Investor Update

Nov 5, 2020

Hello, ladies and gentlemen. Welcome to the Teekayo Capital Q3 2020 Assets Under Management Announcement Conference Call. Today, I am pleased to present Matthew Chabron, Co Founder and Henri Marcou, W CEO. Gentlemen, the floor is yours. Thank you. Hello, everyone, and thank you for joining us today. I hope you're all doing okay and weathering well what is clearly a new operating challenge for many of us brought by the new government restrictions across many countries. I'm Mathieu Chabrand, Co Founder of TIKEO Capital. And I'm now joining you from New York, where we are actually all happily still working in the office. We're certainly the outliers here. And I'm joined today by our Deputy CEO, Henri Marcoux, who's in Paris. We will run you through the main highlights of what has happened at Teco Capital during the Q3 and then be more than happy obviously to answer your questions. Before we get started, let me maybe give you a quick reminder of how we define ourselves and approach our platform. TKO Capital is an alternative asset manager that we created 16 years ago, which has built strong positions across private and public markets. Our unique model consists in proposing to our shareholders an exposure to alternative asset classes in 2 ways. First, by an asset manager with a majority of long dated closed down investment vehicles with recurring revenues coming from management fees as well as performance linked revenues that carried interest on top of that. 2nd, by benefiting from the underlying performance of each of our alternative strategies by having access to what I like to call the factory given that the group deploys its balance sheet in our own funds alongside our clients. So in addition to aligning our interest with one of our clients, this second to none skin in the game is generating portfolio revenues, which are the reflection of the performance we are delivering to our clients, RLP, at the fund level. I also want to highlight that management is the largest shareholder of the group. So there is a total alignment of interest between management, shareholders and clients. This is a unique setup in our industry and I wanted to reiterate that. Moving on to Slide number 5, which I guess is quite self explanatory. We wanted to remind you how much the group has grown over the past 5 years and confirm that we're on track to deliver our main targets set for 2022. First, in terms of assets under management. We ended up the year 2015 with a bit more than €6,000,000,000 of assets under management. Then at the time of the IPO in March 2017, we were managing shy of €10,000,000,000 of assets when we set then our AUM target at €20,000,000,000 for 2020. Today, at the end of September 2020, we are managing €27,200,000,000 of assets and we are on track to achieve our 2022 guidance, which is to exceed €35,000,000,000 Looking now at the profitability of our Asset Management business, I'll remind you that in 2015, we were hardly breakeven. When we IPO ed in 2017, we were profitable for the first time with a couple of €1,000,000 of operating profit. By 2019, our NOPAM reached a bit less than €60,000,000 and we now aim at generating more than €100,000,000 by 20 22. And for those who did not have the chance to follow our 1st year, our H1 results for this year 2020, I remind you that our NOPAM was up by 39.5% year on year for this 1st semester, for this 1st H1 2020. This is another milestone on TKO profitable growth. So then moving on to Slide number 6 and our Q3 highlights. Let me start this trading update by saying that we are very pleased with the way the group has grown so far in 2020 and in particular over the Q3. That is clearly the results of the outstanding dedication of our team, which has remained focused on delivering and totally fully operational despite the circumstances, the unprecedented context that we've all been experiencing. So I wanted to reiterate all our gratitude to the TCO Capital team across our offices around the globe. We have indeed recorded a solid growth in our asset under management, which has increased at group level by 12 percent over the last 12 months and 6% over the Q3 of 2020. This has been achieved thanks to a very solid growth for Asset Management business, which as you know is our core strategic focus and which increased its assets under management by 16.5% over the last 12 months and by close to 8% over the Q3. Net new money was in fact very high in Q3 at €1,500,000,000 which is more than what we had recorded during the whole H1 2020 at 1 point €1,000,000,000 and that was mainly thanks to our private equity and our private debt businesses. If we look at the 1st 9 months of 2020, net new money amounts to €2,600,000,000 of which 2 thirds was achieved in private equity and real estate, which is incremental to our average management fee mix and therefore future revenue generation. As you may have picked up, we have also completed the acquisition of Star America Infrastructure Partners over the course of Q3, which is at the same time a great way to address a large growing and profitable asset class for the group well as a way to accelerate our expansion here in the Americas. Star America is now accounted for in our real assets business line, which has exceeded for the first time the €10,000,000,000 AUM mark at the end of September. During Q3, we have also further demonstrated our willingness to align our interest with one of our investors and the group balance sheet has committed around €400,000,000 to our asset management strategies across private debt, real estate, real assets, sorry now and private equity. We view our strong balance sheet as a key differentiating factor of our model, which is at the same time leveraging our asset management business fundraising and also providing our portfolio with a direct and diversified exposure to the performance of the private asset classes and the underlying investment originated by the group. Finally, in spite of all the current uncertainties on the sanitary and on the macro fronts, France, sorry, we are pleased to confirm both our guidance for the full year 2020 AUM, which we think will exceed €27,500,000,000 as well as our 2022 targets to reach more than €35,000,000,000 of assets under management and to generate more than €100,000,000 of NOPAM. I'm moving now to Slide 7. So overall, as of the end of September 2020, total group AUM stands at €27,200,000,000 which is a 12% growth over the last 12 months. As you can see on the chart on this slide, AUM for asset management activity represents 95% of our total AUM, meaning €25,900,000,000 at the end of September 2020. We are invested in diversified and complementary asset classes and we have also been rebalancing our business mix towards more private equity and more real assets as I was saying earlier. We achieved that through organic and non organic growth initiatives, while at the same time maintaining a solid momentum in all the other asset classes. On top of that, keep in mind that 80% of our asset management AUM stands within long dated closed end structure, which leads to a good level of visibility on future management fee generation. And finally, I would also remind you that our assets under management are rather young and our model does not rely on short term carried interest generation. At the end of September 2020, the dry powder, the capital raised but not invested within our funds reached €6,000,000,000 That gives us significant resources to invest going forward whilst remaining as you would expect from us very disciplined. Direct investments asset under management amounts to €1,300,000,000 at the end of September, which is €400,000,000 lower than at the end of June and that is due to new commitments that have been made in our own funds as per our strategy once again to align our interest with us of our clients. So I guess it's fair to say that we keep on delivering on the strategy we have been implementing since our IPO. And with that, I will hand over to Henri Marcroux. Thanks, Mathieu. Good evening to all of you. So now let's have a closer look at our asset management activity and more specifically the fundraising trend since the beginning of this year. During the Q3, we've been raising €1,500,000,000 which is actually more than what we have achieved during the 1st semester and it is as well more than what we had achieved in Q3 2019. Even though, I mean, quarterly trends can sometimes be misleading, it is, in our view, quite a strong achievement for Q3 of this year. Now looking at the split by asset class On the slide, you can see that private equity and private debt are leading the way in Q3 with €700,000,000 raise for each strategy. If you remember well, our June disclosure, private debt contribution to fundraising was quite limited for the 1st semester, which was actually in accordance with our fundraising cycle as we didn't have any flagship on the market. On the contrary, in Q3, private debt is back to fundraising mode with, as an example, the 5th generation of our flagship direct lending fund, TDL5, or the gain upon evergreen mandate or lastly, the warehousing of our 5th CLO that started early September. There again, we are clearly demonstrating the benefits of being exposed to diverse and complementary asset classes. Finally, I'd like also to mention the evolution of our business mix. TKL Capital is gradually evolving toward higher fee generating strategies. And this is what you can actually see on the 2 pie chart with the increased share of assets under management coming from private equity as well as the growing contribution from the real assets business line, which is now our largest strategy. Now looking at our different business lines on Page 9 and starting with private debt comments for Q3. So after a rather quiet start of the year, which was in line with our natural fundraising cycle, Private Debt has experienced a solid Q3, thanks in particular to the first closing of TBL V, which took place in July actually for €220,000,000 We also raised €65,000,000 as part of the institutional fund, Novo 2020, and we have been chosen on top of that to manage €150,000,000 evergreen mandate for a top tier French institutional investor. This is actually the first evergreen SMA we've been closing in private debt. Finally, I'd like to add that we have launched the warehousing of our 6 CLO in September, adding an extra €200,000,000 to the private debt assets under management. As far as private equity is concerned, so AUM have grown over the 1st 9 months in very strong, and it comes actually both from our energy transition fund as well from our gross equity fund. I'd like to highlight that actually these two funds have recently been attributed with the Rolance, the recovery ladder, which actually qualifies these funds as consistent with providing corporate with efficient equity financing as part of the French state recovery plan. So AUM growth also factors in a strong contribution from ACE Management, our subsidiary specializing investments in companies in the aerospace, defense and security sectors, which has been selected by the leading aerospace players and the French state through BPI France actually to manage the support fund for the aerospace industry. The first closing of that fund amounts to 6 €30,000,000 and it has been achieved, I see, at the end of July in the early summer. Now moving to Page number 10. So looking at our real assets business. So the growth over the last 12 months has been very robust at above 20%, and our AUM have actually exceeded the €10,000,000,000 mark at end of September 2020. So FIDI has contributed strongly to that performance. And I'd like to remind you as well that we have finalized the opportunistic fund called Treo, Tico Real Estate Opportunity in Q1 of this year. Finally, the AUM at end of September do include the integration of Star America to this perimeter. Finally, our capital market strategy has been growing strongly over the last 12 months and have proved very resilient in 2020, both from a year to date or a Q3 perspective with good performance across our front. In spite, I would add, in spite of the unprecedented context we've been experiencing. Moving to Slide 11. Maybe I'd like to emphasize a little bit more what have been the moving parts allowing us to reach the €25,900,000,000 of AUM for our asset management perimeter. Maybe a quick comment before that on our disclosure. As a listed entity, our ambition is clearly to be fully transparent and to be in a position to provide regular trading updates to the market and notably through our quarterly AUM update. That being said, I would like to remind that we are in a business which is actually benefiting from long term tailwinds with long term commitments from our clients and therefore long term investment horizons from our funds. My point is actually to emphasize that, I mean quarterly analysis can sometimes be misleading and can sometimes experience cutoff effect. So this is why our growth momentum should always be considered on the long time horizon. And I do think actually that Page 11, the following charts are actually putting our Q3 perspective our Q3 performance into perspective. And regardless of the time or reason you may have, you may choose, you may have a look into, the broader picture points to very positive momentum with, for instance, sorry, €4,200,000,000 fundraising, which have been achieved for the last 12 months and an AUM growth of virtually double digit over the last 12 or 9 months. Now I'll move to Page number 12. So the second component of our AUM is actually the direct investment and what has been the evolution of our Q3. The quarterly evolution is actually pretty straightforward and quite simple for the quarter. At end of September 2020, our direct investment IUM stands at €1,300,000,000 actually, representing a €400,000,000 decrease to the figure that was disclosed at end of June 2020. This evolution is clearly linked to new commitment from our balance sheet within our funds in line with our strategy of alignment of interest with our investor clients. I'd like to add on top of that that market effects on the group direct investment portfolio has been limited during the quarter at minus €25,000,000 And finally, that our hedging strategy has had a +6000000 impact on our AUM at end of September. On top of that, at end of last night, the impact of those hedging strategy was standing at minus €145,000,000 Mathieu, I'll let you maybe comment the Private Debt activity, Page 13. Thank you. Thank you, Henry, for this overview. And effectively, I'd like to walk you through now through our business lines. So Page 30, let me now give you a little focus on the private debt activity for these 1st 9 months. Since the beginning of the crisis, we have played, I really believe, an essential role as a committed stakeholder supporting the companies in which our funds are invested. We have maintained a very close dialogue. We had the opportunity continuous contact with our portfolio companies and we have supported them at different levels. The most important thing for us was and still remain obviously to help the companies preserve their liquidity as much as possible in this very uncertain environment. On the investment side, once again, as you would expect, we have remained highly selective deploying our capital cautiously and maintaining our approach of investing in high potential companies. And in that contest, I'd like to focus maybe on one investment that we've closed during the lockdown, a great company called PolyPlus. PolyPlus is a company that was founded in 2,001 as a spin off from the University of Strasbourg and is specialized in the manufacturing of transfiction reagents mainly for gene and cell therapy industries. In February this year, after a company process, after an auction involving several U. S. Private equity firms, Warburg Kinkos secured an exclusivity with the existing majority shareholder Archimed to acquire PolyPlus alongside the management team. In this context, TKO Capital, I mean, we had the opportunity to arrange with Goldman Sachs €160,000,000 unit tranche to finance this transaction. It is important to note that the company has grown at a significant pace multiplying its revenue by 10 times over the past 4 years, supported by the development of gene and cell therapies. And this is typically the type of growth story we like to support through our bespoke financing platform. Another illustration of what we are able to do with our private debt platform is the investment in Surfaces Group. Indeed, we participated in financing of the acquisition of this company by Astorg in 2017. And then in October this year, the company was acquired by another client of ours TA Associates, and we took the opportunity to reinvest in Surfaces Group by co arranging alongside gold and a 250,000,000 unitranche facility to support the acquisition. In terms of looking forward for this activity over the next few quarters, our pipeline remains actually pretty healthy and we are convinced that we'll be able to keep deploying our capital, our private debt financing in high quality assets. Moving on to Page 14, I'd like to discuss now our Private Equity business, which as you know has been a strong pillar of growth over the past few months. Our investment approach is to bring growth capital and to provide equity to finance the development, the transformation, the expansion of fast growing companies. We position ourselves as a long term partner, most of the time alongside entrepreneurs, families, founders by providing patient and flexible capital to grow these companies. Our private equity approach is focusing on strong themes and real convictions. We are clearly convinced that the economy recovery will require equity investment and strengthening of those mid market company balance sheet. We're also convinced that investing in companies active in the energy transition is the most immediate and efficient way to drive change and contribute to a low carbon economy. On the deployment side, our T2 Energy Transition Fund, for example, has recently completed a minority stake acquisition of 30% in Eurogroup in Italy. This transaction perfectly illustrates the unique approach of our Energy Transition Fund, which is to focus on technological innovation, energy transition and environmental protection. Eurogroup, to give you a bit of background, is a global leader specialized in manufacturing stators and rotors for electric motors and generators And that supports the development of an in an efficient way, the e mobility solutions, if you want. The company has posted a pretty strong growth of 13% of its sales over the past 3 years, thanks to its strong technological expertise on electric motors components. And Eurogroup, which has a significant exposure to the electric vehicles megatrend and which is idly positioned, if you will, to benefit from this expected boom in e mobility. The transaction has been finalized after a very long selection process and here again that highlights the TKO differentiating hedge by being local and close to the situation. We've been chosen because we had obviously the relevant platform to accelerate the group international growth plan. And as I was saying, notably thanks to our local presence across Europe, Asia and the U. S. And also, I guess, because we really understood the industrial issues and challenges and in particular the ones relative to the automotive industry. And so building a genuine trust based relationship with the management team as a committed partner and providing a true value add support in this transaction were really the key element of successes here. I would leave you also with some perspective. It's important to stress that we have a solid pipeline for the end of the year across all our strategies. So ACE, Aerofund in the aerospace business, T2 in the energy transition, our minority growth expansion equity TG2. And we've continued to fundraise effectively our ACE, higher partner fund, the one that we had the opportunity to discuss over our previous reports few months ago. Moving on now to Page 15. I wanted to provide you with a quick update on our real assets platform, which has grown significantly since our IPO. So as I was saying earlier, we renamed the real estate business line into real assets after the acquisition of Star here in the U. S. And I will elaborate a bit later. At the end of September 2020, this real assets platform managed EUR 10,200,000,000 of AUM, which is broke down on the left hand side of this slide. What is important to note here is that we have a, I think, a comprehensive and complementary real assets platform, which allows us to reach out to a very diversified investor base and to provide them with a broad range of solution and investment solution be it institutional clients or retail clients. So first, you will find our closed end funds with our core plus and opportunistic European strategies as well as our mid market U. S. Infrastructure funds, which represent 30% of our AUM at the end of September. 11% of our AUM is located within permanent capital structure. So we have 2 listed REITs Francier, one in France, Select Current and other one in Singapore, iREIT. And I'll have the opportunity to come back to that as well. We also manage a couple of UCITS funds dedicated to real estate and which are managed by Soffiti. And of course, we have a significant portion of our AUM coming from our SCPI, SCE, corresponding to our real estate investment trust for retail client, which is very sticky and granular and which represents a bit more than 50% of our AUM. So some key figures on the right hand side of these slides. We have €1,500,000,000 of dry powder in the re assets activity and that would clearly enable us to seize investment opportunity and especially in these very uncertain times. In terms of rent collection, what we did over Q2 and Q3, the second, the third quarter was to precisely monitor collection of rents and negotiate with tenants when we could, where we could and to work together to find the appropriate solutions for example by implementing rent deferral or granting some months of free rent or extending the leasing period. Nonetheless, the rent collection remained very healthy and exceeded more than 90% in Q3 for our main real estate fund. It's actually 98% for IRID, close to 100% for the sell and leaseback funds we have and between 91% 97% for 2 of our largest SCPI. This is there's no magic here. This is clearly due to the fact that we have a high quality credit tenants such as the French electricity electric utility company in France, ODF, EDF or the German telco operator, Dutch Telecom or the French state administration. As you can see, our top 5 tenants account for 23% of France and the remaining 77% is very granular as per our portfolio composition amongst our SCPI. Moving on to Page 16, I wanted to give you a quick overview of Star, which is the newest addition to our real assets platform and which manages closed end funds in the mid market U. S. Infrastructure sector. This acquisition that we announced back in July enables us not only to expand in a new asset class for TCO, but also to accelerate our development here in North America. By integrating Star to our Asset Management platform, we really want to scale up the strategy, investing our balance sheet as we do across our Asset Management businesses, like we did with ACE Management, for example, on the productivity side. We're also looking at enlarging the TKO Capital Investor Base, LP Base and access to new investors for all our existing strategies. We had the opportunity to mention that, but I'd like to remind you that there is a real complementarity, there is no overlap between the TKO and the Star America LP base. Star LPs being mainly in the U. S. For 70%, U. K. 20% and in Scandinavia, whereas the TKO Capital LP is mainly Continental Europe and Asia. At the end of September 2020, Star had €580,000,000 in assets under management, of which €180,000,000 in Fund 1 that has finished its fundraising period and is already deployed and €400,000,000 in Fund II, which we are currently fundraising, which is still in marketing mode and which has made 4 important investments to date. First, 2 student housing towers, the first one in Oregon and the second one in Seattle. Another investment in the Demant Power, which is a development platform for energy storage and distributed energy projects with a pipeline at the time of closing of more than 100 potential projects. And then an investment in Cathcart Rail, which is a freight rail services and transportation company to fund its ongoing growth. Simultaneously, a store in Cathcart are forming a platform keep on acquiring and operating freight rails to these type of businesses across North America. Now on Page 17, I wanted to come back to the IREIT situation that I mentioned a bit earlier and give you a bit more color on one of these permanent capital vehicle, IREIT based in Singapore. So you may recall, we invested in IREIT in 2016, and that has allowed us and allowed the group to increase the AUM by benefiting of this real estate investment platform in Europe through a permanent capital vehicle, which is listed in Singapore. This acquisition also enabled us to have a permanent listed vehicle focus vehicle which is focusing on Asian investors in our platform. At the end of September, IREIT portfolio comprised 9 office properties, 5 of them in Germany and 4 in Spain for a total value of €630,000,000 In October, we I mean, IREIT completed a successful €89,000,000 right issue that was 160% oversubscribed. The proceeds will be used not only to finance the acquisition of the remaining 60% stake held by TK in real estate portfolio in Spain and repay also the shareholder loan, which had been granted by one of the main shareholder of the company, CL in Singapore. We'd like to note also that IREIT shareholders, I mean, the long term shareholders of IREIT, so TKO, ourselves, CDL, AT Investments, they all supported and committed to this right issue. This operation and this right issue also has helped us strengthen the high risk financial profile, enable us to decrease its leverage from 39% to 35% with this transaction, which provides Harit with additional headroom additional debt headroom and some flexibility to fund the growth and its capital need. Moving now on Page 18. I wanted to give you a few words on the SEPI funds, which are some real estate investment vehicles designed for retail investors. This is, as you know, the core know how of Soffiti, which we acquired in 2018. The SEPI market benefits from a very strong demand for retail clients, which are obviously looking for some yield in this persistently low rate environment, and it's an attractive investment solution for them. And the vast majority of our clients in our SEPI are in fact investing for their retirement or their pension with a very long term view. That as well as the fee structure of the business make the asset under management very sticky with more than 10 year average duration and some fairly limited and controlled redemption capacity. Also one of the main feature of Soffili is the granularity of its portfolio with more than 4,200 real estate assets, which are managed on behalf of 50,000 retail investors and several institution investors as well. As I mentioned a bit earlier, the rent collection has been resilient so far this year with between 91% to 97% of collection rate for the 2 largest SCPI. So FIDI approach is really to target core and core plus strategies offering investors a strong security on rental cash flow and that is due to the high quality of their tenants as I was mentioning earlier, but also the location. As such, I mean, Soffitie is regularly single out for the quality and consistency of its fund performance. You have some of the historical track record, impressive track record since inception on these slides. In terms of deployment over Q3, we can highlight a couple of transaction. The acquisition of an office building in Diemen, which is 10 minutes away from Amsterdam. The whole building is leased to ABN AMRO for 7.5 year leases. Another example could be the acquisition of an office building in Paris, Avenue de Soufren on behalf of one of its fund. And this is 4.5% gross yield leased to a single tenant, which is a subsidiary of NBC Universal. So moving on to Page 19 and to conclude this overview, I'd like to say that here at TKO, we remain certainly very ambitious for the long term, but also careful and humble given the short to medium term complex environment. We are convinced that we are moving forward with the right approach, the right platform and the right strategy. Investors appetite for alternative is growing. It has been growing. It's benefiting from massive structural tailwinds. And we have the relevant strategy to help them allocate to this asset class. Nonetheless, as Henry was saying earlier, we do not manage the business by the quarter. And you can sometimes have cutoff effects from 1 quarter to another. And this is why we confirm our year end guidance, which is to reach more than €27,500,000,000 of AUM. Again, this is clearly a floor. And believe me, all TKO teams are focused on exceeding this floor. In the medium term and thanks to our setup and I think selective disciplined approach, we're also confident to achieve our 2022 targets, which are to reach more than €35,000,000,000 in assets under management by 2022 and to generate over €100,000,000 in NOPAM. As a reminder, at the end of June for the first half of twenty twenty, 65% of the investment portfolio was invested in our own funds. We are now well positioned to achieve our 2022 objective, which is to bring this proportion up to 75%. Finally, we reiterate the target of a 10% to 15% run rate, return on capital invested in our own funds. I think that concludes our overview for today. Thanks everyone for your time. And with that, we are happy to answer any question you might have. Thanks again. We have some callers in our queue. Our first is Mandeep Jafal of RBC Capital Markets. Mandeep, when you're ready, please go ahead. Good afternoon. Thank you for the presentation and for taking my question. There are 3 from me, please, if I may. First question is on fundraising, kind of good fundraising in PE over the quarter from equity that is in particular in the Aerospace Fund. I was hoping you could provide an update on the target fundraising side for the Growth Equity and Energy Transition Fund. And what's the timeline for closing these funds and potentially opening up new vintages. The second question is in relation to a comment I saw in the press release on the macro hedge. How do you view the necessity for the macro hedge as we move through Q3? What are the factors that you're considering that will inform whether you increase or decrease the level of protection at the end of the year? And the final question is on deployment of capital. You mentioned a cautious approach to deployment. I was wondering if you could give an indication on the deployment over the quarter and how it compares to historic periods? I'll leave it there for a couple of questions. Yes. Thank you, Mandeep. Thank you for those questions. I will try to address them. So fundraising, effectively, Private Equity, as you remember, was an important act for us this year as we had these few initiatives in the market, TGE, T2 and then Aerofan on the back of the successful beauty contest in July. Your question, so as you know, we do not provide update on the individual funds on this course and these meetings. But one thing I wanted to come back to is there's been obviously some impact of the COVID in the fundraising in the way people operate, in the way people can travel to do due diligence, etcetera, etcetera. So we tried as much as we could to accommodate that. And as evidenced by the numbers today, people I mean, some people are still very much in business and we can still get to some interesting closing with some reduced investors. So, IroFund, IroFund 4 is definitely a priority for us. Remember that we announced a €630,000,000 first close this summer, which was €200,000,000 by the French state and the BPI, €200,000,000 by the 4th large corporate backing this project and €2 €30,000,000 by TCO Capital. So we are in full marketing here and you will we will certainly provide by year end update here. On the Energy Transition Fund, which is a very topical strategy as you can appreciate, and we've seen that. That's a side comment, if I can can may, Mandeep. As we were marketing this fund globally, obviously, in our core markets in Europe, but in Asia, now here in North America, we were extremely encouraged by the shift that investors were actually taking towards the strategies beyond the greenwashing that sometimes we hear about that. And that is effectively extremely encouraging for us to be positioned and to have a real genuine skill set on this investment strategy. So as to your question, will there be some successive fund? That is clearly in our intention as we wrap up the funding of T2 and that we invest very selectively to have some successive funds given the expertise we have developed here. Now your second question on the macro hedge, if you can provide some update, whilst this is an AUM update. I think we had the opportunity to mention to you the rationale beyond that, which was the 3rd time in the history of the group after 2,009, after 2016 and now here to implement that in March when some of the key indicators we are following in the credit space or elsewhere where we're being very adversely hit, which was the case in March when the I don't know the levics or the S and P level on index dropped from par to 78, 78 in 10 days when it took 10 months in 2,009. And so we remain of the view that despite what you may have seen over the past few months, we approach the next phase of the cycle very prudently and we want to maintain a very prudent approach. I mean the rebound we've seen in the past few months at least the financial markets rebound, we know that much in terms of underlying real performance of the real economy and even more so on the back of the most recent visuals across Europe and potentially in other parts of the world. Now your last question about the deployment, you may have seen that when we reported H1 and here I can give you that the trend is following that. We had deployed end of June €800,000,000 versus €1,500,000,000 for the same period in 2019. And this selective base has continued. It doesn't mean that we're not taking advantage of that. I mean, quite quite the contrary, as you know, we had a very successful special opportunity of fundraising that we had the opportunity to comment on. We remain extremely opportunistic, I think, in a good way when we do this private equity investment and the pipeline we've mentioned. So you should really see the deployment as being on track and selective. And if you look at the various example I went through, I mean, I went through, I mean, those are a Q3 investment that we've closed over the past 3 months. So you can see that not only we're active, but very selective. Great. Thank you very much. Moving on to our next question, we have Geoffroy Michellet of ODDO BHF. When you're ready, please go ahead. Okay. Hello. Thank you for taking my question. I'm sorry to come back to the MicroEdge. One more specific question is, is it extended? And if yes, until which date and for which amount? First question. Then some question on fundraising. I just wanted to have your comments on the Capital Market Strategies because the net money is slightly negative, whereas the performance is quite impressive. Could you comment on that? And then also on the direct lending in the 5th vintage, you indicated that it was your first close at a bit more than €200,000,000 I just wanted to know if you could remind us at what level was the first close of TDL 4? And when do you expect to have the 2nd close? And then the last question on the CLO. You also indicated that you launched €200,000,000 CLO. I had in mind that normally CLOs are between €400,000,000 to €500,000,000 Thank you. Yes. Good evening. This is Henri speaking. So just to come back on the edge and the derivative, when we have disclosed our H1 results, we said we actually disclosed that the position was rolled at end of September until end December. So the size of the position has not changed and it has been rolled from September to end December as we stated during the 1st semester results. Your second question was on TDL V. So the first closing, I think we disclosed the figure in July, was 220 €1,000,000 that took place in July. And there has been since then additional closing, and we are expecting further closing actually to take place in November and in December as well and more specifically from Asian investors. Maybe Okay. You want to Yes, sure. I mean, Jean Francois can address this yellow. Maybe just to add on to the direct lending strategy that Henry mentioned, I mean, as you know, that would be sort of the vintage the 5th fund, the 5th generation, that's one of our most historical and most institutional strategy that we have implemented. So you're asking the previous fund was the strategy was €2,100,000,000 overall. The fund number up 3 was €610,000,000 So whilst we're not setting in a target, I mean, there is clearly some good momentum around the strategy. And I would add that ironically, what has happened over the past 6 months now and which is actually very likely to keep on happening given the circumstances has given a renewed interest for the asset class. I mean, remember that interest rates obviously are extremely low in Europe, but they're even lower now in the U. S. When people were nervous about either a bubble, either too much dry powder that have been raised to chase too few too little opportunities. I mean, the reality that now all these private strategies are real complement as I've tried to evidence in our review to some situation fast growing mid market companies. So we're expecting the appetite to still be there. Now your question about the CLO so far, I just want to make sure I understand well. Were you talking about the opening of the warehouse or the pricing of the deal? No. On the Cielo, I was just mentioning the size because EUR 200,000,000 seems to be a bit below the size of the Cielo. You're absolutely right. So that's why I wanted to be very precise. So €200,000,000 is the opening of the warehouse that we are doing with the bank and as we've done here for the past 5 year issuance. And that's normally the size that you open that you start ramping. So you acquire assets. And once you get to effectively a €200,000,000 size, which in a normal market is roughly 50% of the deal, then effectively you price the deal and then you get additional resources, dry powder to keep on ramping. So our last deal our first 4 deals were around €400,000,000 The last deal, deal number 5, which was obviously pre COVID, was €450,000,000 euros Now the market has reopened sometimes a bit lower than €400,000,000 €350,000,000 So we'll see by the time of the final ramp what is the size, but you should assume an in line size with our historical vintages. Okay. Thank you very much. Moving on to our next question, we have Nicolas Fajan of Kepler Cheuvreux. Nicolas, when you're ready, please go ahead. Yes. Thank you very much for taking my question. I have 3, please. The first one would be on your joint venture with Le Group de Lottery, if we could have any update on that joint venture. The second one would be, maybe I missed it, I'm sorry if I did. Any update on Sofit inflows year to date and also specifically on Q3? And finally, you recently had a large Swiss bank actually commenting on regarding its asset management division and in particular regarding its U. S.-based alternative asset management strategy, which according to their own words were quite disappointing. So I wanted to know if from your own view or your own feedback you saw such things in the U. S. Currently? Thank you very much. Thank you, Nicolas. Maybe I'll start with the third one. Here again, I want to make sure that I understand well. When you say the comment of the Swiss banks disappointed by the performance of its U. S. Alternative strategy that took your question? Yes, exactly. As I said that actually there is a performance during Q3 and even year to date was rather disappointing. So I wanted to know if you observed such a thing. Well, it always depends what we're talking about. If we're talking of the performance of the underlying assets they're invested in and if that is the question, it obviously depends if we're talking of private equity, private debt, intra real estate or go ahead. Yes, sorry. If I precise, it was real estate from CRE, mainly from CRE. Okay. So real estate, all right, okay. So yes, I mean specifically in real estate, that's why we wanted today to give you an extensive review because you can legitimately have some question about the real estate given what we've been witnessing in the market. And I hope that we manage to reassure you on the quality of the underlying assets, tenants, etcetera. I mean, in the U. S, listen, let me start, I've been using that. Please forgive me if you find that a bit short minded. But at the beginning of the year, January 1, 2020, which is what 11 months ago, 10 months ago, there was a co working company that was supposed to go public for close to, I don't know, €80,000,000,000 €100,000,000,000 or something. That was a real hot topic. And today, as of November 5, 2020, I don't know how many of you on the line are sitting in an office. But all of a sudden, we don't need any more offices and the work from home has become the norm. So I'm taking this example just to stress how quickly perception may have changed. And for Q3, I think that reality is not as binary. So commercial real estate, I mean, offices even also in the U. S, and I don't know the example you are referring to, if those guys are overweighted, I don't know, in the New York City, for example. I mean, I can tell you, as I was saying, by reflection, we a little bit alone right now sitting in our offices here at TKO and people in this working from home environment whilst there is no lockdown here. So commercial real estate, there's obviously a question mark of supply demand on the long term. And I think that some of our competitors, listed competitors have been making some pretty strong statements about that. We remain very constructive long term, albeit selective in commercial real estate. That could be a good transition, by the way, with your first question. I mean, obviously, if you're looking at leisure and hotels and things like that, well, when people cannot travel, you don't have that much of a business travel or leisure travel and we're seeing effectively some part of the market being under some significant pressure. But here again, I don't buy into this asset class is gone forever. I'll come back to your comment about Groupe de L'Oreal. That's why we are trying at TKEO to work with historical partners, very skilled partners to assess once again merits of the underlying situation. And then coming back to the last point, I will spare the resi discussion, relatively robust, particularly here in the U. S. But the question about the retail, right, and which types of retail, you saw that the first default in the CMBS world, which is a securitized market for real estate financing, as occurred in retail, in big malls, in the fact that many the traffic is decreasing and that we are seeing some real shift here. As you know, we are exposed to the retail market through Soffydd, extremely granular with you saw the numbers we gave you today in terms of rent collection. We would not be buying the Hudson Yards shopping mall here in New York. I mean that's definitely not what we're going after. And the example you were referring to with your Swiss asset manager may have been overweighted into this type of asset class. So we remain very constructive on the asset class, albeit selective. The very infrastructure component is a sign passing the €10,000,000,000 mark that we are very real about that. You may have picked up that, for example, student housing, right? One may say, oh, you're going to student housing, but the universities are closed. Here again, I'm not buying that university will remain closed for the next century. So being able here to position with long term recurring infrastructure type of concession with universities and leveraging our real estate skill set are very interesting axis of development. And so just to come back on the Groupe de Lottery, effectively this group led by Gilles Duillard, a very successful hotelier entrepreneur, who's been a partner of TKO since inception 16 years is one thing that we are very proud of because here we can once again leverage some skill set adjacent to the group with some people investing alongside us. It's more than an operating partner. It's a real core investors. And there will certainly be some interesting opportunities in the hotel space as you noticed many groups who've reported listed groups in the space are going through some difficult times and there will be some opportunities coming out of that. I may leave the SOFIDI question to Henri. Yes. Thank you, Matthew. Well, I think on Soffini, we've been disclosing so far the fundraising year to date, which stands at €500,000,000 since January 1. What we can say on that is that, that fundraising actually more than 50% of that fundraising was concentrated in Q1. Clearly, during the 1st lockup end of March April, we've had a slowdown in the fundraising pace within Sofitters. But so far, from April to September October, we've not seen any decrease in that fundraising. It has remained quite stable, and we are still attracting a monthly significant monthly inflows on those strategy. And as such, the figures that Matthew has just given you a few minutes ago, Page 18 of the slide deck, on the basis of a very strong performance of IMO Hunt, FIMO and on the basis of the yield that is going to be distributed this year is clearly a very strong strength of our real estate mutual funds within Sofit. Very interesting. Thanks very much. Our next caller is Arnaud Gibley of Exane. Arnaud, when you're ready, please go ahead. Yes. Three questions, please. Firstly, could you perhaps disclose what percentage of your portfolio companies are in troubled sector? And what defaults rates have you seen in your private debt and CLOs? My second question is on retail. Generally, in the industry, we've seen a lot quite a trend of more retail wanting to buy into liquids. And I think you've done quite a lot on that front. Is that something you think is going to accelerate? And a sub question to add to that is with your renaming self ID as part of real assets, should we see that as a willingness to try and cross sell more into the Soffili network? Thank you. Sure. Thanks, Arnaud. Very interesting question on retail because that's very strategic effectively for us. I'll try to clear the first part of your question on the private debt and CLO. As of end of September, we had no default effectively on the sub portfolios. There are some troubled, as you define, if I hear you well, some troubled sectors or areas, but we've been partly on the private debt side extremely active and presence with portfolio companies. There's been some and as you know, I mean, private debt is different because by nature, they're illiquid, all to maturity top type of company. And then the Cielo by nature, it's liquid or supposedly liquid. So we may have had some situation that we traded off before a default or some restructuring were announced. I don't know to what extent I can comment on that. I can think of 1 that we exited, which is a situation in a French situation, which is in the exhibition center, let's call it, keep it fairly vague. We traded off this loan before it started a restructuring process, for example. So that's how we've been trying to have a very mobile approach, if I may say. Now the retail question and just to be clear, so what we call real assets is effectively real estate and now we added the infrastructure, the infrastructure that we acquired here in the U. S, which is still relatively modest because it's, let's call it, dollars €700,000,000 out of €10,000,000,000 your total AUM. But that's effectively a sign of trying to converge the overall real asset class. So we did not remain we named that because of Sofitie. It's effectively the Sofitie and real estate that got the benefit of integrating the infrastructure. I think that you may remember, Arnaud, when we acquired Sofie B in 2018, that's one thing we stressed is that effectively the retail investor channel was a key channel we wanted to develop at TKO And we could do that direct through some distributor platforms, some Sejet Pay, IFAs type of distribution working with banks. You remember that we did 2 very interesting partnership in Italy, in Spain with Fidoram, then with Bank of March. We have some discussions with potential partners in other countries in Europe, but also other regions of the world. Effectively, the structural tailwinds that private assets benefit from is still very much reserved to institutional investors. You may have picked up that the French BPI, BPI, Banque Midhe Investissement announced what I think is a very interesting step a couple of weeks ago where effectively they're creating a fund where they contribute some of their private equity exposure and opening that up to the wider public, to the retail public. And the fact that that comes from a supply of rent entity is a very good sign because it stamps, if I may, it stamps the fact that giving access to retail investors to do so to this private market is key. And I would say that even more so given the situation we're in right now and the fact that public entities realize that reinforcing share capital equity base of the mid market companies across Europe, that would be a great opportunity for retail investors. So, and why say, hey, talking about our competitors, but I'm always happy to highlight some smart initiatives. You may have seen that some of our peers and competitors have announced also more recently some partnership with large bank network. So there is a real ambition here to keep on leveraging cross selling. You would remember also that we have at TKO2 very interesting peer to peer crowd lending platform that here again have access to a very interesting network of private investors. So are we trying to approach that from the large bank, private bank, retail distribution network to the direct through the IFA CGP to maybe some even more disintermediated type of platform to give to effectively democratize as much as we can retail access to private markets. I don't know, maybe just to give you a bit more color on actually on your first question. Within the firm, we have a strong risk backbone. And as such, we have risk committee. And obviously, those committee are following up as well the level of assets, which we currently are classifying under our internal rules as within what we call the watch list. And just to give you a few figures, at the end of 2019, we had roughly a bit less than 10% of our private debt assets under watchlist. Effectively, that figure has gone up to 18% in Q1 and has gone down to 15% in Q3. So we had a bit of more we have three level of watchlist, watchlist number 1, 2 and 3, and it has gone up in Q1, but still gone down during the latest report in Q3. Thanks. Can I just follow-up on the retail side? I mean, this is fascinating. I'm just wondering what sort of structuring solutions can you come up with? Because I suppose the issue in getting retail investors investing in private equity is a compliance one. It's having the right ticket size and the back office to manage that. Are you thinking of any innovative ways of trying to come up with a better structural solutions to make private equity more available to maybe off the math, but I think the mass affluence? Well, Arnaud, there are there are several aspects to be considered. The first one is, since beginning of 2019, we had the creation in Europe of a new format of a fund called LTIF, the European Investment Long Term Investment Fund, which allows you actually to go within retail and to sell such kind of assets, which is what we've been delivering this year in Spain with Bancamar. So to that, I would say, dedicated structure of funds, we are now able to more fundraise within retail through retail actually without having the specificity of the difficulty of institutional investors. That's the first thing. The unit the second point I'd like to mention on the kind of initiative we may tackle is definitely the unit linked. And more specifically, in France, we have this huge market of insurance life with insurance company, which are actually struggling with the euro base where they are struggling to deliver, I would say, performance. And so retail are more and more looking for to diversify their unit lead, and there are many opportunities here to create some unit league with actually assets coming either from private debt or from private equity assets. Thank you very much. At this time, we have no more live questions. While we wait maybe for one last question on the call, we have one question on the webcast that I will read out loud. First, now TK is based across the globe. The question is where do we see the growth in terms of AUM will come in the coming years in terms of geography? That would be the first question. And the second question, mature for you, maybe is in the U. S. The gentleman is asking about the business potential both on a qualitative and quantitative basis going forward in North America. Thanks, Louis. So first part of the question, obviously, for TQ, our expansion in Asia. Sorry, let me rephrase. I mean, we remain predominantly a European player, which has started to expand over the past 5, 7 years across Europe. And remember that our presence in every single country has always been with a double approach of developing origination capacity, sourcing deals, but also developing local relationship. And I really believe that has been keys in our development outside, let's say, our domestic market trends and certainly very successful and encouraging. I mean, Asia is a market where we've been active for the past 5 years, Singapore, Seoul, Korea, then Tokyo a year ago. And here again, very promising. We're working right now, for example, in Korea on some fairly innovative structure. I mean we're talking about the private debt market or the private credit. Korean investors have been very have been early ahead of the pack here and we're working on some structure to effectively make sure that we can present our clients LPs or prospective clients and LPs with investment solution that really address their objectives or their constraints. North America is the most recent one. We've been here for 2 years. We had some pretty interesting milestones across our strategy and obviously that's organic and inorganic. I think I would not tell anything sensitive by telling you that by the end of the year together with the acquisition of Star that is now fully public, we should get close to, let's call it, the $1,000,000,000 AUM coming from North America. And that includes obviously Canada. When I say sorry, let's say the Americas. Canada, we have our first encouraging LPs in LatAm as well. So I guess to answer the question of this person on the webinar, it's really about the model of expanding locally and having local presence to then convert into a local dialogue works. Now I will obviously temper that by the fact that the overall situation has been slowing down, the have been slowing down the new relationship and new business development in many instances. Now the second part of your question is really about the potential qualitative and quantitative here in the Americas. As we start our 2nd year or 3rd year here, we now have a real asset investment platform here, STAR. We have an existing within our capital market strategy that we did not touch base much on. Today, we have some equity analysts present here, more than 60% of our equity position are a U. S.-based company. In the current environment. As you can appreciate, it's even more differentiating to be here. Our liquid credit colleagues are here as well on the ground. And we have announced and we are still working on the secondary private debt initiative that structurally will be geared towards some U. S. GPs and that comes down to the structure of the market, the depth of the market and also the LPs, habits around trading in and out of some existing GP. So we see some real acts of development here in North America. That's for the quantitative aspect. Then for the qualitative aspect of the question, the developing new relationship takes time as we've done in Europe and in Asia. The objective is to do it well, meaning that we want this relationship to become real clients of TKO that we can cross sell over the years. I mean, remember, we've got more than 62 third of our clients who are invested in more than 2 strategies and that will be the key here, Meaning that it doesn't have to be like just a one off, you're raising a fund with one relationship and then you do not build on that. I mean, for example, one of our first LP in Canada was the first one to re up in our private debt strategy. It's a very prominent public pension fund in Canada. And the very fact that we managed to have them re up in TDL5 after the investment in TDL4 is very encouraging sense. So that's how I could approach this question and we remain very excited by the opportunities we have in this part of the world. Okay. Thank you, Mathieu. We have no other question on the webcast. Great. We have one last question over the phone. We have a follow-up from Mandeep Jagpal of RBC Capital Partners. Mandeep, when you're ready, please go ahead. Hi. Just one more further for me, if I may. Question on the balance sheet cash position at the end of the period, if you can. You reported EUR 400,000,000 of commitment from the group into its own funds over the quarter and it remains a core part of the ticket house strategy to continue to do this. I was just wondering if you could provide an update on the balance sheet cash position at the end of the quarter. Well, thanks for that question. Well, actually, the fact that our direct investment AUM are actually made of mainly the cash and the investments carried out by the balance sheet, excepting actually the investments made within our funds. So when the balance sheet is taking some new commitments into our funds, which we've been doing actually in July and in August, specifically in the form of ACE management. Actually, we are taking commitments. So this commitment, we are consequently reducing the amount for direct investment AUM even though we are not cashing out those months, it's only commitment. So to come back to clear to your question, the level of cash at end September, the level of TCO Capital is quite stable versus the level of cash at end of June. Great. Thank you. We have one more caller that's just joined in our queue for calls over the phone. Our next caller is Carlo Domiceli of Societe Generale. Carlo, when you're ready, please go ahead. Good evening, everybody. Thanks for taking my questions. I have 3. The first one is on some color on the market performance factored in your AUM short term guidance of 20 $7,500,000,000 And number 2 is a clarification on fundraising. Am I right in saying that the underlying net new money in the 3rd quarter was approximately EUR 0.55 billion, excluding acquisitions and commitments in all funds. The third question, maybe I missed it, sorry, in case. What are you going to do with the macro hedging? Are you going to roll it over next year? Thank you. Thanks. Well, as far as the fundraising is concerned, actually, I think the figures are in the press release. They do exclude any acquisitions. So the net new money over the Q3 is EUR 1,500,000,000 for the asset management parameter for Q3, clearly. So and you can find all the detailed figure on Page number 6 of the press release. Bottom of the page, net new money for the quarter, which actually stands at 1.48 2, so €1,500,000,000 And the scope effect is €500,000,000 It relates actually to Star America Infrastructure, which is not actually net new money. It's an acquisition, so it's a scope effect. Then maybe, Carlo, if I can answer your short term target. As I think both Henry and I mentioned on this call, we see the €27,500,000,000 as a floor. And I can tell you that we're all focused on exceeding this floor and 100% of the teams are dedicated to that. Now by the same token, what we mentioned a few times on the call is that we're not managing by the quarter. There can be some cutoff effect. I mean, the overall situation has created some may sometimes delay or some hurdles, as I said, to traveling to all that. So you should really see that as a floor. As a matter of fact, it's maybe a good transition for me to tell you before we wrap up that the next call will be on February 11, 2021, which is when we will release and disclose our full year AUM for 2020. So I will remember this last question, Carlo, and I will make sure that we've managed to outperform this objective when we next talk and meet. Thank you for your attendance. I guess Thank you all. Thank you for your support and interest. Stay safe in this period. And as always, we remain together with Louis, Theodora and all the team available for any follow-up question. Thank you all. Bye. Bye bye. Bye bye. Thank you for joining this evening's event. You may now disconnect your lines.