretive because we have respectively two colleagues in each offices, but the marginal yield of what they've been reaching out in terms of investors is extremely relative. In Israel, to give you a data point, I mean, today we have raised more than EUR 1 billion of AUM, with a very strong customer base across all our businesses, and partly driven by insurance companies.
In Abu Dhabi, more recently, as I said, opened, you know, last year, where, we have recorded our first, investors, sovereign wealth funds, private banks, and a growing, obviously, need for these regions to allocate to European, managers. We'll be broadening our presence. You know, we're using these two hubs to broaden our presence across, the GCC and the, and the region. On that, I will hand over to, Antoine to, discuss the retailization.
Thank you, Mathieu. The platform we put together is global, 17 offices, and the purpose remain the same. In each country, we try to raise money locally, we try to invest locally, and also we build the brand. When it comes to retail, and it's a big theme across the industry, everybody is chasing retail and the retail money is embedded in various scheme, if I may say, around each countries. So for instance, when you are in France, it comes to unit-linked, you have digital platform, you have private bank. At Tikehau, we've been chasing this retail money almost since inception.
So as a result, as Mathieu mentioned earlier, 29% of our fundraising in 2023 is coming from retail investor, and 27% of our entire AUM is coming from retail investor. We give you a few example here, both from a product point of view, but also from a geographical point of view. And in the last 5 years, we've been partnering across, you know, Middle East, Spain, Italy, France, obviously, in various product. We put EUR 1 billion on unit-linked product. French savings is mainly embedded in insurance company. I've been doing that in real estate for quite some time. We are adding and pioneering in private debt, so we raised in the last 18 months, close to EUR 1 billion of unit-linked product, private debt or unit-linked product.
So the plan remain the same, is we are gonna continue to innovate, and as we said, we create rather than compete. We are chasing retail investor around the world through various product and on the entire platform. We mentioned also Opal, which we launched, less than 18 months ago. It's a fully digital platform from KYC to subscription to reporting. After less than a year in operation, we raised EUR 85 million. So EUR 85 million in the scope of our EUR 43 billion is not much, but to launch that, it cost us less than EUR 2 million. And now we have a fully digital platform, so we have our own fintech that we own, Tikehau owns 100%, and we're gonna keep doing that.
We think that when it comes to retail, we are a little bit ahead of the curve, and it's probably one of the critical area for fundraising. A lot of people are approaching Tikehau to benefit from our distribution platform. We have a lot of incoming call from people in the private equity industry, in the infrastructure industry, and for instance, Opal is putting third-party fund on our platform. So retail remain a big theme, and we're gonna probably accelerate that all around the world. I say a few word on investment discipline and value creation. As Mathieu highlighted, you know, our job is mainly to make sure we deliver good return for our LPs, investor, and shareholder.
In 2023, we invested EUR 5.9 billion across strategies, but mainly, as you see, 75% has been invested in our what we call yield strategy, which is credit. Why? Because, you know, the risk reward of the credit, and it's true for CLO, it's true for private debt, became more appealing because leverage has been reduced, interest rate have increased. So deploying capital in the yield strategies is probably key for the return of tomorrow with limited risk. So we invested a little bit less than in 2022, which, you know, demonstrate our discipline, and at the same time, we managed to exit and realize more asset. It has been a record year in terms of realization, EUR 2.4 billion.
Very important to realize assets because you give back money to investor, and obviously, they are happy with that, and they reinvest with you. When it comes to asset quality and investing, you want to make sure that you invest with the proper risk reward. So we have few KPIs here. I'm not gonna comment everything, but we decided to put the level of leverage in our private debt, in our private equity, and the LTV in our real estate. As you notice, 4.4, 3.7, and 24% loan-to-value. We are maneuvering and investing with a low level of leverage. 25%, 24% when it comes to real estate is very rare. Usually, a real estate investor are buying real estate with a lot of leverage.
We build the firm with limited leverage, and as a result, when, you know, it's becoming more turbulent, obviously, you know, you're suffering less. Level of diversification and granularity remain very high. We have 9,000 tenants across our real estate. We discussed briefly the balance sheet. It's a key strategic asset. It's not only skin in the game, so we've got EUR 3 billion invested in our funds, but that's really enable us to innovate. So when we decide to launch a new product, launch a new geography, launch our digital platform, do a strategic joint venture with a financial institution or a corporation, and as you know, we've been building the firm with strategic alliance with Unilever and AXA Climate when it come to agro-regeneration. You know, we invest EUR 100 million alongside AXA Climate, alongside Unilever.
So this balance sheet is really a key weapon in our view. It's really a strategic asset, and also, it's probably enable us to manage the risk probably in a more efficient manner, because at the end of the day, the balance sheet is your money. It's 51% our money, so we make sure that the risk reward remain good. And I will now leave the floor to Henri to discuss our financial performance.
Thanks, Antoine. Good morning to all of you. Happy to be here today in London with you. Maybe starting by providing you a few data points on the quality of our AUM, you know, to illustrate the potential of management fees, of profitability attached to our business model. So maybe the few first few data points are the way we are splitting our AUM on the left part of the page. As you can see, our fee-paying AUM and future fee-paying AUM have grown by 11% year-on-year, so representing together 91% globally of our AUM. That increase, you know, was driven by two main effects.
First, you know, dynamic fundraising and deployment for private credit strategies, so including direct lending, including CLO, including secondaries, and also, you know, solid, as well inflows for private equity, and capital market strategy. Once again, here, you know, if you assume an average management fee rate around 1%, that's more than EUR 40 million of additional revenue that will be embedded within our profit and loss on a yearly basis in the coming year. In terms of asset management revenue, that you can see on the left part of the page. As you can see here, we've had a 6% growth year-over-year in terms of asset management total.
And the revenues have reached in term of management fees, EUR 312 million. That's actually a 6% growth year-on-year that is driven, you know, by the continued progress, notably on our fee-paying AUM. In 2023, the average management fee rate maintained was maintained at a high level, reaching 94 basis points, you know, reflecting on the one hand, the fundraising mix that has affected, notably the year 2023, with more yield strategies than anticipated across the year end. And we had also some fundraising calendar effects to be considered during the year. In term of revenue, you may have that performance-related revenue have reached EUR 10 million in 2023.
They are including actually the contribution of our first direct lending fund that was launched back in 2014. Now, talking about the operating leverage, we are disclosing today, you know, this core fee-related earnings, which is, I mean, quite a standard nature of a KPI in the industry. Make it simple, it corresponds to our fee-related earnings, excluding share-based compensation. Why is that? Two main impact: share-based compensation are non-cash effect first, and then they do not have any impact on the consolidated equity. This is an IFRS effect that is being offset on a consolidated level.
That's why we are actually excluding this performance with this share-based compensation to calculate our core fee-related earnings, which in the industry is actually a key metric to show much better assessment of our asset management activity underlying profitability. So in 2023, core FRE has grown by 13%, reaching EUR 123 million, representing a margin of 39.4%. That growth was actually driven by management fee growth, firstly, coupled with efficient cost management throughout the year. To be noted as well, that the core FRE grown 18% compared to the first half in the second half, and the margin has actually exceeded 40% in the second half of the year.
Now, looking at the asset management EBIT, which is, you know, one of the KPI on which is running our dividend policy distribution, it has grown by 9% year-over-year, reaching EUR 117 million for the year 2023. So maybe a few data points here on operating costs. You know, looking at the cost base of our asset management, we have continued in 2023 to invest into our platform, clearly to support future growth while remaining, you know, highly selective and disciplined. As you can see here, the main component of our operating cost relates to personnel expenses, you know, accounting for approximately 70% of our operating costs.
They have grown operating expenses, personnel expenses have grown by 6%, mainly driven by selective hires in key functions, such as investment specialists and IT. We have been reinforcing, you know, our teams in key areas of growth, notably, I'm thinking about North America, Asia, some regions in Europe, and we've also continued to expand the platform, as it was mentioned by Mathieu a while ago, notably in Abu Dhabi. Just an important data point also, that in the second half of 2023, you know, total operating costs decreased by 10% compared to the first half, mainly due to adjustments that were made on the pace of recruitments, operating leverage gains, thanks to, I will say, internal streamlining and obviously cost optimization that took place.
So now maybe a few data points on carried interest and performance-related earnings, which are, you know, material profit driver ahead for the coming years. Let me first remind you that, you know, we have a cautious and conservative approach. I think we've been disclosing that since the IPO, the way we are booking those carried interest into our financial statements, waiting up until the end of the life of the fund. What are the main KPI on this side? First one, in December 2023, AUM eligible to carried interest have grown by 16%, so they have grown faster than our asset management AUM. That means that we are, you know, raising capital in priority in strategy eligible to carried interest.
Meanwhile, AUM eligible to carried and currently at work and above hurdle rate have reached EUR 7 billion, so they were up 33% compared to 2021. Now, maybe an additional data point, very important to understand, I would say, the potential of additional revenues in the coming years. That's the first time we are actually disclosing that figure. At end September 2023, we had approximately EUR 180 million of unrealized carried interest recognized at fund level and that amount has been growing actually by more than 50% year-on-year. So these carried interests are booked as a liability within our funds. They are not yet booked in our profit in our financial statements. They will be when the fund will be maturing.
Last point, maybe as far as performance-related earnings are concerned, this is something we've been explaining in the past, is I think we have one of the most, I would say, shareholder-friendly allocation of carried interest, because 100% of the performance fees of our CMS are going into our financial statements, and 53% of the carried interest are allocated to our financial statements. Let me now have a look, you know, at our investment portfolio revenues. They have reached EUR 180 million in 2023. Clearly, with an acceleration in the second half of the year, they have reaching actually EUR 95 million and representing 2.4x the level that we generated back in H2 2022.
So portfolio revenues were driven, you know, by realized revenue, corresponding to dividend, coupon, and distribution, and capital gain, partially offset by negative unrealized revenues. Having a look at those figures, unrealized revenue resulted actually from positive contribution, both from our private equity and tactical strategy, partially offset by the effect of the listed REITs that we are holding within our balance sheet. As a reminder, you know, 2022 to 2022, unrealized revenue, where I would say offering a high level of comparison, as they were included approximately EUR 150 million, two effects, euro-dollar back in 2022, and Univision, U.S. media firm impact, a deal that has impacted us in 2022.
One important element to be highlighted here is the obviously the increasing contribution from our asset management strategies to realized revenue. Those revenues have actually grown by 20% year-on-year, reaching EUR 168 million, and their level has actually doubled versus 2021. We wanted actually today also maybe to illustrate a little bit more with a few data points the way that our portfolio has been rotated in a very active manner. So maybe three main things to keep in mind when you are considering our active portfolio. First one, on the left part of the page, the, I would say, increasing contribution to realized revenue from TSO strategies.
As I said earlier, you know, asset management strategy contribution to realized revenue have grown 20% compared to a year ago, and actually they have doubled over the last 3 years. So clearly, you know, those revenue coming from our funds will be one of the main contributors to realized revenue in the coming years. Second element to keep in mind is that IFRS may not be probably the best way, you know, to illustrate the capacity of our generation of revenue. So here, as you can see, we've been providing you an additional data point, which is the gross cash flow attached to our portfolio revenue. And actually, that's, for the year 2023, that's more than EUR 600 million of gross cash flow.
For the last three years, same amount corresponds to EUR 2.2 billion. So clearly, we have a very active rotation of our portfolio, and this gross cash flow includes, you know, dividend, coupon, distribution, asset disposal, capital return, and that's a strong contribution, you know. That cash flow generation is a key feature as well of our portfolio. The third element we wanted to provide you today as well is, you know, that embedded long-term value creation. We've provided you here a split in terms of how our investments are going to mature. And clearly, as you can see on this page, at end December 2023, close to half of our investments have a maturity date from 2029 and onwards.
So it's clear that the value creation of our investment portfolio is clearly still ahead of us and contains lots of potential in terms of additional revenue. So introducing once again those new features to effectively demonstrate the active rotation of our portfolio. So having a look now at the bottom of our P&L, a few data points. Corporate expenses have grown moderately in 2023 due to actually disciplined cost management, as we said before. Financial costs reached EUR 40 million, reflecting the successful pricing of our 2023 sustainable bond. As a reminder here, 2022 financial statements benefited, you know, from a positive impact on a swap fair value in 2022.
Finally, net results reached EUR 177 million with a significant contribution from the second half of the year, and H2 net results grew, has grown 144% compared to H2 2022, reflecting actually higher profit generation, both for asset management and investment activity, for the year. So as a result, you know, of this strong value generated across our business in 2023, we will propose the payment of a dividend of EUR 0.75, representing actually a 7% increase compared to the level of 2022. That's actually fully in line with our policy to distribute more than 80% of our asset management EBIT to shareholders, with obviously an increasing amount in absolute term since IPO.
Before handing back to Antoine and Mathieu, maybe let me wrap up on our, on our robust balance sheet, which is, which has been, you know, supporting the growth of our business model for the past year, and which will continue clearly to be a, a key differentiator, in, in the coming years. At end December 2023, we had EUR 3.2 billion of equity, EUR 1 billion of short-term financial resources, of which EUR 200 million of cash. The evolution of cash reflects the investments we've been carrying out, during the, the year 2023. As you may recall, so we have been assigned an investment-grade rating by both S&P and Fitch, that have, reaffirmed our rating in 2023, illustrating the strength of our business model and our financial structure.
And finally, maybe last point, as you know, sustainability is a key differentiator and a very important point for us, whether in terms of investment, but also, at the level of the group financing. And at end December 2023, 78% of our debt was linked to ESG criteria. Thanks.
Thank you, Henri. A few slides on outlook and priorities. We think that, you know, when you build a firm, you want to make sure you're following your own judgments, which hopefully end up being the right theme and the right thematic. We put a few here, we put seven. Private credit, obviously, with the change in cycle, interest rate higher, leverage being lower, margin increasing. As you know, we pioneer in European direct lending. We started in 2007, so we've got probably the longest European track record when it comes to direct lending. So it's not that we're going to wake up tomorrow and say, "Oh, shall we launch some direct lending?" It's really at the forefront of the firm.
As I said earlier, 75% of our investment in 2023 has been in private credit. We are obviously accelerating that. We are launching our sixth flagship direct lending fund, which hopefully is gonna be a very large fund. So we're gonna keep expanding really in the sweet spot of the private debt and the private credit. Impact, as I said before, you know, create, don't compete. We start investing in energy transition back in 2013. We launched our first fund in 2018, which was a first-time fund of energy transition of EUR 1.1 billion. We are currently raising a EUR 2.5 billion fund. We are one of the few firm with already realization when it comes to track record.
So we're gonna accelerate our energy transition practice, but also make sure we are launching new initiative, and agro regeneration is a good example. Impact continue to be a major theme, and hopefully we'll start getting the benefit of being probably a little bit early in the cycle when it comes to impact. When market change, people realize that liquidity could be an issue. I give you just one example: We launched in 2020, a secondary private debt fund. We are launching the second generation now. This fund has been returning more than 20% net, which for secondary private debt, the risk-reward is quite good, and we're gonna expand that. But again, we think we are well-positioned.
So don't get me wrong, I don't want to be arrogant saying that we are well-positioned everywhere, but as a matter of fact, we build this firm by innovating, by creating rather than competing. And when you look at the entire spectrum, we consider that we are well positioned. Infrastructure is mainly U.S. for us. At one point in time, we may enter the European market, but as you know, infrastructure in the U.S. need a lot of CapEx and a lot of new infrastructure are coming, and it's true for port, for highways, for airports. We bought a small firm called Star a few years ago. Now we are raising the third generation, and that will probably accelerate in North America. Democratization, I touched base earlier.
27% of our AUM is coming from retail investor, multi-channel, unit-linked, digital, private bank, IFAs. We are accelerating that, but also trying to create extra value for our shareholder. So instead of partnering with the existing digital platform, as I said, we launch our own platform, Opal Capital. And the way we think is a little bit different because Opal, for instance, has been marketing Morgan Stanley fund, Goldman Sachs fund, and now start marketing our fund. But now we have an internal tool that we're gonna grow, and are we creating a EUR 5 billion fintech? Too early to tell, but the plan is really to grow that. Permanent capital, you know, when cycle change, people realize that having permanent capital, and you can do it directly or indirectly.
Indirectly will be mainly the U.S. route for the alts being you know investing and expanding insurance company. We've got our own balance sheet, which is permanent capital, but a lot of our funds are really long-dated. For instance, when it come to unit-linked, the length is very long, and I think we want to keep that, and probably we're gonna publish the part of permanent capital in our AUM consolidation, a lot of you had question. There is no doubt that the market is consolidating. Why? Because you've got some generational change. You know, some partners have to transition to younger generation, and you know, they want probably to realize the stake they own in their GP. So that's one theme.
Second theme will be because fundraising, fundraising became more and more challenging for a lot of people. Obviously, they try to partner with people with distribution capacity and also able to invest in their fund. And we had a lot of discussion around the world when it come to consolidation. Why? Because you've got these two trend that bringing you a target. We have a balance sheet and a very big balance sheet, as we say. So, you know, if we decide and when we decide that it makes sense because it's the right DNA, it's the right geography, it's the right asset class, we may consolidate the sector. But the trend is just starting when it comes to consolidation.
You saw some very big transaction like the BlackRock GIP, for instance, but there are more and more transaction coming. So we think, you know, to wrap up on that, we are well positioned. We're going to continue to innovate. We are going to continue to put the same drive and energy, and that will translate in a strong net income, and we'll discuss the EUR 500 million net income target to on the last slide. It's a growth journey, it's an entrepreneurial journey, so we've been expanding 17 offices, five business units, new strategies. We decided that in 2023, we'll also start focusing on cost, not so much because the market became difficult because, as you noticed, it's a record year for us in terms of fundraising.
But we just decide to focus on cost because, you know, that's part of the journey. After 20 years, it's good to, you know, put new discipline. We're going to continue to grow. We're going to remain entrepreneurial with a clear vision, but we decided to spend a little bit more time on the cost, and that will translate into increase in FRE margin. That's already, you noticed, in H2 2023. And maybe if we go to the next to the next slide, you know, guidance remained the same, but we decided to add a EUR 500 million net income target, which is more or less EUR 3 per share or earnings per share.
As Henri mentioned, you know, we increased the dividend by 7% this year, and the plan obviously is to keep increasing the dividend. And to do that, you want to make sure that you increase the net income, so we decided to put this target, which is not super ambitious, but it's still EUR 500 million of net income. So that's the plan. I will probably stop here. Maybe let Mathieu give you a 2-minute conclusion, and we'll answer question.
No, I think you, you covered it all, but just to, just to wrap up and to, to reiterate what, what Antoine said, I mean, this has been a journey, and we're, we're now today at an inflection point, where scale is the name of the game. We have successfully expanded, you know, across the globe with this local presence. We have broadened our, investor base, both geographically and, as I said, you know, by nature of our investors. We're not dependent on one given strategies. We're not dependent on one investors type. And all this investment that we made, and just to, come back to this, cost management, point, the alternative asset management business, it has a huge operating, leverage.
And we're now at this point, we think at Tikehau, where we have front-loaded the bulk of our investment. Remember that our CapEx in our business are our OpEx. And so today, you know, we can effectively scale the business and with confidence, but with a lot of work coming, effectively give you this EUR 500 million net income target. That, as we like to say, you know, with Antoine and the rest of the team, that's how shareholders are getting paid, by the net income, not by the EBITDA, not by the growth of the turnover. And we know and we experienced what it has led to when it's growth for the sake of growing. We want a profitable growth, and we believe that we're on the right, right track, you know, to deliver that.
We'd be very happy to take some Q&A here in the audience or on the webinar for those who are dialing in from a distance. Thank you.
Shall we start with the webinar since we have 218 people, so we expect two questions or 436 questions?
So we'll start with the webinar unless we have questions in the room right now, because we have a decent amount of questions coming from the webinar. So, first question is coming from Deutsche Bank. First question is related to the management fee rate. If you can elaborate on the evolution in 2023. We mentioned mix calendar effect, and the question is: Are there any underlying pressure on fees? That would be the first question.
So, as you have all the figures in mind, our average management management fee has moved from 98 basis points to 94 basis points. So a slight decline, but coming mainly from the mix of the fundraising. In 2023, we raised four CLOs, where the management fees, for instance, is on the fifty basis points basis. We are raising this year our Decarb number two with a, as I said, a EUR 2.5 billion target, where the management fee is 2%. So there is, we are not, you know, anticipating or seeing any fee pressure. In the traditional asset management, there is a huge pressure on the fees because of the ETF. In the private market, for now, we see almost no fee pressure.
So, you know, this average management fee rate should slightly increase in the coming years.
Thank you for that. Next question, still from Deutsche Bank in other words , what you can tell us about the markets landscape in 2024, both in terms of fundraising and deal environment. Market statistics are pointing to a M&A pickup in H2, so what's the firm's view on that?
So we think that 2024 is gonna be much more active than 2023. It's very strange, our cycle could change very quickly. Six months ago, people were highly cautious. We feel like they are more optimistic, more optimism around the world. So we see probably more transaction coming. We start seeing some bottom fishing when it comes to real estate. As everybody knows, real estate, especially large office, are under pressure. We announced ten days ago that we are buying a shopping mall outside Paris with 176 tenants at 11% net return. So probably the last time we saw that was ten years ago, probably even more.
So we plan to be very active when it comes to investment, because the size of the platform, operating in 17 countries, because, you know, 750 people, is a very, big team, as we say, if you compare that to, to AUM. But our sourcing capacity, remains strong, and I think from our point of view, we're gonna be probably more active in 2024, probably on real estate. We'll keep being busy, on private debt, and also we probably, will be deploying more when it comes to private equity because valuation, decline a little bit. So to answer the question, we anticipate that we are gonna be probably, more active, when it come to investment.
Also, you want to remain disciplined, 'cause as Mathieu said, you know, today's return is tomorrow fundraising, so very important to remain disciplined. And then the second part of the question, when it comes to fundraising, 2024 is an important year for us because we have some very large initiative. Direct Lending number 6, Decarb number 2, Secondary number 2, TSO number 3. So we anticipate to be busy and remain busy, and I will let Mathieu add a little bit on that.
No, I will come back to the contribution on the fundraising. 2023 was a very interesting year because that's when we saw our first very large Japanese investors coming in, our first very large Chinese investors coming in, our very first sovereign wealth fund coming out of the Middle East. In Europe, some new markets contributing on top of our historical, you know, big contributors. North America, you know, picking up and expanding into Canada. But the reason I'm mentioning that is that unlike certainly, you know, at the time of the IPO, but even two years ago, we've got many more engines that are firing now and contributing to the overall fundraising of Tikehau.
That's, I think, is very important for you to realize. I mean, as Antoine told you, you know, we started 20 years ago. We had EUR 4 million of AUM, EUR 4 million. Today, it's north of 40, and I can tell you that we never got a call from any sovereign wealth fund telling us that they wanted to invest EUR 2 billion with us. And this journey, I'm not saying that that was the most challenging part of the journey, but we didn't have this reach that we have today. We didn't have the footprint we have today. We didn't have the brand awareness. And remember that, you know, a Tikehau, a fundraising, a new AUM, is just a consequence of, you know, of a franchise and a brand awareness.
So that's the every day is intangible that we are able to develop locally the relationship that we are able to build. And I'm coming back to this dinner we had last week in Singapore. I remember the very first day when we opened 10 years ago. I can tell you that the office was empty, and I may have lost sleep, you know, that night, you know, on the rent we had just signed. 10 years later, you know, that's what, you know, entrepreneurship is all about and the confidence we're getting, you know, from our, you know, from our clients. So I think it's important to factor that in.
As I said, I never said it was easy, and that came with increased intensity, not only from us, but also that we are expecting from all of our colleagues. I believe that, from now on, effectively, you know, we might pass the EUR 50 billion mark in the short term. We gave you the EUR 65 billion target for 2026. But I can tell you that, you know, deep inside, the next stop is 100, because that's where, you know, the league that we are belonging to, that's where the game is taking place.
Thank you. Moving on to the next questions, we have quite a decent number of questions online. On the portfolio, which has grown to EUR 3.9 billion, and the question is: How do we evaluate what is the correct ultimate size of the portfolio as we are growing our asset management business?
There is no secret sauce or perfect recipes for the size of the balance sheet. But as you know, our balance sheet is quite heavy, if you compare to our AUM or to our peers. The most relevant peer will be KKR, with a very large balance sheet. We think that we are not obliged to invest our balance sheets, for specific fundraising. So, for instance, when it became a mature business, which is the case, for instance, for direct lending number six, we are not obliged to invest the balance sheet. Also, we think the risk reward is good, so we probably are investing.
But, but-- and I think we, we mentioned that before, with, with a EUR 5 billion balance sheet, a EUR 3.2 billion equity base, we consider that we have probably a large enough balance sheet. So no particular need to increase the balance sheet, so that mean no particular need to issue new debt, and, and, and not at all issue new capital. And we may be in a situation whereby at some point in time, balance sheet would be probably too big, and then we can probably consider offering more dividend or more capital reduction. But, but the size we have now is probably good to go to EUR 100 billion and, and, and even more than that, we probably do not need a bigger balance sheet.
If, if I may add, maybe Louis, you know, a theme that, that you like, you know, personally. The balance sheet has been a huge enabler, but also a compounder. It's an enabler because when we have effectively a new idea or new strategy, you know, we can launch the strategy, we can demonstrate the proof of concept, and then we can go to LPs and show them, you know, what has been the, the merits of any given strategy, rather than effectively going on the road, spending six, nine, 12 months, and by then the opportunity might be, might be gone. So it's a huge enabler, and I think that any entrepreneurs would tell you that you're never over-capitalized. And the second thing, this compounding effect.
We highlighted the allocation of this balance sheet into our own funds and the yield strategies. And whether you take 8%, 10%, 12% or more assumption of the return of this allocation, and remember that most of that is contractual by way of a coupon, by way of a concession contract, by way of rents, you can effectively have this compounding effect over the years and your equity base growing regardless of the asset management contribution. And that's a very significant engine that is also picking up right now because this allocation is maturing, and that is also supporting the assumption of our new guidance we're giving you.
Thank you. Moving on to the questions, first from BNP on three aspects. First, cost evolution outlook for 2024, 2025. Should we expect a similar growth as in 2023, or have we just navigated and tried to manage the cost in 2023? Second question, on the 2026 target, and what's the contribution of real estate in that EUR 2,250 million guidance? Finally, question on M&A. What are the obvious gaps in the coverage that we would like to bridge, and how are we assessing M&A options and what we are seeing in the market?
Three different questions. Maybe I start with the cost. As I said before, you know, we are paying more attention to the cost, because probably we reach the right size when it comes to the infrastructure, so number of offices, 17, number of businesses. So we are paying more attention to the cost, and you already saw that in the 2023 figures. So we are gonna probably keep doing that and probably reallocating cost and resources. So, for instance, our growth journey is more and more outside France. Obviously, we are born in France and listed in France, but we are reallocating more resources and, as a consequence, more cost outside France.
So that means reducing the headquarters is part of the plan, and be more, more offensive in new territory. So that will be my answer on the first question on the cost. The second question is on real estate and impact on FRE. In 2023, we raised EUR 1 billion less in real estate than in 2022, because obviously, you know, people are reassessing and considering their real estate investment. And despite that, you know, our profitability increase. So the takeaway of that is that now we build a very diversified business across geographies, across asset class, across funds, so we are not dependent at all on any particular business.
And when real estate will come back, which, as I said before, we start seeing some some bottom fishing here or there, and we have been doing that, the example of the shopping mall I mentioned. We're gonna probably attract again some real estate investor on specific deals as well. So for instance, we bought from a distressed operator, a very large hotel in Paris last year, and we bring some very large co-investor from Middle East. So real estate cycle is changing, we don't see any particular impact for our 2023 FRE targets. And maybe the third question?
Yeah, on the M&A maybe-
M&A, yeah.
I can, I can comment here. Two things. First of all, as you read every day in the press, and maybe the question coming from BNP, you know, they, you know that bankers are very, very busy marketing many private platforms or at times, you know, public platform, because the consolidation and the scale that I was referring to is, you know, is, is now well, you know, well, well underway. One, two thing that has happened is, talking about the fundraising, since, you know, many people have been commenting and questioning the fundraising. In general, fundraising is more complicated, right? So if you give a business plan to value a company and a target, you're expecting to go from zero to 100.
If you're going only from zero to sixty, first of all, you know, your top-line assumption, you know, has decreased, and in parallel to that, your cost of capital has increased dramatically because 3, 4 years ago, money was cheap, not to say free. And so today, when you take the risk-free rate plus the risk premium, you're discounting maybe at 7%, 8%, 10%. And so obviously, if you've got a lower, you know, business plan, discounted a higher discount rate, the value of the asset is much lower. And I think that there is a little bit of a little bit of convergence here, and we saw some transaction being done at much more reasonable valuation, and that's something obviously that we are focusing on. We looked at many at many opportunities over the past few years.
Remember that the public market, the IPO market, plus the GP staker, as they call it, were driving valuation relatively high. I mean, today we're going back in some more reasonable territories as long as, you know, sellers are not outright sellers, but people who want to be part of the journey, you know, with us. I'll give you an example. I mean, we were discussing with one of the most talented publicly U.S. listed asset manager who've been extremely acquisitive over the past few years, and they said it's very simple. "You know, we only pay 10x.
Whatever it is, we pay 10x and not the 20x that people are expecting, and we pay 100% with stock so that people effectively are part of the journey with a very locked-in realization payout. So in this environment where effectively you can start having more reasonable discussion on valuation, on transaction, obviously, we are extremely busy. We announced last year, under the leadership of Louis and his team, you know, the creation of a dedicated M&A and strategic team. We have discussion with the banks and direct entrepreneurs every week from Asia to North America, I mean, obviously here in Europe. But those transaction would only materialize if there is a chemistry, a chemistry in the people, in the culture. We are in the people business.
You know, our assets, part of our assets are walking out of the door, you know, every night, and we have to make sure that whoever we join forces with will share our value, our DNA. We might not fit everyone, but it's okay. If we do have the fit, you know, with these people, like we did in the past, with Star America in Infra, with Ace Capital , you know, on the aerospace, obviously with Sofidy, then we can, you know, we can effectively have an interesting, interesting discussion. Are there some, some gaps, you know, in what we do? There's certainly some scale, some scales objective, infra, you know, being, being one.
On the private equity, obviously, we've had very fast growth over the past few years, but it's still relatively lower in terms of contribution to the overall business. And you would certainly expect us to grow definitely outside France and probably outside Europe.
Thank you. Maybe a quick round to see if any people if you have questions in the room, or we still have a decent amount of questions on the webcast, so we have enough room to go forward. I'm trying to regroup the questions because there are many of them. So maybe first theme asked by a couple of people on the webcast is about outlook for leverage both looking at M&A opportunities as well as the balance sheet gearing overall. And also another question is the gradual ramp-up to the EUR 500 million net income, and what's in what timeframe can the portfolio deliver 10%-15% you know run rate return? That would be the two themes to address right now.
Maybe on leverage, as I said earlier, we are very happy with the level of leverage we have at the balance sheet level, so the plan is not to increase the leverage at balance sheet level. When it comes to net income and the EUR 500 million target and the ramp-up, so the net income is coming from three layers: management fees minus the cost, so that's our FRE. EUR 123 million of core FRE in 2023, and the target still of EUR 250 million in 2026. That's the first layer. The second layer will be the performance fee and the carried interest. So for the first time, we disclose a number which is EUR 180 million already in.
The question is: When are we receiving it? The way it works is that let's assume that you have a fund, a 100 million fund. If the net asset value of the fund is 200, when you are eligible to 20% carry interest, that mean that you're gonna receive 20% of the 100, so EUR 20 million. And the sum of that is the 180 we disclose, and we have 20 billion of AUM, potentially creating some carry interest. That's mean that the second layer of the net income is coming from the carry interest performance fees. It's increasing. Henri commented a slide earlier.
Yeah.
So at the end of 2021, we had EUR 80 million, now we have EUR 182 million. So that's the second layer of profitability to create the EUR 500 million net income. And third, the balance sheet, which this year we had no particular realization, so that means that we did not exit assets from the balance sheet, but we get recurring revenues coming from our private debt fund, our CLOs, and so on, our real estate, and that's now north of EUR 180 million for this year. So to achieve EUR 500 million net income, you need the three engines. The three of them are accelerating, so we are very happy with the ramp-up phase to deliver the EUR 500 million net income.
Thank you. Wrapping up three other questions from CIC, Oddo, and Kepler. First question on the private debt from CIC, the competition, competitive pressure, how do we quantify and assess that pressure, and do we see any sign of default within portfolios? Second question would be on the timing of realization of the 182 of carried interest provision at the fund level. And the third one is on the liquidity of the stock. How is this progressing?
Maybe I'll start with the private debt. So if we're talking, you know, direct lending, which is our core business in private debt, that the market we are targeting at Tikehau is very much the European mid-market, SME focus. I'm saying that because lately there's been a lot of cover page in the paper about very large syndication being addressed by private lenders. We're not into the multi-billion syndication business because effectively for this business, you compete with the public market. So at times, the public market are open, at times they're closed, but when they are open, where do you have to concede to be more competitive than the public market?
So we're really targeting on this segment of the market, so on the direct lending here in Europe, on the secondary private debt in the U.S., and our special opportunity business, which we intend, which, which we expect to be a very significant contributor to performance, is really targeting, you know, this market. You know, I think you heard me saying in the past that it's easy to borrow EUR 1 million from a bank, and it's easy to borrow EUR 1 billion. But when you want to borrow EUR 100 million, which is, you know, what the core of the European economy is in need, that's where the asset managers and the private lenders, like us and others, are extremely relevant. So that's where we are focusing on.
So the pressure we have is that the market in 2024 is now an organized market, unlike what it was maybe 10 years ago. Remember that direct lending and private debt in Europe evolved on the back of the GFC. I think at the time, you know, people were talking about shadow banking. I mean, when is the last time we all heard about shadow banking, when now it's a you know, it's a full legitimate alternative to bank financing and capital market financing? So it's great that the market is getting organized. We believe that having the origination network and platform like we have at Tikehau is a key differentiating factor to be able to source, originate, and then select the companies we're financing.
Another data point that you've been seeing over the years is that we are converting 5%-7% of the opportunities we're working on. 5%-7%. So you need, I think you say in English, to kiss many frogs before you find your prince. Nothing to do with the frogs. But I think it's important you keep that in mind because the first rule of credit investment is diversification. And so by investing into this platform, I mean, not only, you know, there are some benefits, as we discussed, but you also, you keep expanding the origination network. So we remain extremely selective. We have seen last year and, you know, over the past 18 months, some situation that needs, you know, a more careful monitoring.
Obviously, you know, we're starting, we're starting changing cycles, so both from an operating performance, from a liability standpoint, from a cost of funding, from a hedging standpoint, from the energy, whatever cost, from the inflation. So but, but that's, that's what we are being paid for, if I may say, you know, to do this asset selection and this portfolio monitoring. So, we remain, we remain extremely focused on this, on this asset class. And as one of the main allocator into the strategies, you know, the balance sheet, that's a great compounding contribution to the balance sheet I was referring to.
Maybe on liquidity. So now we have 13 brokers or banks covering us. We added, as you notice, Deutsche Bank and Goldman Sachs in the last months. So 13 equity research for a EUR 3.7 billion market cap company is a good result, and I think we're gonna try to have few other additional broker. Because that's probably something you need when at one point in time there will be a liquidity event. As we said, you know, earlier, a liquidity event could come because you're doing an M&A transaction and you're offering shares to the target and merging with a company with a lot of free floats. There are not so many, but there are some.
At one point in time, you can also organize an ABB with some existing shareholder willing to sell. So that's probably the two main routes to create liquidity. We know that liquidity is low. We put everything in place to make sure that when it's coming, there will be appetite. And Mathieu and I, the IR team, have been really touring various parts of the world. So now we talk probably to all the investor in alternative asset management company. So everything is in place. At one point in time, liquidity will come, and we keep working on that, because that's one of the few things we need to achieve in the coming months and year.
Okay, we are approaching the end of that meeting, so last final chance for the room. Otherwise, I think, gentlemen, we can wrap up on this Q&A session.
Dun, dun, dun! Thanks for your time. We are still around, so happy to answer other question live.
Thank you.