Good afternoon, ladies and gentlemen, and welcome to the Deutsche Borse Group Investor Day 2020. The event today is split into 2 parts. During the first part, which will last around 60 minutes, we are presenting our mid term growth strategy, Compass 2023. The second part will be the Q and A session. For financial analysts and investors, there is the possibility to register questions already during the entire event via the Q and A tool below the video screen you see in front of you.
Let me now hand over to our first presenter, Theodor Weimar, Chief Executive Officer of Deutsche Borse. Theodor, the floor is yours.
Thank you, Jan. Welcome. Ladies and gentlemen, as well from my side, thank you for joining our today's Investor Day. I do hope we will have an exciting 2 hours together. We have named our today's session Growth, Growth in uncertain times.
The pandemic, ladies and gentlemen, will not stop our interaction with you. As you can imagine, all the other way around. We are living in corona times. It is a must do that we conduct this meeting in a completely different manner. But as I always say, better safe than sorry.
The pandemic will not stop us, I said, from discussing our strategy with you today. But nevertheless, I'm looking forward to better times when we can meet face to face even. Today, my colleagues and I will give you an update on the progress we have made. And more importantly, we will present our outlook of the multitude of growth opportunities ahead of us. Given the virtual format, ladies and gentlemen, we consciously decided to keep our presentation short and concise and focused.
And of course, at the end of the session, we will have ample time for Q and A. Who is with me today? I'm very glad to have Gary Talney with us, the CEO of Institutional Shareholder Service. Just yesterday, we have signed our transaction with ISS, and I'm very pleased to introduce Gary to you. The same applies for Sebastian Charia, our CEO of Cotigo.
He runs our data analytics and index business, and he is determined to build state of the art investment products of the future. Then, of course, we have got Gregor Podmeier, our well known CFO with us and Thomas Bork. Thomas will show that we are well positioned to deliver scalability and growth via product innovation and partnerships at Eurex, our most important business segment. Stefan Leitner, who assumes responsibility for the whole pre trading and post trading area with focus in his presentation today exclusively on the fast growing investment fund service business. But be assured, he is the mastermind behind our Contigo, Uber Efrain Centre and Clearstream Growth Initiatives.
And he was very instrumental in getting our institutional shareholder service transaction done. Let me now also introduce some very important business segment heads who are with us today for specific reasons. Peter Reitz, the Head of EEX, who runs the fascinating business, which combines global capabilities with local expertise and Carlo Kholzer, our Head of 360T, who runs a fast growing and award winning foreign exchange business, a combination of OTC and on exchange businesses. And I'm delighted to announce that CALA will assume an extended role in driving our adjacent growth initiative going forward. Chart 1, how do we want to structure the first 60 minutes?
Part 1 is a brief recap what have we achieved. Part 2, yes, gives an overview what is the way forward, what is the core of our Compass 23 program. Part 3 will detail our key initiatives going forward. And Part 4 translates all of this into financials. Let me begin on Chart 2 with a review of our achievements over the past 3 years to better frame the evolution of the current strategy.
When I joined in 2018 in January Deutsche Borse, my first impression was this is a great company. It is highly profitable. It has an amazing market expertise and a very strong technological competence base, But it's still far too dependent on the cyclicality. It has to run faster on its own accord. And it has great potential in doing so.
We need to capture that was my assessment. We need to capture new asset classes, especially in the data and analytics space. With this in mind, we developed the Roadmap 2020 in 2018. The primary goal of the Roadmap was to strengthen organic and inorganic growth. And now after 3 years, there is time to say how did we perform over the last 3 years.
Looking at the scorecard of the Roadmap 2020, my humble conclusion is mission pretty much accomplished. No reason for self complacency, of course, but I think we delivered. We have made ambitious promises and we have kept them despite a very challenging environment, especially during the year 2020. A great thank you to all of my colleagues around the globe who have made this possible. Our financial performance with 9% revenue growth and even 12% bottom line growth was very strong speaks for itself and is well within our target range.
Also in strategic terms, most boxes can be ticked. We consistently delivered secular net revenue growth of 5% per year. And in this context, it was instrumental to focus the steering of the company entirely and specifically on the secular growth, which was a paradigm shift for the company. Back in 2018 and you analysts and investors may remember, back in 2018, we did not give any guidance on the M and A side, but we've worked hard to identify and execute upon attractive inorganic opportunities. Overall, we have executed more than half a dozen of deals over the last three years.
Aside from several smaller deals, the acquisition of Axioma in 2019, UPS 4 Centre in 2020 and most recently ISS a couple of hours ago were the most important ones. We also made very good progress in the rollout of new technologies, especially in the field of multi cloud strategy, where we managed to become a lighthouse player and a protagonist at least in Europe. Last but not least, we successfully implemented our famous SPIP €100,000,000 structural cost saving program. Why am I mentioning this? I do think we have significantly strengthened our execution discipline.
On the next chart, right, you can see and this is the most important part of today's presentation, what is the way forward for Deutsche Borse. And let me first draw again your attention to the title of our today's presentation, Growth in Uncertain Times. We choose this title carefully and thoughtfully be assured. Chart 4. I want to share with you our ten convictions that served as a guiding principle for the strategy Compass 23.
1st, we want to maintain and even accelerate our overall growth ambition. We are a growing company and we want to be perceived as a growth stock. We do target 10% growth rate per year on the revenue side. 2, 50% of our growth continues to be secular net revenue growth. This is what was what we as an organization can drive managerially.
It is in our hands, 5% growth per year is homemade and fairly stable. We have demonstrated this over the last couple of years. 3, over the next 3 years, we are expecting for the group overall no cyclical tailwinds. Some of our businesses will face hefty headwinds, others will benefit from positive market volatility. We see a different development in the different segments.
We may discuss this later on. 4, M and A will further increase. Its importance for us. We expect a 5% revenue growth rate stemming from acquisitions from the year 2020 till 20 23. With yesterday's announcement of the acquisition of ISS, we've already achieved half of it.
So 5% growth rate per year is not an unrealistic number. We are generally open for larger deals. We continue to pursue asset class expansion rather than stock exchange consolidation. We do have the skills and the funds for such endeavors. 5, ESG is emerging as a powerful new asset class.
ESG will become a sweet spot of our future strategic efforts. 6, operating costs at Deutsche Borse will not be steered according to the overall revenue development and growth rate. Will consequently steer our cost base in line with our secular growth we are targeting. Cyclicality must not affect our growth initiatives. 7, our EBITDA margin anyways and already right now pretty high shall remain at high levels with what we have already achieved.
We do want to keep these EBITDA levels. 8, we will continue with investments into new technologies like cloud and distributed ledger technology to tap into new revenue pools, revenue opportunities and to increase the operating efficiency of our franchise over time. And we are willing to invest in adjacent growth areas. Through our corporate venture portfolio, we've got a strong corporate venture portfolio arm and in combination with a new platform for a seated creation of marketplaces for new asset classes. Carlo will detail this later on.
9. We expect next year to be somewhat cyclically muted because of the high volatility this year and lower interest rates we have to live with. But this will not throw us off course with regards to our secular growth opportunities over the upcoming 3 years. 10, finally, we think that our strategic plan firmly underpins further and even accelerated growth rate at Deutsche Borse. But our strategy is also flexible enough to allow for adjustments if COVID-nineteen or any other unforeseen circumstances require.
I explicitly mention that we have prepared and developed a contingency plan, which can get activated quickly if necessary. Let me go to the next chart. Despite the extremely dynamic macroeconomic environment over the last couple of months, we firmly believe that the underlying secular drivers of our business are fully intact regardless of COVID-nineteen and V or U shape recovery scenarios. Over the counter to Onyx change is structural and the shift to central clearing is even reinforced by the Brexit. Our trading businesses will continue to taking advantage for it.
Our institutional funds business will benefit from the strength outsourcing of the banking industry. And the importance of the buy side, the shift to passive investments and products continues. ESG is a major generational topic as you all know. It has and I take this word consciously, it has historic dimensions. This is a big, big opportunity for us as a group.
On Chart 6, all those trends are translated into concrete, concrete secular growth opportunities. And I'm leaving aside for the time being ISS because we will address this separately later on. Let me point out the most significant growth initiatives. In pre trading, the combination of index and analytics under the Contigo roof will help us to increase buy side penetration and become a leader in the area of investment intelligence. At Eurex, these trends will give us the opportunity to introduce many new derivatives products and continue to build a leading OTC clearing platform in the Eurozone.
At EEX, we will further expand our leading position in European Energy Markets and win more businesses in the U. S. And even beyond. In foreign exchange, we have created a one stop shop for exchange and OTC solutions based on our superior leading technology, it is now time to further capitalize on this unique position and the numbers in 2020 speak for itself. And at Clearstream, we will continuously onboard new clients to grow our custody business and franchise and strengthen our leadership position in the funds business.
The broad and diversified set of growth opportunities is clearly one of the strengths of our business model. Furthermore, it emphasizes how robust our business is. On Chart 7, we will talk a little bit about the M and A agenda. Rather than engaging in complex transformational situations to tie up resources across the entire value chain and the entire group of Deutsche Borse, we are using inorganic acquisitive growth to increase the size and the scale across different asset classes. This strategy has already worked fairly well out, so we are going to stick to it.
Let me briefly summarize some important strategic guidelines for our M and A activities. We approach M and A like investors. Long term value creation for our shareholders stands above everything else. There has to be a strong strategic fit. It needs to be a good and convincing equity story for you.
There has to be a very clear path, yes, for integration and a very clear scenario for synergy realization. We need to be strong on the post merger integration side. In case of publicly listed assets, we need a high closing certainty before we engage intensively. We all know, yes, it is possible. And if it's possible, we will avoid situations where assets were auctioned to the bidder of the highest price.
That is, for us, always a difficult situation. We prefer rather than we prefer formats where we are not owning 100% of the assets. Minority owners could be the management, could be the seller itself or a strategic partner. With the partnership approach, we think M and A can be done even more successfully. We are prepared to enter into larger deals, as you have seen, right, over the last 12 to 18 months.
But they are but these larger deals are not a must. Deals need to be strategically and financially compelling. That is the promise what we are giving. Let me make an important point also in the context of M and A. In the past, Deutsche Borse was perceived to be unable to successfully partner up with clients and third parties.
We think there has been a lot of change since then. In terms of M and A, we have created an environment for entrepreneurship and found the right balance between, on one hand side, control and on the other hand side, independent independently. And let me stress this today. The entrepreneurial spirit of the businesses which we have acquired also had a very positive effect on the rest of the organization of Deutsche Borse Group. Our acquisitions made us more agile.
They are challenging us and we are learning from the acquisitions. They are true trusted partners for us and not just participations. The partnership approach was a very important element of the ISS acquisition and the way we acquired and integrated Axioma. Next chart, let me briefly describe the strategic rationale of the ISS acquisition in my own words. ISS is a global leader in corporate governance.
ISS is famous for providing governance research advisory solutions and end to end voting solutions to the market globally. ISS is a very successful company. It is growing and has a decent profitability. It will add substantial recurring revenues with more than 90% recurring revenue ratio. ISS is a perfect strategic fit to us and highly complementary to our existing businesses.
It's a data driven company and precisely a analytics data driven company. It has access to a very broad buy side client base and I cannot stress this factor enough ISS is a top player in the ESG business. Their leading advantage and their leading notch in the G, the governance is a huge advantage. Beyond the ESG business, there are promising links across the full value chain of Deutsche Borse. And ISS is a well known global brand name.
You all know ISS. And ISS comes with an experienced and very strong leadership and management team. Gary, the CEO, is a passionate and highly respected leader internally and in the external world. On Chart 9, I would like to summarize and underpin the following. ISS will help us to significantly expand our ESG business, a big, fast growing and a very important data business of the future.
ISS and Contigo are perfect partners on the ESG side. ISS and Clearstream will benefit mutually from their respective businesses and client relationships. To cut a very long story short, ISS is a best in glass provider for ESG and stewardship solutions, a data provider, which fits perfectly with our leading position as a capital market infrastructure provider, and it fits perfectly with our strategic ambitions. On Chart 10, let me summarize our growth strategy in financial terms. With Compass 23, we are pursuing a simple, but we think a very realistic growth formula.
The growth formula is we think we can achieve a 10% top line growth and a 10% bottom line growth as well annually. On the top line, 5% secular growth is what we have achieved so far consistently. Therefore, we think the 5% growth rate is realistic over the next coming years. On the bottom line, indeed, M and A is structurally dilutive on the margin side because we are coming from such a high margin. But on the other side, we are committed to keep today's margin levels.
And by the way, cyclicality may help us otherwise and hopefully. The scalability of our business shall work and has worked in the past. And if necessary, I will stress this again, a contingency plan can get activated quickly if necessary. As a consequence, a 10% EBITDA growth rate is our target and can be achieved. That's our formula, 10% top line and 10% bottom line.
Now at the end of my presentation, I'm very happy to hand over to Gary. Gary, let me emphasize, we have been deeply impressed by the culture and the senior leadership of your organization. We very much look forward to partnering and to working with you. As you said to me on Sunday, 2 days before we have signed our documents, you said and I'm citing, Theodore, it is an incredibly powerful strategic move for both of us and for both firms. And I would like to echo this today, Gary.
I will say from my side, we will make everything to make our partnership a great success. Thanks for tying your future to us, Garry. The floor is yours.
Thank you very much, Theodore, for your very, very kind comments and for the trust that you and your management team have placed in ISS, myself and all our people. We are humbled by it. We are thrilled to be a member of the Deutsche Borse family of companies. Let me take just a few minutes. Welcome everyone.
Good morning here in New York. Good afternoon. And just give a fairly brief summary of ISS. As Theodore Orr kindly said, I think that most of you are familiar already with ISN and its global presence. But let me just take a few minutes to highlight some statistics and give you a little bit of a sense of ISS and its very exciting future prospects as part of the Deutsche Borse family of companies.
ISS is an innovative global leader in data and research and centered primarily around corporate governance and ESG. We believe we are the global leader in corporate governance and have been so for over 35 years and our position in broader ESG and distribution services as well has been quickly accelerating. We empower investors and companies to build for long term and sustainable growth and we believe we provide best in class data, analytics and insight. Our global reach is wide. We have a large and diverse client base of over 4,000 clients.
We focus clearly on the global reach, but as well with a very strong customer service on local touch. And we believe we're primed for continued growth going forward, both organically and through acquisitions as I will touch briefly. ISS today, we are over 2,000 people. We have 33 offices around the world. We operate physically in 15 countries and we cover 115 markets around the world.
What is important to note in the 115 markets is that as part of our commitment to clients, ISS commits that if a client holds a security in their portfolios, an equity security in their portfolio, we will cover it for them on a governance basis. We cover approximately 40,000 meetings a year. If you don't mind turning the slide. Again, ISS is a very well established global business. We have an excellent organic and inorganic growth track record.
As you can see from the graph that is being presented, if you look at our 2014 to 2020 estimated net revenue growth, you will see a 15% CAGR, which is quite satisfactory and in line with our targets. We focus our growth is focused primarily on both organic as well as acquisition growth. What I tried to do here is give you a little bit of a sense of the acquisitions that we have made over the past 6 years. We have done 11 acquisitions. I'm not going to cover all of them here.
6 of them focused primarily on ESG, 3 of them on data and analytics and 2 in data and distribution. What I will say is that ISS focusing on recurring revenue businesses. That is our business model. As Theodore noted, over 90% of our revenues are recurring, which is in line with the way that we target our growth. We are very focused on acquisition of data companies as well as companies that obviously have recurring revenue business models much like ours.
We look at talking acquisitions as part of our global growth strategy, particularly in the ESG space. And I am very pleased also to note that our pipeline today is actually quite full and we are looking at a number of small tuck in acquisitions that would be highly complementary to our ESG growth efforts as well as our data and distribution growth initiatives. If you don't mind turning the page, ISS, ESG, permeates all five businesses currently that form part of our ISS group of families. We focus on service serving investors and corporations. The 5 business lines within ISS, just to briefly touch on them, our ISS governance business.
That's what everybody knows generally about what ISS does on a global basis. We provide governance research and advisory services as well as end to end proxy voting solutions as Theodore mentioned. Our second business line is our fast growing ESG business and there are many, many exciting initiatives within this business line. I'll touch on some of them briefly as they relate in particular to our growth initiatives with Deutsche Borse. 3rd business line that we have is our corporate solutions business and that focuses on helping companies design and manage their governance compensation and sustainability programs.
The 4th business line is what we call our ISSMI business. That's our market intelligence business. And that is essentially a data insight research and workflow solutions business, focusing on global asset managers and distributors. And last but not least is our ISS Media business. And within that business, we have 3 of the leading conferences in the world for the investment management industries.
If you aggregate these businesses a little bit differently, you will see that 75% of our business relates to ESG and Stewardship Solutions, 23% to our data and distribution and 2% in media. And I'm not going to touch in great detail on this, but underneath all these businesses is a very strong integrated data and technology infrastructure that drives product innovation. We're very pleased with our data collection and data management initiatives. We believe that they are world class and I'll briefly touch on those in a minute. If you don't mind turning the page.
We just thought that we would give you a graph that just highlights the growth in the ESG market in terms of data spending. You see on the growth on the left that you see 20% growth per annum growth on ESG data spending and you actually see 35% annual growth on ESG index spending and ISS is very prominent in both of those sectors and looking to expand our products and services, particularly as we see the various initiatives across the Deutsche Borse Group of Families, as Theodore mentioned. If you look to the right of the slide, you will see a number of our business lines. I'm not going to touch on all of them in great detail, but you will see particularly if you go down to the bottom 2, our ESG screening data, research, ratings, index, climate and cyber businesses. Note that we have recently done an acquisition in cyber ESG ratings.
We believe that that is a unique and key differentiator for ISS in the future. And we also if you look to the bottom of that right hand side, you will see the index and analytics businesses, of course, Deutsche Borse, Stocks, DAX and Axioma, the Contigo businesses where we think we have fairly significant revenue synergies and we look forward to working together with Sebastian and his team in the very, very near future, very exciting prospects. If you turn to the next slide and my final slide, I just wanted to provide essentially a little bit of the roadmap that we see going forward. We believe that this partnership with Deutsche Borse strengthens dramatically the pre trade business. We look forward to being a part of it.
We look for it to provide significant runway for growth for ISS. If you look to the categories on the left, we see future ESG growth on multiple fronts. We believe that this will catapult Deutsche Borse into being a global leader once the transaction closes. ISS is a global leader in the ESG space today. We believe that with the backing of Deutsche Borse as well as their global footprint, this will only accelerate our product and M and A roadmap in the space.
Number 2, we have a very strong and diverse client base, both of us. Our strong global brand has translated into access to 4,000 plus clients. We have high buy side exposure, including 2,000 plus asset managers, including the global top 10. We believe that we are regionally complementary. We have a very, very strong U.
S. Franchise and brand. Our brand happens to also be very global and well known. We hope to leverage Deutsche Borse's strong European brand and network as well to expand in EMEA and Asia Pac regions. We think our businesses are complementary.
There is very, very little overlap, which is extremely exciting, therefore presents a number of revenue synergy possibilities that we're very excited about. We have very complementary product offerings already within ISS and strong linkages already to a number of Deutsche Borse Businesses. And we are looking at concrete revenue synergies in pre and post training. Finally, we have what we believe are strong operation skills. We have successfully integrated 12 acquisitions.
We have strong and deep experience in operating emerging market, data and processing centers. That is one of the core strengths of ISS. We're very proud of our teams based in Manila and in Mumbai. And we believe that Deutsche Borse also will be able to leverage those resources and we hope to be of assistance. The final statement that I will make, which is extremely important for our clients is that our research and advisory activities will continue to operate on a fully independent and arm's length basis.
That basically is a tenant of what ISS has been built on over the last 35 years and that is expected to continue. And with that, again, thank you, Theodore, for your kind words. We're very proud of this achievement and we look forward to working together for many, many years to come. So back to you, Jan.
Thank you, Gary. Our next speaker today is Sebastian Chiria. Sebastian is the Chief Executive Officer of Contigo, our Index and Analytics business, and he will present opportunities exactly in that area. Sebastian, the floor is yours.
Thank you, Jan, and welcome everybody from the New York office of Contigo. It's great to be here today and I want to take just one second to congratulate Gary and the ISS team for joining the family. We've been working together for quite some time with ISS. We've created great products together and we're really looking forward to creating a lot more magic when you're inside the family. So welcome, Gary, and welcome to the ISS team.
Boy, it looks like a lot of time has gone by since we did the acquisition, but it's only 1 year that has taken place. And let me remind you the reasons behind why we did the acquisition. We really thought at the time that the union of indexing and analytics was going to create intelligence that would give tremendous value to our clients. And I'm not going to go through all the key drivers of secular growth that you see on the left. But what is important is to remember that we thought that these secular drivers were going to drive double digit growth, 15% until 20 23 and easily double digit growth over 10% per year if you actually took out the effects of the Axioma acquisition.
Now next slide please. Of course, what we did not expect, I did not expect and I'm not so sure what I would have done if I knew what was coming, that the COVID crisis was going to hit. And I've learned by managing Axioma through other crisis in the past that although crisis tend to be paralyzing, actually there are great opportunities for disruptors because let's not forget that we're a challenger, we're a disruptor in the space and what we want to get is we want to get events that break the inertia in the marketplace and that's exactly what COVID does. I know that you might think that I'm a glass half full kind of guy. I am and I'm an entrepreneur.
So as such, I tend to think that actually everything that happens is for a reason and is actually going to turn out right. But if you really think about what has happened with COVID and we go 1 by 1 through those effects, we just see that this is creating nothing but more opportunity for Contigo. There is going to be inevitably a higher requirement for sophistication in the investment solutions that the asset management industry provides to its clients. And for that, we're going to need to mix indexing and analytics. There is no other way to create that intelligence.
We know that brands are going to be important and
to have to rely on
the brands of stocks, DAX and Axioma as a way to get to the client base is a great way to succeed. We know that the public debate between active and passive is going to do nothing but intensify because in this time of COVID, we realized that passive products are actually getting excellent performance. And that, of course, is very different for what's happening in the active space and that reduction in fees, that compression in fees is going to lead to our clients really looking to make investments in technology, but just that's the natural way for them to reduce their costs. And ultimately, what we have seen as a trend in ESG is going to do nothing but intensify. It's going to provide a disruption.
It's going to provide an opportunity for the asset management industry to reinvent itself and to actually grow even more, but it's going to provide an opportunity for us to really provide very creative solutions. And with welcoming ISS to the family, that's going to do nothing but intensify our opportunity. Next slide, please. So let's talk about what's going to happen next year. How do we go back or how do we go to double digit growth, which is what we intend to do?
Well, there's 2 pillars to our strategy. On one hand, we want to do what we were doing before and doing it better. We want to leverage our optimization expertise to go into the wealth space. We want to grow even more with ETFs and asset based fees. We want to continue and enhance our collaboration with Eurex to provide a whole ecosystem of investable products to our clients, so that they can leverage our IP.
And we want to, of course, leverage new partnerships to get to the marketplace and reach segments that we couldn't reach before. But of course, that's just half of it. The other half is to create new and innovative products. And we think that their sustainability is a key component where we can bring together indices and analytics and provide a whole sustainable solution. And we also think that by expanding our solution to the cloud of all the products that we had on the analytics space, we're going to be able to help our clients to really leverage technology to reduce costs and to achieve those economies that they need to achieve.
For this reason, we have a new tag line and this new tag line is Contigo Optimizing Impact. Thank you very much.
Thank you, Sebastian. And our next speaker now is Thomas Buch. Thomas is member of the Executive Board of Deutsche Borse, and he's responsible for our Trading and Clearing division. And Thomas will present the opportunities in Trading and Clearing overall, but in particularly in Financial Derivatives. Thomas, the floor is yours.
Jan, thank you very much. It's great to be with all of you here today. Let me continue the value chain with Trading and Clearing. Trading and Clearing comprises our 3 leading franchises, Eurex, EEX and 360T. In the course of this year, we have also added the cash market business and the market beta business to the portfolio.
Last year, I spoke to you about our growth opportunities stemming from the 3 prevailing industry trends that we have also heard earlier from Theodore and Sebastian, which are changes in investment themes, regulation and technology. All of these are framed by our core ambition to be the preferred venue of choice for the buy side. And despite COVID, all these trends are fully intact. Indeed, some of them have even accelerated, such as the trend towards electronification, but also the trend towards sustainable investment. Now how do we exploit these growth opportunities?
Our platform for growth is the combination of synergetic assets within our group. We are operating deep liquidity and margin pools for benchmark products, combine it with leading risk management and superior technology. And we are very proud we have a world class team that operates with excellence and that provides continuous innovation and a strong senior leadership team. Let me now, together with Peter and Carlo, share with you some insights to confirm our ambition levels for organic growth in trading and clearing with Eurex EEX and 360T. Eurex has grown to be a €1,100,000,000 business, and it is truly global.
We are the venue to trade index products with a global trading community and the place for the long end of the euro yield curve. And again, this year, we see attractive growth rates of around 10%, mainly fueled by our good volumes in index derivatives, OTC clearing and collateral income. And as you can see here, our key secular drivers are product innovation, building on our strong globally leading position in index products, and we'll continue to closely work with Sebastian and team for expansion our partnership program, which fuels volumes in OTC clearing, and we have a strong pipeline for further growth and scaling up our offering and also building new ecosystems. We are focused also on expanding our value chain. We are happy to welcome quantitative brokers to the group, which are for the first time for us in electronic execution business, it's not only an attractive growth case in itself, but it's also a very synergetic expansion into the buy side value chain for us.
Let's turn to the equity index universe. As I mentioned, product innovations underpin our global lead and drive our structural growth ambition in this segment, And we have a highly attractive product pipeline. Actually, we are not just launching products, but we are building new market segments and ecosystems. And some of the examples you find here on this slide. MSCI is the leading global index suite, and Eurex has the largest share in open interest and also the broadest product portfolio.
We will continue to scale our order book liquidity. We are focused on expanding our buy side distribution and broadening our product portfolio. With total return futures, Eurex was an innovation leader delivering a showcase for futurization, addressing the need for margin efficiency and moving an entire OTC segment into listed derivatives. And we have heard a lot about ESG, which is an asset class. Again, Eurex is a global leader with the largest product portfolio.
We have already €11,000,000,000 notional traded this year. We've just added further products, the Eurostoxx 50 ESG and the DAX 50 ESG Futures. And of course, we have great expectations. We deliver the investment vehicles to the trends described earlier and will benefit from the sustainable investment and green finance trends. Lastly, fixed income.
At fixed income, our successful partnership program drives our growth. Launched in 2018, the strong cooperation with our clients is the foundation for our success. Our offering is competitive. We have reduced the basis to 0 and spreads are at par with LCH. Our distribution now covers all major banks and institutional clients, and it continues to grow.
Volumes have increased sixfold, and the market share now stands at 19%. And we will further benefit from the Brexit dynamics, but also from our unique USP of bringing together repo, swaps and futures in 1 integrated CCP offering. I thank you for your attention. With that, let me hand over to Peter to cover the commodities.
Yes. Our next speaker today is Peter Reitz. Peter is the Chief Executive Officer of the European Energy Exchange, and he will present our opportunities in commodities. Peter, the floor is yours.
Thank you very much, Jan. As many of you know, EEX is the biggest power exchange in the world for a 3rd year in a row. And power derivatives in Europe is our main business. Our business has been growing significantly, mainly through winning market share from the OTC market. But we not only provide derivatives, we have a unique combination of spot trading, so the very short end of the curve and the derivatives, which makes this combined offering very attractive for both producers and industrial consumers.
Next to our core markets in Europe, we have Nodal Exchange, our U. S.-based exchange, which holds more than 50% of the open interest in U. S. Power and is entering the U. S.
Gas market and environmental markets. And also in Asia, we are the number one trade exchange in global market share in terms of open interest. And there's further potential growth for us as energy markets in Asia deregulate like the recent example with Japanese power. Through all of these different initiatives, we will deliver a secular growth above 5%, leading to a net revenue growth of 7% to 10% over the next years. The next slides show how we can leverage our short and long term market position.
In Europe, more than 75% of power derivatives trading is executed through EEX, But more than 50% is still OTC. So there's still a lot of growth potential even in our existing markets. The second element of that growth is regional growth. We now have more than 20 markets on our platform. These are all of the European countries and the recent addition with Japan.
And our core strength is connecting international clients with the local community of each of these markets and through that creating new liquidity pools and new trading opportunities for our customers. The fight against climate change is one of the key challenges of our time. Decarbonization is the key like it was acknowledged in the Paris Agreement. The main instrument for that is cap and trade mechanisms that give CO2 a price. We have significant experience having run more than 2,000 auctions for the individual countries, electing more than €62,000,000,000 for those auctioneers.
And EEX has just been selected to be the auction platform for the EU for another 5 years. We've also won the tender in New Zealand with our partner NZX to run the auction markets there. The growing share of renewables creates new opportunities both at the very short end of the curve. The intra day market is growing and has been growing significantly also because of the lack of predictability for wind and solar power that creates the need to adjust positions. But also at the very long end of the curve, investors into new capacities of renewables are looking for standard products and increasingly benefit from especially our clearing offering.
Also in the U. S. Where Noble exchange is winning market share in the power market, 40% of the power in the U. S. Market comes from gas.
There's significant capital efficiency in putting gas and power in the same clearinghouse. And last but not least, our Asian offering, especially the recent addition of Japanese power, has big potential. Power consumption in the Japanese market is 2 times that of our biggest market, Germany, But the market maturity is still at a very early stage. But with our experience and our international distribution, we can develop these markets. And through that, we can create with organic initiatives and selected M and A it grows for the next couple of years.
Thank you very much.
Thank you, Peter. I'm handing over to our next speaker today, Carlo Koltza. Carlo is the CEO of 360T, and Carlo will be presenting our opportunities in FX and adjacent businesses. Carlo, please.
Thank you, Jan. Ladies and gentlemen, good afternoon. I'm here today to inform you about DPG's FX business as well as the new growth initiative that we are going to start very soon. It was exactly 2 years ago that I was informing you about the FX business last time in person exactly that day when we announced the acquisition of GTX. Since then, we have integrated GTX within the group, and it has become a highly valuable part of our diversified value proposition in terms of customer base, product and geographical focus.
And with this within these 2 years, 360T and FX has managed to penetrate all the growth vectors that we were intending to follow consequently, with the effect that we are on a very robust double digit growth trajectory based on organic growth and based on different growth vectors that I want to present to you in a minute. Also, the market trends are still in our favor like a growing market, a further level of electronification, a broader market maker landscape, alternative credit model requirements and technological progress. The further development of 360T and the FX business of Deutsche Borse is based on 5 pillars, 5 vectors of growth. Number 1, further extension into the other customer segments, in particular, institutional space, asset management space. We had made great progress over the last 2 years.
Additional product offerings like the offering of an interbank swap platform that we call mid match, similar endeavor is to do this for the NDF market. Further regional expansion, in particular in Latin America as well as Asia Pac. Also, the ETD initiative shows 1st traction and has made significant progress over the course of the last 15 months. And also, obviously, based on this credit development, the development of the OTC FX Clearing offering, which hopefully goes live in 2021. So overall, I can only say the DVG's FX business in a very good and scalable position with huge growth potential that I just mentioned and ready to stay on this double digit growth trajectory going forward in our Compass plan to 2023.
I would like now to follow up with the new initiative that we have started, which we call 360x. 360x is a new platform for Deutsche Borse's growth into new asset classes. It's the goal to create and operate new marketplaces in new asset classes based on a very entrepreneurial approach to combine the best of 2 worlds, the scalability, the reputation and the access of Deutsche Burger with an agile and entrepreneurial approach to build and incumbent incubate new businesses. This will go live very soon. We are in the process of founding the platform as we speak.
The first verticals will be focused on art and real estate. And based on a fashionable modular way, we will continue to explore the market and identify additional asset classes in order to create a completely new growth sector for Deutsche Borse in order to create new marketplaces and nurture new revenues potential. With this, thank you very much for your attention.
Thank you, Carlo. Our next speaker today is Stefan Leitner. Stefan is a member of the Executive Board of Deutsche Borse and responsible for pre trading and post trading. Stefan will be talking about our opportunities in Investment Fund Services. Stefan, please.
Thank you very much, Jan. When I today focus on IFS, let me still highlight upfront one sentence on Clearstream overall performance, which IFS is an integral part of. Against the odds of a very difficult interest rate environment, we will, on balance, achieve in aggregate growth because there's a strong custody and settlement fee revenue momentum that we have across the entire platform. Now clearly, within that, IFS stands out, and IFS has been successful under Roadmap 2020, and it will continue to be so. Under Roadmap 2020, IFS between 2017 2020 has grown by 18% per year.
So the 15% under the current plan are something that we feel very comfortable, in particular because the last few years have already shown a 13% growth on an organic basis and the 10% secular growth that we now have put into the context of the new Compass 23, therefore, is very safely achievable. In particular, since the plan also includes continued M and A momentum. Now you see that the 3 acquisitions that we have already completed contribute 6% growth over the planned horizon. And if I talk about AOSMEC in Australia, which has opened up the $2,000,000,000,000 market for us, it's clearly something which we now have fully integrated in the strong onboarding pipeline. The same is true for Swisscanto and UBS Fund Centre, the other two acquisitions which are fully integrated and the cross selling is progressing very well.
As a last highlight, also for the plan, it's critical to also focus on the scaling. IFS continues to scale very well between the margin of 41% in 2017 and the margin for the 1st 9 months of 2020, which in the range of 56%, you see the progression and that will continue. So how are we going to achieve that? Now 1st and foremost, IFS continues to be at the sweet spot of major industry trends, and it's very well positioned by the work that was done over the last few years by Philip Sale and many of the colleagues in the business. So those main trends continue.
The strong growth of the fund market, in particular in Asia above 10%. IFS is well positioned in Asia and in Australia. The entire expansion into alternatives and new asset classes IFS has built already a number of years ago alternative capabilities in the fund space, ETF as well as the entire ICSD platform integration has helped to cover the breadth of products. In the same way, the transition towards more independent distributors is really playing to the strong part of IFS, who has a network of 300 distributors that they are working with. And last but not least, our clients continue to be under enormous pressure.
Outsourcing is in the order of today, and we have proven that we can onboard these type of situations. And more important, with UBS Fund Centre, we have started to show the strength of the partnership that we are able to execute and work together. But as we look ahead, it's not only in surfing these dramatic continued change waves, which we're well positioned for, but I really see IFS as the centerpiece to a B2B ecosystem in the fund space. That's why it's not only about the continued optimization of our vesting service. It's not only about the expansion of the front office distribution support, the UBS Fund Centre acquisition that we continue to develop and where, as I say, more onboarding, more partnering, more M and A is possible.
But more important, it's also the 3rd leg that you see on the left hand side here on this chart, which is the expansion into the back end of the value chain. We have started to be transformative and disruptive to the share issuance in the fund space. We have set up together with our technology colleagues and partners, together with asset managers and the Luxembourg Stock Exchange Fund DLT, which will bring distributed ledger technology to the fund space. And as a 4th area of growth, going forward, I do believe and that's so exciting about ISS and being here today together with Gary is the data opportunity, especially in the fund space, is a very powerful story to play. And having partners like the Symfund franchise and brands that ISS brings just as much as very tangibly here in Germany, the FWW brands will empower us to drive the growth on the data side in the front space.
So if I look ahead, the vision is very clear. For IFS. It's the center of a B2B ecosystem, as I said. I think it will be more partnering and more M and A. We are open to our clients.
We really want to work with them, and we have shown that we can do this. And therefore, I'm very comfortable that the team will deliver the financial ambitions, the more than 10% organic, secular growth, but on top of that, continued M and A momentum. So let me hand it back to you, Jan. Thank you. Thank
you, Stefan. Before I introduce our final speaker today, let me just remind you financial analysts and investor can already register questions via the Q and A tool, which you find below the video stream in front of you. And I'm now handing over to Gregor Potmeyer. Gregor is the Chief Financial Officer of Deutsche Borse, and he will present more of the financial details of our Compass 2023 plan. Gregor, over to you.
Yes. It's a pleasure to be here.
And let me start
with a review of our achievements with regard to our Roadmap 2020 targets. We delivered what we promised. We fully reached our Roadmap 2020 financial targets. Net revenue grew by 9% CAGR. Secular growth was more than 5%.
Adjusted net profit grew by 12% CAGR, what is exactly in the range of our target of 10% to 15%. Going forward, we want to simplify our reporting. Our income statement will be published on reported basis only. That means we will skip the reporting about adjusted numbers. Base year for important Compass KPIs will be 2019.
Following our strategic focus, 3 KPI will reflect our profitable growth ambition. Net revenue growth, EBITDA growth, EPS growth. Now I come, you know it, to my favorite slide, right? We want to grow on our net revenue until 2023 with a 10% CAGR. 5% will come from secular growth, 5% from M and A, no cyclical tailwind on a net basis.
Our secular growth ambition is based on a multitude of strategic initiatives. Starting in trading and clearing, roughly €110,000,000 will come from new exchange traded derivatives. That's MSCI derivatives, total return futures, dividend derivatives, ESG derivatives, ETF derivatives. EX will continue to grow market share and achieve a €90,000,000 net revenue growth for the next 3 years. 360t FX will contribute around €70,000,000 Pricing in the range of €40,000,000 in that range, so that means roughly 1% out of our net revenue growth will come from pricing here.
OTC interest rate swap clearing, so €35,000,000 So adding up to roughly €55,000,000 this year would end in roughly €90,000,000 with a market share of 25%. GFF, €30,000,000 and Buy in Agent, that's a new service we will offer beginning in 2020, will deliver with some €25,000,000 In the post trading business, IFS will contribute some €100,000,000 custody, €90,000,000 In the pre trading area, indices, roughly €60,000,000 Analytics, roughly €40,000,000 From a cyclical perspective, I said on a net basis, it's neutral, but there are 2 different directions. So one is NII, that's where we see a reduction of roughly €130,000,000 So in 2019, it was roughly €190,000,000 And now we guide some €60,000,000 for the coming years here. So strong headwind, obviously. On the other hand side, we see modest cyclical tailwind on the trading and clearing, what add ups over the 4 years to €170,000,000 M and A will contribute roughly €600,000,000 €100,000,000 of already closed deals, like Axioma, like UBS Forcecenter, like quantitative brokers.
ISS will contribute some €300,000,000 so including the secular growth of more than 5% and including synergies. And we also include here future M and A in the range of roughly 200 €1,000,000 what we are confident to achieve over the next years. Our midterm secular net revenue growth opportunities are fully intact. All business segments will contribute to the growth strategy. Eurex was 7% to 10%, more than 5% from a secular perspective.
The acquisition of quantitative progress adds another one percentage point. EX, 7% to 10%, more than 5% from a secular basis. 360T, more than 10%, roughly 10% from a secular basis our cash equity business, 0% to 3% for the next years, so more flattish development. Clearstream, 0% to 3%. Here, there are 2 opposite effects.
So one, the NII, I already explained. On the other hand side, we see some 3% to 5% secular growth in that business segment. Investment Fund Services, 10% on a secular basis, 6% from already executed M and A transaction Contigo, 10% secular growth, 5% via the acquisition of Axioma. ISS will contribute on Deutsche Borse Group level roughly 2%, so including the more than 5% secular growth. And again, what Aurelien mentioned, future M and A will contribute some 2% over the next year, so adding up to 5% M and A growth.
We will continue to pursue our successful M and A agenda in the 6 areas Theodor already mentioned: Index and Analytics, ESG, commodity, FX, fixed income and investment fund services. We will show capital discipline and have a clear financial framework for M and A. Transactions should be cash earnings accretive in year 1, latest in year 3. Return on investment in year 3 should be higher than our WACC across the M and A portfolio, and our WACC today is roughly 6%. Margin dilution is accepted for transaction with strong strategic fit.
As Gary already showed you, ISS is a very attractive growth business, which fits very well with our Compass 2023 financial targets. BB1 is acquiring a growing business with more than 218,000,000 dollars net revenues in 2020, more than a 5% CAGR opportunity pre synergies, more than 90% recurring revenue basis. In 2020, there's a 35% adjusted EBITDA margin with obviously further operating leverage potential. We expect some €15,000,000 additional synergies in 'twenty three out of that transaction. ISS will be fully consolidated and forms a new segment within the pre trading area.
DB1 will hold roughly 80%. ISS Management and Genstar Capital will hold 20% together. Purchase price is US2275 million dollars 400 percent cash debt free basis. Deutsche Borse share of 80% is financed through roughly €1,000,000,000 debt and the remainder with own cash. Transaction is cash earnings accretive in year 1.
It's roughly 5% based on run rate synergies. Transaction is expected to close in the first half year of 'twenty one. We refine our financial steering logic to support our growth ambition. Operating costs at DB1 will be steered in line with secular growth we are targeting. In line with our simplified reporting, all in operating costs will be the new cost metric.
Continuous improvement. So we expect here roughly 2% productivity increase per anno or roughly €100,000,000 by 2023 will be the key measure to capture efficiencies. We are planning with a broadly stable EBITDA margin on current high levels until 'twenty three. Additional cyclical support would result in an EBITDA margin increase. We confirm our long standing capital management policy.
We will keep our AA rating mainly because of the post trading business. So that means net debt EBITDA below 1.75 times FFO net debt above 50%. We confirm our dividend policy with a payout ratio between 40% to 60% of net profit reported. With increased earnings, payout ratio is expected to decrease. Excess cash is preferably reinvested into the business to support M and A strategy, and we will maintain our sound balance sheet structure.
The last slide of today's presentation summarizes the financial targets for 2023. Net revenue will grow by around 10% on average per annum. Secular growth will be 5%. M and A will deliver 5 also 5%. EBITDA and EPS on a reported basis will also grow by around 10% on average per annum.
Thanks for your attention. We are now looking forward to your questions. Back to you, Jan.
Thank you, Gregor. With this, we would now like to start the Q and A session. We will start from questions here in the audience and then turn to the analysts, which are connected via video stream. In between, I will also read out some of the questions we have received from the chat system so far. The first question comes from Benjamin Goy from Deutsche Bank.
Benjamin, the floor is yours.
And good afternoon. Two questions, if I may, please. First, on the ISS acquisition. So more than 5%. I mean, it's accretive to your group revenue growth you plan organically.
But still, considering the vast opportunities you highlight in ESG and what we see from some competitors in the field. I wonder whether this could be higher. So what would you need to see to call it high single digits or even double digits growth rates from this business going forward? And then the second question is for this deal. I think you use a good amount or the large amount of your current Funch firepower.
So maybe an update on your on the current firepower. So is it around EUR 500,000,000 left? You add, obviously, over the over next year more, so call it, will you have EUR 1,000,000,000 or even more than that for future deals in the near future? And should we expect a continuous focus on data and index as well as investment fund services for M and A? Thank you.
Thank you, Benjamin. For the first question, we would like to see whether we can reconnect to Gary, please. Gary, you're on. Gary, I think you're still on mute. We don't hear you, Gary.
Please unmute yourself if you have done so.
Does this work?
Yes. Perfect. Yes, it does. Thanks.
Great. Sorry, apologies. Actually, the question broke up as it was coming through my video link. So I got part of the second, but I didn't hear the first at the risk of waiting a little time. If you could repeat the question, it would be really helpful because I can hear you now.
Yes. Sure. So basically wondering what would you need to see to be more confident than larger than 5 percent considering the ESG opportunity and what peers are reporting today?
Thank you. So it's a question that we think about all the time actually. We see tuck in opportunities in the ESG space and we actually see the growth of our businesses in double digits in ESG. So over time, our ESG business will continue to accelerate and grow and that obviously will become a much larger part of ISS. So ISS is between our organic growth initiatives in ESG and the tuck and acquisitions which are unpredictable as you know, but we have a very, very full pipeline today.
We expect the rate to be significantly higher than 5% and solidly in double digits.
Thank you.
Thank you, Gary. And then the firepower question Gregor will take,
please. Yes. So Benjamin, as you are aware, we had some €2,000,000,000 firepower before of the ISS transaction. And yes, there are still some €100,000,000 available. You are right.
In addition, I would like to mention that we have a strong cash flow generating business. And so our cash will pick up very quickly. So we are good positioned to continue to do further M and A, and that's obviously our ambition level. And from a strategic perspective, we mentioned the 6 asset classes where we want to invest, and that's unchanged our focus.
And if I may add, Gregor, it's not long ago when I got many questions from investors and analysts who were challenging me, what are you doing with the excess cash and the excess capital you're having, right? And I was and I fell a little bit under pressure because some people wanted to get their money back. And now I'm glad to hear that they're getting exactly the opposite question. I like it a lot and I can assure you we'll be cash generative very quickly. And it's also pretty clear we have said we will do another €200,000,000 revenue add ons over the next couple of years.
And I'm sure we'll have the funds available for this. And don't forget, we've got also some equity power, which we normally not talk about.
Thank you.
Thank you, Theodore. Before we move to the video stream of the analysts, I have one question in the chat system for you, Theodor, regarding the importance and readiness of larger deals. Could you please provide more color on your thoughts of larger deals beyond the recently announced Lapis transaction?
Of course, I'm glad to hear that you guys pick up on this, yes? But if you look into the track record what we have done over the last couple of years, it's very easy. We started with small add on deals. We tested, right, our capabilities and our skills to integrate companies. We developed a partnership model.
And over time or less over the last 3 years, we have increased the sophistication of our M and A deals and how we are integrating the deals. This whole partnership structure we are working with for the larger deals, right, is obviously something we can build upon. And on Axioma and on ISS, and I'm sure that Sebastian and Gary will agree to this, right? I think the fact that we are dealing with our partners like true partners is very important. So it's very clear, right?
We dare to go into larger deals. We don't think it would be the right thing to do to go into transformational deals, right? But somehow in the €1,000,000,000 to €5,000,000,000 range, that's something what we are targeting. But again, I will not let myself or my dear exocallers get pressure, right? We will do whatever is strategically and financially compelling and comprehensive, right?
That's what we are doing. It needs to be convincing at the end of the day. We are not doing M and A for the sake of it. And I can assure you that our Chairman of the Supervisory Board, Martin Jette, is also very keen in order to challenge us that we are doing the right deals right. And you can be assured that our compensation system is fully aligned with the fact how we are doing M and A deals, not just M and A deals for the sake of it.
We need to do M and A deals, which are good M and A deals, and that is what we are promising.
Thank you, Theodor. I would now like to hand over to another question here in the audience and hand over to Dirk Becker from Allianz Global Investors.
Dirk? Yes, good afternoon. Thank you for the presentation. I would have also two questions, please. First would be on Borsa Ittariana.
And I know this asset would not have been a good fit for you. When I look at your M and A criteria, it probably doesn't meet lots of those, but it would serve been strategic because you've now allowed Euronext to become the preeminent stock market operator on the European continent, and they've been able to enlarge their value chain. So my question is, would it not have been good for you to make a bit more of an effort to make it maybe more expensive or more difficult for Euronext to get to this asset? And the second question would be on ISS. I think it changes a little bit the complexion of Deutsche Borse because it's a bit more labor intensive than what you usually have.
It's a bit less operational leverage. In the future, this will be probably 20% of your employees for less than 10% of your revenue. And I would just like to understand whether there's a chance that you can increase the operational leverage and make this more like a Deutsche Borse business as we know it? Thank you.
Thank you, Dirk, if I may, Jan.
Go ahead.
Right. On the Borsa Italiana, Dirk, to be very outspoken and clear, we have looked into it in parallel to our ISS deal. That's not a surprise. You can't do a deal like ISS overnight. And this is all during hefty corona times, point number 1.
Point number 2, indeed, we had been interested in the MFS side, right? It's a fixed income business, which would have been a great fit to us, but it's not a secret that would have created immediately antitrust issues on our side as well. Therefore, we have seen a clear risk associated on the MFS side. And therefore, our proposal had been finally that we go into a minority position in the most attractive part of the business. Point number 3 or 4 is on the governance side, we were not.
We were not in a position and not willing to compromise ourselves, right, in such a way what was expected there. And therefore, right, we were in the game, whether it was an expensive asset at the end of the day and who was driving the price. It's not on me and us to judge. But at the end of the day, I think Euronext did its conscious decision, and it's good. And we love competition, and we will continue to work and to discuss together with others, including Stephane Bouchnard.
And therefore, it's fine for us. And as you can see, right, I think it was difficult for us, and we have been hesitant at the beginning, shall we enter the discussion or not? Because we were expecting that you guys are challenging us there. But we have said in hindsight in 10 or 15 years, you guys would have challenged us, right? Why didn't you look into it even more?
And it's also pretty clear. I think with the outcome now that we couldn't get Borozartaliana, but that we were successful with ISS, we are extremely happy. On the second question, Dirk, on the ISS side, yes, indeed, right? Yes, indeed. The structure of the business of ISS is slightly different than ours, right?
But at the end of the day, right, we have understood, right, part of the family of ISS is, right, The people they are which are employed in India and the Philippines, right? It's part of their business system. They're fully integrated. And when we talked with Gary, it was from beginning on a very interesting scenario. Could it also be something which we can leverage on our side?
And as I said before in my introductory statement in my first part of the presentation, you can be assured we are listening carefully to our partners, how they are doing it. And I think I'm quite famous for when I see money on the street which can get picked up, I will go for it. Trust me, Dirk. Trust me.
Thank you, Theodor. We would now like to turn to the video stream and speak to Mike Werner from UBS for the first question from the video stream.
Can you hear me all
right? Yes, Mike, we can. Go ahead.
Excellent. Thank you. Two questions from me, both related to ISS. I guess, one, I was just wondering if you and again, thank you all. Thank you for the detailed information with regards to ISS.
I was wondering if we could get a better understanding of how much the governance, the proxy part of the business generates from a revenue perspective and what that growth rate has been in the past couple of years. And then second, we know there's a number of regulations coming into force in the EU, the EU disclosure rules, taxonomy, which is going to require much greater disclosure on ESG related information. I was just wondering if whether through Contigo or through ISS or through a partnership, how Deutsche Borse can potentially benefit from those regulations coming on board? Thank you.
Thank you, Mike. Could we please switch to Gary? Gary, you're on. Did you follow the questions?
I did. This time they came through, Vlad and to your Jan.
Thank you.
So two questions. The first one, the governance business also used to be known as the proxy business is approximately a third of our revenue. It has had incremental revenue growth over the last few years and continues to accelerate. So I would say it's close to mid single digits. It's in line with our revenue growth on a consolidated basis at ISS.
And we're very pleased to see that accelerating revenue growth on that business. In terms of rules, ISS is used to working within regulatory regimes. We strive very hard to have strong relationships with our regulators. We are very supportive of those and we think that those are true competitive advantages for us as well in how we manage to help both institutions as well as corporations meet their obligations, meet their fiduciary obligations with regards to the rules that are being proposed. And we ourselves as participants also meet those rules.
You will see most likely rules over time, particularly in the EU targeting ESG and we feel very comfortable that we will be able to help asset managers and others, including obviously ISS itself, it meet those obligations fairly quickly.
Thank you, Gary. And while we have you on, I have a further question regarding the ESG part of ISS and the growth rates you're expecting? And also a little bit in relation to the overall size of the market, so where you see yourselves positioned, what the competitors are? So if you could elaborate a little on that, please.
Sure. We view our ESG business as one of the top 3 global ESG businesses in the world today. And we came from a fairly small place just a few years ago. Depending who you ask in the marketplace and I'm not going to pass judgment on this, but I'll just give you factual information. We probably are number 2 or number 3 in terms of our ESG size of the business and our business is accelerating.
So in terms of percentages, I'm happy to if we have time, I'm happy to dig in a little further. Yes, I don't know if that answered the question.
Thank you. I think it did very well. Thank you, Gary. We have another question from the video stream from Philip Middleton of Bank of America. Could we please switch to Philip?
Philip Middleton, Bank of America.
Maybe the question was difficult.
Maybe one, 2 sort of question in between regarding guidance. And the question was on the existing parameters and excluding ISS, what should be the expectation for revenue and profit growth in 2021, so next year versus 2020, Gregor?
Yes. That's obviously a challenging question as we all do not have the crystal ball. And in principle, we will give you more concrete guidance on 2021 when we have seen our preliminary financials in 2020, so that will be mid of February. But in principle, I can already say today that we are focused on our secular net revenue growth, what is 5%. So that target is true for 'twenty one.
From a cyclical perspective, obviously, you know that our Q1 was very strong. And so most probably, that's not possible that we will beat that or there will be strong headwind in the Q1. But in the quarter 2, 3 and 4, we see obviously the chance to outperform that. And our basic scenario is that beginning from Q2, we will get we expect some economic recovery so that a vacuum is available for in the world and so that economic recovery would start and that would obviously help to have some smaller cyclical positive impact in Q2, Q3 and Q4. And with regard to the M and A perspective, what is the contribution here?
So we're already now more than €50,000,000 for next year out of the transaction from UBS Force Center on quantitative broker. And then obviously, ISS has sent the question when are we able to close that in the first half year. The earlier, obviously, the more there will be in 2021 a significantly impact out of that kind of M and A transaction. So overall, that's from a revenue perspective. And from a cost perspective, as Theodor already mentioned, we would be we have contingency plans in our drawer where we are able to react if we would see more headwind compared to what we expect today.
Thank you, Gregor. Could we please try to switch to the video again? And Philip Middleton, Bank of America?
Philip? Can you hear me?
Yes. Go ahead.
Yes. Can you hear me?
Good. There we are. And thank you very much to your colleague for arranging all this as well. She was very, very zealous and we appreciate it. 2 things quickly.
First of all, what is the logic for keeping 20% minority stakes in acquisitions? How does that help you merge that business with other businesses in the group? How does that help you drive revenue synergies? And also, in this specific example, how does the fact you've different minorities in ISS and Contigo help those two businesses work together? And also, you've not actually talked about T2S at all in this presentation.
I just wondered if you had any updates there. If not, then that's fair enough. It would be interesting to hear about that too.
Pierre, do you want to start with the approach to minorities, please? Great.
Let me kick off and then maybe Stephane may add on additional color. On the 20 percent minority, what is the governing thought on our side, Filip? Firstly, we say, yes, it is very important and highly welcomed if there is a senior management team who is willing to invest in our joint businesses. The willingness to roll money, own money, right, of the senior management team is an asset in itself because we know, right, that this will drive the future success of companies. Secondly, having a private equity sponsor, right, working together with us is normally also a strong driver for discipline, execution discipline, future growth and operational excellence.
That is the these are the 2 major principles. And on the UBS front center side, right, it's good to have the client with a third party business, right, to have the client with the biggest part of the business on board. And therefore, it's always a clear rationale behind it on the minority side. It is not a must that we go into the minority positions, but if we can structure it in a smart way, we are willing in doing so. Stephane?
Thank you, Stephane. So the question on the investor CSD and T2S, please.
Very happy to give an update. As I stated at the beginning in my few remarks around Clearstream more broadly, Clearly, the headwinds from the net interest income have offset and hidden, if you want, a very continued good growth on the basic custody and settlement fee side and therefore also our investor CSD offering, which has seen a 6% growth. We have by now and just these days passed €15,000,000,000,000 of assets under custody. So I think that's a hallmark. If you go back, we started at €13,600,000,000 in 2018.
So therefore, that momentum is there. And with respect to the comprehensiveness of the product, in the next few weeks, Spain and Portugal are going to be added. I think we truly can say that the core countries of Europe are now on stream in terms of the investor CSD offering.
Thank you, Stefan. And we would now like to change to Bruce Hamilton in the video stream. Bruce Hamilton from Morgan Stanley, please. We see you, Bruce. We can't hear you.
No. Nope. Then let's maybe try another one quickly. Gojit Kambo from JPMorgan. Is Gojit on?
Gojert Kambo from JPMorgan. Gojert? Yes. If you speak up a little, then we also hear you.
Hi. Can you hear me now?
Yes. We can. I'm from JPMorgan. Is Goetz on?
Jan, can you hear me?
Yes, we can. Please go ahead.
Yes, brilliant. I just got a few questions. So firstly, just I don't know if you answered this already, but in terms of the revenue growth of ISS was around 5%. Just in terms of different businesses, how do you think about growth there in terms of market intelligence, the corporate governance and ESG? Is this a different growth profile in those three businesses?
That's the first question. And then second, just on Quantigo, given the 50% growth in CreditWise, how should we think about the cost development? You look at the innovative products,
Thank you, Gudjit. Maybe we'll try to go to Sebastian Chorea of Contigo to address the question regarding the relationship between revenue growth and cost growth. Sebastian, can you hear us?
Yes, perfectly. Thank you. Thanks, Corjan, for that question. From our perspective, the way we look at this is that we need to have revenue growth because revenue growth is behind the thesis of Contigo and of course given the market opportunity. But in order to achieve that revenue growth, of course, we have to invest in the business.
So at this stage, what we're thinking is that the cost is going to start right now it has been going more or less in lockstep, but on an ongoing basis, we're going to start seeing a slightly decrease in the growth rates for costs and a little bit of an increase in the growth rates for revenues, which will help us a bit expand our margins. And that's going to be just a function of the operational leverage that we're going to get. Of course, the synergies that we promised, but let's not forget that unlike ISS where it was just one company coming in, in this case, we also had to integrate stocks and Axioma. So in order to do that, we're going to get operational leverage that comes from that integration.
Thank you, Sebastian. And the first question was addressed to Gary. I think you touched upon a little on that already, but maybe you could elaborate a little bit more on the differentiation of growth rates between the different segments as part of ISS. Gary?
Thank you, Jan. So ISS is comprised essentially of 5 business units. And going quickly through them, the first one is the governance business. The second one is the ESG business. The third one is the market intelligence.
4th is corporate solutions and 5th is media. We think of them holistically actually when we make investments for growth. So our targets are around 5% growth rates that Theodore mentioned before. We if you try to break it down, you will see that our governance business and our corporate solutions business are in the mid single digits range and we expect that consistency to continue. If you look at our ESG business, we see that as a double digit growth.
If you look at our Mi business, that business was is in the midst of essentially of an investment program because we are refocusing it. So I would say that our target is low single digits and our media business is highly dependent on the COVID environment. So you might see significant growth of that business next year if a vaccine is in place and we all get back to travel and conferences. So maybe that gives you a little bit of a flavor of the growth, but it all essentially adds up to currently, it's been adding up to about 5% revenue growth. Hope that clarifies.
Thank you, Gary. One question from the jet system here is more regarding cyclicality. So what if the volatility doesn't pick up? How will we be able to compensate for the lower NII? So I think this goes a little bit into the contingency plans we've mentioned.
Gregor?
Yes. Obviously, this lower NII, so in the Clearstream segment, so I told you that that Clearstream overall is targeting for a 3% to 5% secular growth. Obviously, that already compensates some of the reductions we see on an NII side. On a Deutsche Borse Group perspective, if we would see strong cyclical headwind for the full year 2021, then we are able to react. It's by far not our base case.
That's why we call it contingency plan, and it's very concrete, the contingency plans we have here. So we would be able to react that the cost increase would not be the way as we planned for. So we would be able to have some close to flattish costs on a constant basis if there would be the need to.
Thank you, Gregor. Could we now please switch to the video stream again? And first, the questions of Arnaud Giblatt from Exane. And after Arnaud, we would like to switch to Johannes Thormann from HSBC, please. So first, Arnaud Giblatt from Exane.
Hi, afternoon. Can you hear me?
Yes. Go ahead, Anno.
Yes, great. So I've got 3 quick questions, please. On ISS, there's a 20% minority stake that remains. I'm wondering if there's a put option for private equity
to exit. Clearly, they have to
have an exit at some point. So I'm wondering what that is. Secondly, on your use of reported earnings as a reference base rather than adjusted earnings. Clearly, we've been proponents of this. I'm just wondering what has made you make that change.
And thirdly,
EEX, I'm wondering if you could comment a bit more about the slowdown in volumes we've seen in 2020, what that's down to. I think it's lower electricity price consumption, but I'd like to hear from the horse's mouth. And also what you see in terms of the outlook on volatility of electricity prices given the structural changes to electricity markets? Thank you.
So Gregor will start. And then after that, we'll switch to Peter Wright of EEX, please.
Yes. With regard to the reference of our reporting changes, so Arnaud, I think you were one of the guys who told us that the adjusted number is not the perfect number that we should focus on the reported number. So we take this feedback obviously seriously. And so that's also the reason on the one hand side that kind of criticism we got. On the other hand side, it's also a simplification of our reporting if you have just one number set on a reported basis.
And so the reasons out of simplification also was the main trigger to do exactly that way. With regard to the first question of the put options, yes, there are put options in place also for the management, also for the PEs of Gensa.
Thank you, Gregor. So could we now please switch to Peter and the question on EX and the volume development in 2020? Peter?
Yes. Thank you for the question. And the answer is pretty simple this time. The volumes that we've seen in 2020 have been largely driven by the direct impact of the COVID crisis. We've seen significant growth in March April, in particular, as volatility picked up and people needed to adjust their positions.
But the overall impact of this crisis was that the power demand has dropped and we've seen the outcome of this through May till August. In the last two and a half months, September, October, volumes have picked up and so has revenue because it's directly related. So overall, this is still very much driven by the development of the COVID crisis itself. And that will continue also into next year. And depending on how that process will develop, whether we will face another shutdown, which obviously will reduce power demand again.
So the outlook for volatility is almost impossible to predict because it will be direct related to the COVID scenario.
Thank you, Peter. Could we now please switch to Johannes Thormann of HSBC, please? Johannes, the floor is yours.
Johannes from HSBC. Three questions, if I may. First of all, on your 10% revenue and 10% growth target, could you explain why you don't shoot for operational leverage anymore? Normally, you have targeted positive jaws in this. And can you help me understand this?
Secondly, just if you could provide some more details
on the
financing of the ISS deal in terms of the bond. Do you have a certain duration? Mind you, want to repay it quickly or rather use the cheap rates lower for like lower for longer for 10 years or so? Could you explain this? And last but not least, what drove your decision to target 5% M and A driven revenue growth as you never guided for M and A growth before, although now market prices are far higher and probably contain bigger risks in those deals?
Yes. Thanks, Johannes, for your questions. So yes, there is a change. So we say it's 10% top line growth and it's 10% bottom line growth. But we also said 5% of this 10% revenue growth comes from M and A.
And you see that the margins of that asset we acquired is lower than Deutsche Borse has today overall. So that means if we do 50% of our growth from M and A and that's below the current margin level, that means the existing business, there you will see an operative leverage. And so that's why we do not change that principle for the existing business. And the assumption here is also that from a cyclical perspective, we will get some tailwind over the next 2 to 3 years, and that gives us flexibility and opportunity also to show leverage from today's existing business. 2nd question with regard to the funding of ISS Bonds.
Yes, the intention is so overall, we want to fund roughly €1,000,000,000 so roughly half of it in U. S. Dollar, half of it in euro most probably and also on a longer term basis. So that's our understanding. And if you look on our maturity profile from our bond spend, so every year basically there is a replacement so that we could also react to reduce the leverage when we have created enough cash out of our cash flow generative business.
The third question with regard to why do we pick now 5% M and A growth. So you have seen in the past, we did roughly some 2% of M and A growth. Now we did this ISS transaction, what is obviously a bigger one than we did in the past. But this shows you that our M and A ambition level is more credible, and it's clear the management focus to continue to diversify our business, specifically in the area of more recurring revenue, so specifically in ESG, Data Analytics and so on. So that is our core conviction that this is also the right way.
And overall, we have more confidence that we are able and we are prepared now to do more M and A as from also from organizational perspective, we increased our capabilities here. And it's the clear understanding of Deutsche Borse Management to go that path organic and inorganic growth.
Thank you, Gregor. Could we turn to Haley Tam from Credit Suisse now please on the video stream?
Hi, can you hear me okay?
Yes, Haley. Go ahead please.
Fantastic. Okay. So two questions from me, please. First of all, if I can ask you about M and A again and the information that you put down on Slide 36. Looking at that and the sums of the columns on that slide, my interpretation is that your main focus for further M and A would be Eurex and EEX.
And I just wondered if you can confirm that that's the case and perhaps make any remarks there. And then the second question is actually very specifically about Eurex clearing. I just wondered on slide sorry, I've lost the slide number now. On Gregor's favorite slide where he breaks down the pathway, Slide 35. Can you confirm if the €35,000,000 growth that you expect to see from OTC interest rate swaps, does that include any incremental growth from the European Commission's encouragement to people to reduce their excessive reliance on UK CCPs?
Thank you.
Okay. Yes, sure. This OTC interest rate, also starting with the second question, so this additional €35,000,000 is based on the current environment. So we are confident today, we achieved some 19% market share, and we are confident to continue to grow that in the range of 25%. So that helps with the growing market overall to increase our net revenues from this year, roughly €55,000,000 to close to €90,000,000 in 2023.
So here is not included a potential Brexit scenario where EU Commission and ECB would consider in case there's final no agreement between EU and UK, would these institutions would consider to reallocate business to Europe. And so that is not part of our business case. So that is basically an option on top of that and is not included in our plan here. With regard to your first questions, yes, you do not see in our plan here M and A transaction in the Eurex, EX and 360T, FX part. And as you have seen in these 6 asset classes, what we defined, all of these areas are clearly of high interest for Deutsche Borse.
And therefore, we are looking also intensively in these areas what kind of M and A is possible. So we do not exclude it to the areas where we did already M and A transaction like investment funds services like now ISS and Contigo. So we are also in the other areas much interested to do M and A. So we are open in all of these 6 asset classes we mentioned.
Thank you, Gregor. Could we now turn to the question of Andrew Coombs of Citi, please? Andrew Coombs? Andrew, are you on? Or can we have any alternative analysts, please?
All right. It seems there is a technical issue. Maybe we are moving on with a question out of the chat system regarding the key KPIs we've mentioned, so revenue growth, EBITDA and earnings per share. And the question was, given that how important M and A is for our strategy, why we don't look at any return metrics?
Yes. As you have seen in my presentation, we have a clear financial framework, and that includes 2 KPIs. So one is the that it's already cash earnings accretive in the 1st year. So that's obviously perfectly covered by earnings per share. And the second, KPIs is return on investment where I told you that across the portfolio, we should be in line or above our current WACC and our WACC is currently 6%.
So from an M and A perspective, we have this clear KPI in our mindset overall for Deutsche Borse Group. This KPI doesn't make sense to follow-up with a return on equity or something like that because in the mid in all our trading areas, we are not regulated. We do not need a certain amount of equity. Therefore, focus on M and A side. Yes, we have both KPIs, return on investment and earnings per share on our agenda, and we show capital discipline across the framework I told you.
Thank you, Gregor. We would now like to try Andrew Coombs again of Citi. Andrew, the floor is yours.
Fingers, you can hear me this time.
Yes. Excellent.
Perfect. All right. Well, thank you for taking my question. I actually have 3, if possible. The first of which would just be on what you are projecting for future M and A in your EBITDA progression number.
You've kindly given the incremental €200,000,000 for future M and A in revenues. I assume you've embedded an EBITDA margin assumption on that for your 10% EBITDA growth. So if you could just clarify there, are you using 35% similar to ISS? Perhaps you could clarify. 2nd question and a much broader question.
If I look at the revenue building blocks, previously, you were guiding to greater than 10% revenue growth from Eurex and the EEX. Admittedly, that was cyclical and secular when I look back at the previous Investor Days. Now you're guiding to about 5% just from secular. Can you just elaborate, is that just purely because there's no longer a 6 core element embedded there? Or is there actually a lower secular growth rate that you envisage from here?
And then the final and last question, you talked about 90% of ISS revenues being recurring. Please, can you just elaborate on exactly how the charging structure works there? I assume it's a subscription based model. Thank you.
Okay. Maybe I'll take the first two questions and then Gary can comment on the third question with regard to the recurring IHS revenue level. So for future M and A, so we told you that most probably the EBITDA margin of the acquired assets will be below of the level of Deutsche Borse Group. But it really depends on the acquisition we do. So with regard to UBS Force Center, that's even a higher a we guided you and said it's roughly 35% on an adjusted basis, but also with some operational leverage scaling aspect.
So overall, we don't want to specifically guide what is now our future EBITDA margin in the targets because it could be very different. And you see here 35 on the one hand side, 70 on the other hand side. And it really depends in which area we do which deals. If you would do more in the Investment Fund Service area, most probably, there are higher margins compared to the data analytics, what would be closer to the ISS margin. Your second question with regard to trading area, cyclical and secular opportunities.
So you see on my favorite slide again that we assume some cyclical upside in the trading and also in the clearing and post trading business. So that's €170,000,000 you see here. And so that's in the range of 1% to 2% roughly on average for the next years. So there is some cyclicality here included. We just say on a net basis, it's neutral because we have this headwind with regard to NII at Clearstream.
But this will be slightly overcompensated by the expected tailwind we expect for the trading business. 3rd question to Garry.
Yes. Thank you. Garry, do you want to elaborate a little on the revenue generation at ISS and the fee models, the recurring nature, please?
Thank you, Jan. Can you hear me?
Yes, we can.
Okay, wonderful. Yes, as previously stated, our business is approximately 90% recurring and a good chunk of the remainder is what we call reoccurring. So the short answer to the question is that, yes, they are subscription businesses. Subscriptions range between 1 several years. And as part of those subscription businesses in many instances, sometimes we have what we call one time revenue that comes out of it as well, but it is part of a subscription.
But generally, you should think of them as subscription businesses.
Thank you, Gary. We have two final questions for today from the video stream. The first one is Bruce Hamilton. So I think we have an audio now. Bruce?
Hi, there. Yes, can you hear me?
Yes, excellent.
Brilliant. Okay, cool. So just two questions, one on FX positioning and one on sort of deals. So in terms of your FX business, I guess I was keen just to understand how far you think we're through the kind of shift from OTC to exchange. I think on the EEX, you said about 50% of the way there.
But how much is there further to go? And then in terms of things like futurization and central clearing, I get the impression talking to other people that CME are further advanced in futurization and the appetite for clearing, given we've just been through a crisis period, actually the credit risk hasn't really emerged. So how strong is that theme? And how is your positioning very different in futurization to the CME? And then finally, I guess, do you think you have all the building blocks to succeed in FX?
Or is there anything you would look to add inorganically? And that leads on to the question on deals. I guess, given you're now 1.75 times net debt EBITDA, your peers obviously have shown that they're willing to go well beyond the long term sort of debt capacity to do strategic deals. So if there's a good deal comes along, would you be willing to go, say, 2.5 times with a view to paying down over 12, 18 months? Or would you take a different view to the likes of Euronext and LSC?
And back to Haley's point, when you look at the sort of opportunity set from here, is it still more in the sort of IFS and data area? You see assets you see a fragmented pool of assets that you could buy? Or is there a broader set of opportunities in the other areas?
Thank you, Bruce. Carlo will take the first question, please. Carlo?
I took 3 parts. Number 1, do we have all the components in place to compete as a diversified offering? Number 2, is futurization really coming to the extent that is anticipated? And what's our differentiating factor to the CME? And number 3, does futurization in general still a theme despite some developments or that didn't come on the clearing side.
Number 1, I mean, I think this is our strength, and it has also shown through the crisis that we are very diversified on the OTC side as well as on the future side. I mean, on the OTC side, we cater different customer segments, the Asset Management segment, the corporate segment as well as the market tech and banks or hybrid bank sector. This helped us a lot. So we are benefiting from volatility when it comes. When it's not there, we still have a constant growth.
I also want to add, we had about over the last 2 years, we added 400 new customers at literally no churn, lower than 1%. So that explains our secular growth in all different segments and activities. So volatile spot business, not so volatile swap business and a mix of all. So and this is in different geographies, whereby lockdowns in India have hit us, whereby activity somewhere else was higher. So diversification on the OTC side is one of our winning factors, and this adds scale.
Now the addition to the futures already has shown additional revenues this year, which adds to our diversification. Our plan was to make about €1,000,000 of this. We come close to this probably and the tendency increasing. Now the question, is that coming more or not? Yes, it's coming more.
It doesn't replace necessarily OTC. It even in addition because now the market, similar like an equity, have an ability without physical settlement to do hedges on the listed derivative side, which leads to overall increased activity. In comparison to the CME offering, we see that in certain currency couples, we already have better spreads in big parts of the day. So the liquidity is there. We also have some innovative offering like the Rolling Spot Future, which doesn't exist on the CME side.
The composition there is different. But there are days where we already have in certain currency couple 10% to 20% of the market share of the CME tenancy increasing, and we're increasing the variety of currency couples and introducing options over the course of next year, so listed options as well. And the last question, is futurization and clearing still the name of the game? Yes, it is. I mean, some regulators have a bit pulled back on the push on clearing requirements.
We haven't seen that for the cross currency swap. For some reason, not yet at all. But I think the proof is still out here that this might come over the course of the next couple of years, and we are well prepared for this. So I assume that credit mitigation through clearing will be a significant part of the credit mitigation path going forward, which is also documented by articles from certain banks, which are big in the PB space today and want to reduce their risk in that era. Does that answer your questions?
Thank you, Carlo. And the question on M and A goes to Theodore, please.
Yes, Bruce. Thanks for the question from my side. Let me try to differentiate our business a little bit more, right, with regards to M and A agenda. Firstly, we've got a fixed income business where we are pretty much lagging behind. And there, I'm willing I think everybody in Exco is willing to pay a strategic premium if necessary in order to fill the gap, point number 1.
Point number 2, on EEX, we are a big player. We are a top player globally. We see each and every deal, right? And we will continue to act as we have done in the past, potentially rather small and midsized deals than bigger ones because we immediately run into antitrust issues. There is a certain exception there, and that is the field of the adjacent businesses on the commodity side.
Currently, we do predominantly power and gas, right? And of course, carbonization is a big topic there. On the foreign exchange side, Carlos Business, right? It's very clear we are determined to grow and organically. Unfortunately, the space of available targets is fairly limited, right?
And we cannot change this. And therefore, right, we will further grow this business organically. And you have seen with the acquisition of GTX some 2 years ago, which works out very nicely, right? And the numbers what we are producing this year, it's a good starting point. But on the FX side, right, we need to have tangible assets in front of us and then we will look into it on the M and A side.
IFS. On IFS, I've always said and I can reiterate that we are willing to look at each and every situation where our IT platform, Vestima, fits. There we will do a deal. There we will do deals. We are globally a super player, 2,800 €1,000,000,000 €2,800,000,000,000 of assets under custody there, right?
So this is always a field where we look into it. Of course, we have to differentiate where do we have antitrust issues, what can we do further, right? This is the normal course of business what we are doing there. ESG, I don't need to repeat what we have said before. ESG, we've done a big acquisition now, right?
And ESG is a field where Gary, where also Sebastian will look into it. And we as a group, this is on the radar screen as well. What is left then is data and analytics. Data and analytics, I've always said, we are not interested in the old fashioned data businesses with end terminals and this kind of stuff. We interest we are predominantly interested in the analytics part of the data business.
We are predominantly interested in business which create high recurring revenues. We are predominantly interested in businesses which fit together with Contigo now, newly with ISS, right, with our value chain. That is the situation how we look at it. And as you have seen, we have opened up now the door for ESG, right? And I can tell you, if over the course of the next 3 years, ladies and gentlemen, right, another asset loss will pop up, right?
Compass 23 is like a true north, right? The needle, right? It shows us where we want to go, and we are happy to open up this. If there is a new asset class popping up, we will do. We have not discussed today about asset classes which are which can be tokenized in future.
We have not talked about asset classes, which are driven predominantly by the technology side. We've got Christoph Boehm sitting here, right? I think we need to be flexible simply to do there. And we have not talked about all the venture investments we have done, right, which is good, yes? We're spending a little bit money there, not too much, but very focused money, which is very well perceived.
And we learn a lot from this kind of investments. So this gives you the framing of the overall situation on the M and A side.
Thank you. Theodor, could we now the question of Martin Price from Jefferies, please? Martin?
Good afternoon. Just had a quick final question on ISS. I was wondering what gives you confidence that there are no risks of client attrition or perhaps enhanced regulatory scrutiny of the deal given possible perceived conflicts of interest resulting from ownership of the governance, proxy advisory, broader advisory businesses alongside listings and the index services business? Thank you.
Yes. That's a question also for Garry, please, regarding the independence of your governance research. Gary, are you on?
I'm on, Jan. Thank you. Can you hear me?
Yes, go ahead. Great.
And I think I caught most of the question. It kind of faded at the end. But if the question has to do with the conflicts of interest policies, ISS has been and has had this structure of businesses for many, many years and we have worked very closely with regulators and of course with clients. Our clients are generally extremely comfortable with how we run things. We have very robust firewalls between the businesses.
They operate separately. Our research is generated at Onschlank. Our clients clearly know that. We get diligence by the largest financial institutions in the world on a recurring basis, sometimes an annual basis. We provide a number of compliance reports to them upon request.
So we're very comfortable with our business model and we don't think this transaction at all impacts that potential client attrition. We have been through a number of transitions over the years and we have been quite successful in maintaining and retaining the client relationships. I think there is a significant amount of trust and credibility that has been built over the years and I expect that to continue in the future. Thank you, Jan.
Thank you, Gary. We still have very few questions in the pipeline, but given that we already slightly exceeded our time today, I apologize and would like to hand over to Theodore for closing remarks. Thank you.
Yes, ladies and gentlemen, thank you for this as I think quite lovely discussion. Thank you for joining today's Investor Day. Let me conclude with a couple of final remarks. Firstly, bear in mind, originally, we had planned to conduct our Investor Day or our Capital Markets Day end of May. And I could share with you openly and transparently, we had developed our strategy prior to the originally planned Capital Markets Day.
We presented our strategy to the Supervisory Board where we had discussed it in the strategic committee in the overall governance body, right? And then we decided to postpone the Investor Day till November till today. And I can share with you, right, that we really went through carefully and thoroughly. We went through, can we really achieve the secular growth? Is corona is COVID-nineteen a driving force which changes fundamentally our businesses.
We came to the conclusion this is not the case. And our business segment heads were involved in this. This is not just the Greco, Theodore, Stefan, Thomas, Christoph, Heike, right, type of stuff, right? We asked our business, our business segment to have a huge degree of freedom, including Sebastian, right? In the future, Gary, we've asked them, what is your view on the secular growth?
And they came back and confirmed, right, the discount coming from the COVID is fairly limited, right? On the cyclicality side, we have factored in the changes of the NII, especially coming from the United States rate cuts. That's what we have factored in. And therefore, we changed some assumptions we originally had on the cyclicality side. On the M and A side, right, it's very clear, right?
We simply said, we can do roughly 2% CAGR. We demonstrated 2% CAGR over the last 3 years, excluding ISS. And then we said, given the pipeline, given where we are working on, where we see the ideas, where we have started conversations, right? We think we can be a little bit more bold. And that made us being comfortable to share with you for the first time guidance on the M and A side.
And yes, you have seen, right, we didn't overpromise. We want to rather overdeliver. So I do think we have developed a fairly good financial plan. It is solid. The strategic basis is very good because if you look into the strategic direction and the fundamentals where we can work on, these are very strong.
So we continue to be very transparent with you, right? We are not famous for allowing surprises, right, in last minute. That's normally not the case. Of course, nobody can exclude any kind of black swan events, right? And that is the reasoning.
And we shared this openly with our Supervisory Board, with our Strategy Committee, with our Chairman of the Supervisory Board. We discussed, right? Of course, things can happen, right? And therefore, we baked in consciously this contingency plan. And hopefully, we never need to rely on it.
Thank you for your attention today. Stay healthy and see you soon.