Good afternoon, ladies and gentlemen, and welcome to the Deutsche Borse AG Analyst and Investor Conference Call regarding the Q2 2021 Results. At this time, all participants have been placed on a listen only mode and the floor will be open for questions following the presentation. Let me now turn the floor over to Mr. Jan Strecker.
Thank you, and welcome, ladies and gentlemen. Thank you for joining us today to go through our Q2 2021 results. With me are Theodor Weimar, Chief Executive Officer and Gregor Pottmeyer, Chief Financial Officer. Gerd and Gregor will take you through the presentation. And afterwards, we will be happy to take your questions.
The presentation materials for this call have been sent out via e mail and can also be downloaded from the Investor Relations section of our website. As usual, this conference call will be recorded and is available for replay. Let me now hand over to you, Theodor.
Thank you, Jan. Welcome, ladies and gentlemen. Let me start today's call with a short update on the implementation of our strategy, Compass 2023, which we introduced last year. Afterwards, Gregor will be presenting the financial results, as always, in pretty much detail. Let me first summarize our growth strategy in financial terms on Slide 1 of the presentation.
With Compass 23, we are pursuing a simple but realistic growth formula. We think we can achieve 10% Net revenue growth and a 10% EBITDA growth on average per annum between 2019 2023. With regards to net revenue, we have built a strong track record of consistently achieving 5% Secular growth. Accelerating the M and A growth to 5%, what we are planning is very realistic over a 3 year timeframe from our point of view, especially after closing off the ISS transaction earlier this year. The COVID-nineteen pandemic has made the macro environment we operate in extremely dynamic, but the underlying secular drivers for our business, including the trend from OTC to on exchange, the shift to passive and the proliferation of ESG are fully intact.
We will also continue to pursue our MLA agenda with undiminished force rather than Engaging in complex transformational projects that would tie up resources across the entire group and could be perceived as an expression of Megalomania. By the investment community, we are making use of inorganic growth to increase our breadth and scale across the different asset classes. This strategy has already worked fairly well for us, so we are going to stick As we assume that M and A on average dilutes our EBITDA margins, we are targeting an increase of organic EBITDA Margins. Next to top line growth, continuous improvement will be a key measure to capture efficiencies and ensure The scalabilities of our existing business. With this, we should be able to increase the organic EBITDA margin by a few percentage points until 2023.
Cyclical growth beyond our expectations, For instance, at the conference of the starting speculation around inflation and interest rate development would result in an additional improvement of our EBITDA margin. Since the announcement of our Compass 2023 Midterm targets last year. We've made good progress, as you can see on Slide 2. As we all expected, net revenues in the first half of this year was under some cyclical pressure because the record activity levels at the beginning of last year. However, we were able to successfully mitigate these effects with continued secular net revenue growth and an increasing M and A contribution.
Due to the cyclical headwinds we experienced, we decided to manage the organic operating costs as prudently as possible and also our continuous improvement efforts are paying off. Therefore, The overall operating cost increase in the first half of the year was entirely driven by consolidation. Fact. With this, we are well on track with our semi annual results to deliver upon our EBITDA guidance for 2021. The development is also fully in line with the expected Compass 2023 growth trajectory.
Let me now touch upon 2 other important key performance indicators that we use to measure the success of our strategy. The first one on Slide 3 is the share of recurring net revenues, which has steadily increased over the last couple of years. Today, More than half of our net revenue is based on fixed fees, subscription for licensees and is thus Recurring. Looking at the different sources of growth until 2023, we are expecting a further increase of recurring net revenue in the years to come. We feel that it is somewhat underappreciated by the market as the focus on some of the cyclical Dependencies like equity market volatility is still almost as high as it was in the past when our revenue streams look completely And also, please do keep in mind that the transaction related net revenues does not just contain cyclic components, It also includes many secular growth components like product innovation at EEX, the trend towards renewables at EEX and the OTC opportunity at 360T.
The second important KPI It's the share of ESG related net revenue on Slide 4. The ISS acquisition has also helped us grow our exposure to ESG related products and services. And more importantly, it is positioning us extremely well to benefit from the significant ESG growth opportunities across the group going forward. At the same time, We are also supporting the transformation towards a sustainable company, but we are not only committed to this, We are also aiming at improving our own corporate ESG footprint. For instance, reaching Net zero climate neutrality by 2025, 25 years ahead of the official target of the European Union shows that sustainability is also part of our DNA as a corporate.
The most recent milestones In implementing our M and A strategy was the announcement of the acquisition of Crypto Finance at the end of June shown on Slide 5 on our presentation. While financially, this is a rather small transaction, strategically, It is an important step on our way to building a trusted and fully regulated digital asset ecosystem in Europe. We identified crypto finance as an ideal partner because it gives asset managers exposure to its new asset laws on its way to institutionalization session in a fully regulated environment. As part of Deutsche Borse Group, the business will be further scaled. Its range of services will be expanded, and we intend to make it accessible for our existing participants.
Before I hand over to Gregor, let me touch upon a growth opportunity that is gaining more and more in importance. Over the years, We have built up a very successful portfolio of minority investments, which includes a broad range of attractive businesses along our entire value chain, as you can see on Slide 6. The strategic angles range from exploiting joint business development opportunities via getting access to innovative technology to making financially attractive investments. With this, we are supporting our core business to handle the speed of changing landscapes in corporate various digital trends and transition to fully automated and digitized offerings. Altogether, we have invested more than €200,000,000 across our corporate venture, capital portfolio and other minority investments, And we are planning to increase this further.
Since most of the investments are still accounted for At acquisition cost, they represent significant hidden reserves. However, In the first half of twenty twenty one, we saw earnings contribution from our stakes at Clarity AI, the illuminate fund and 360x amounting to a double digit €1,000,000 figure. While this is certainly not recurring in nature, You would expect our minority investments to be a more regular contributor to our annual results going forward. With that, let me now hand it over to you, Gregor.
Thank you, Seve. Let me start with the detailed financials in the Q2 on Page 7 of the presentation. Net revenue amounted to €882,000,000 and included, amongst others, The consolidation of ISS for the 1st full quarter as well as positive valuation effect of around EUR 40,000,000 related to the accelerated full purchase of FundCenter from UBS. The operating cost amounted to €383,000,000 and is not adjusted for exceptional items anymore. On an organic basis, operating costs declined by 2%.
The EBITDA includes the result from financial investments of €20,000,000 which benefited from the Continued positive development at Tradegate and from the new valuation of our stakes in Claroty AI and 360x. We are now assessing those stakes on a fair value basis to make them more visible in the income statement. Depreciation amounted to €71,000,000 and includes effect of around €25,000,000 related to purchase price allocation of acquired assets in accordance with IFRS, with IFS being the most recent addition. On this basis, the cash EPS amounted to €1.79 whereas the normal EPS stood at €1.69. Yes.
Good at €1,690,000 On Page 8, we show the development of financials in the first half year of 2021. We were faced with quite strong cyclical headwinds because of the record activity levels at the beginning of last year, which were very much driven by the initial COVID outbreak and the much lower equity market volatility in the Q2 this year. However, we were able to offset those effects with continued secular net revenue growth and an increasing M and A contribution. As Theodor already said, the macroeconomic consequences of COVID-nineteen are Cyclical headwinds for us, which means that we need to manage our organic operating costs even more carefully than we already do. Therefore, the overall operating cost increase in the first half year of twenty twenty one was completely limited to consolidation effects.
On Slide 9, we provide an overview of the 3 components of net revenue growth in the first half of the year. Compared to the same period in 2019, which is a compass base year. Consolidation effects resulted in additional €141,000,000 net revenue or a CAGR of 5%. This was mainly driven by the addition of ISS, Axioma, Fund Centre and Quantitative Brokers. Technicolor growth, being the key component of our strategy to increase net revenue, developed as planned And increased by €169,000,000 or a CAGR of 6%.
All segments have to achieve this with Clearstream Eurex and IFS being the largest contributors. The cyclical growth contribution was negative at minus €19,000,000 or CAGR of minus 1%. This was driven By the much lower net interest income at Clearstream and lower trading activity at Eurex, particularly in the index derivatives. Reported operating costs shown on page 10, totaled to €730,000,000 in the first half call. The only driver for the overall increase of 10% compared to the previous year were consolidation effects.
This was mainly driven by the consolidation of ISS, Quantitative Brokers and Funds Centre. Besides that, as I said, we manage the cost very prudently, resulting in a small decline of organic operating costs. I am now turning to the quarterly results of the segments, starting with Eurex on Page 11. In the Q2, we saw the lowest level of equity market volatility since the initial COVID-nineteen outbreak. As a result, index derivatives and margin fees declined significantly against the previous year.
This was partly offset by speculation around inflation and long term interest rates, which made Interest rate derivatives grow by higher double digit percentage rate. In OTC clearing, we observed a Further increase of market share in euro denominated products to overall 22% in the 2nd quarter. Even more encouraging is the fact that our market share in long dated euro interest rate swaps increased to 18%. The net revenue performance is mainly the result of additional incentives, for instance, for portfolio switches to further accelerate client onboarding as well as volume and market share growth in the post Brexit environment. Other net revenue in the Eurex segment benefited from the consolidation of quantitative brokers at the end of last year, which contributed €5,000,000 in the 2nd quarter.
Now our commodity business, EEX, shown on Page 12. We saw an overall high single digit net revenue growth And the more than proportional increase of EBITDA, as power markets were faced with reasonably high comparables, The gas and carbon emission products saw solid levels of growth. Let me now turn to Page 13 and the FX business. Even though FX market volatility in the 2nd quarter was Lower compared to the same period last year, we saw good volume and net revenue growth levels. This was particularly driven by secular growth in the core business and the strong performance of FX forward.
Next, I'm turning to Page 14 and our cash market, Zebra, where we saw a decline in activity due to much lower equity market Volatility in the Second Quarter. This was partly offset by final proceedings relating to the sale of Regulatory reporting up last year, from which we earned around €7,000,000 in the data line item. The result from financial investments in the Xetra segment amounted to €7,000,000 and benefited again from the positive development at Tradegate. Therefore, the EBITDA showed double digit growth. The results in our post trading segment Clearstream on Slide 15 continue to be driven mainly I have a significantly lower level of net interest income.
In the Q3, the 2020 comparables will decline to €14,000,000 and will thus be much more like for like compared to the current level. The Investment Fund Service segment, which you can find on Page 16, continued its strong performance. In addition to the book gain of around €40,000,000 relating to the accelerated full purchase of FundCenter from U. S, We also saw substantial secular and inorganic growth. Secular growth was based Continuous on boarding of new clients and funds.
Inorganic growth was driven by the fund distribution business, which is performing better and better from quarter to quarter. Adjusted for the book gain and the M and A effect, Net revenues did increase by a sizable 33%. Slide 17 shows the Contigo segment, which benefited from higher single digit growth across most line items. The EBITDA includes a gain of around €10,000,000 from the new valuation of the stake in Clarity AI. On slide 18, we show the new Institutional Shareholder Services segment, which now includes a full quarter of Financials.
More than 70% of net revenues for ISS are generated by ESG Products and Services in a broader sense. This includes the Corporate Solutions, ESG Analytics and Governance Solution Businesses. Non ESG comprises the market intelligence and Media Businesses as well as a few smaller units. Since we are not adjusting for exceptional items anymore, Net revenue and operating cost of ISS included some non operating items relating to the transaction and integration. We gave a guidance for ISS for more than 5% net revenue growth, which was perceived by some market participants as being on the lower side.
But double digit growth is certainly a better reflection of our actual ambition. Besides benefiting from secular ESG trends, Those growth rates will also continue to be driven by M and A. Since closing our acquisition in February, ISS announced 3 M and A deals. 1st, in April, Stockholm based Nordic Investor Services, a leading regional corporate governance advisory firm. 2nd, in May, New York based Genesis Research, a leading provider of product intelligence to the asset management and insurance communities 3, And just a couple of days ago, Sydney based Rainmaker Information, who offer a market leading combination of Proprietary data sets, industry benchmarking, research and market share reporting for Australia.
The last page of today's presentation shows our guidance for 2021 in the context of our Compass 2023 Midterm Plan. Although Eurex, for cyclical reasons, developed slightly weaker than expected. We are fully in line with our guidance for the full year of around EUR 3,500,000,000 net revenue and around €2,000,000,000 EBITDA. This is because we saw better than expected secular growth, In particular in the IFS segment, inorganic growth, positive valuation effect and a favorable development of of different minority investments. This concludes our presentation.
Thank you for your attention. We are now looking forward to your questions.
Thank Call. Channel. And the first question comes from Johannes Thormann from HSBC. Over to you.
Good afternoon, everybody. Johannes Thormann from HSBC. Thanks for taking my questions. First of all, a follow-up on crypto finance. You said €20,000,000 in 2021.
This is a pro form a figure for the full year. What can we expect for the next year, a relatively stable development or Rather an upward trajectory in revenues. And secondly, sorry for being the devil's advocate, but you Said yourself, M and A dilutes the EBITDA margin and asset prices have increased massively, so larger deals in the fund services space and Other areas seem too expensive for you in the past. Is it time to take a breather in M and A and probably just do a share buyback this year to use your funds and wait until the market has normalized. Thank you.
Yes. Thanks, Johannes, for the two questions. The first question around crypto finance. Yes, the EUR 20,000,000 Net revenue is a full year number for 2020. And for the next year in 2022 2021, sorry.
And for the next year, in 2022, we expect high double digit growth for that asset. So it fully meets our expectation in that new asset class, on what we call digital assets. 2nd question, maybe to add, and crypto finance is already today As a good profitability and obviously margins will continue to increase as it's also a very scalable business. 2nd, with regard to M and A and share buyback. So we are convinced That we will continue with our M and A strategy.
There are always opportunities in the market Where we can do nice M and A deals. Therefore, our priority will continue to follow our path on M and A and not on share buybacks.
Okay. Thank you very much.
Call. And the next question comes from Hailey Tam from Credit Suisse. Over to you.
Thank you. Could I ask one question then since that is the rule? With your Contigo division, the revenues do look reasonable on a year on year basis, but obviously are down from the second half run rate of 2020. And I just wondered, are you expecting the new business sales, new customer growth to actually drive revenues back To those levels on a near term time scale? Or is your focus really more on EBITDA margin expansion here?
Because I think even excluding Clarity AI, it was still a big uplift on EBITDA Margin. So any color you can provide there will
be much appreciated. Thank you.
Yes. So Quantigo has had not a bad development in Q2. So even if you adjust On the analytics for the FX impact. So our analytics business is grown by 13%, so 1 3% on a U. S.
Dollar basis. So that's obviously a good cause rate on the index business overall. So adding up, So contingent would have grown by a double digit growth rate if I adjust for that FX impact. There is still some headwind out of The COVID situation, and we expect over time that And we will come back to the growth rate, what we have seen already in the past. And so we have a Good confidence level that Continuum is able to show double digit growth to benefit from The secular drivers turn to passive investment, ESG index.
So we are positive with regard to that and we expect double digit growth for the next time. With regard to the question, growth and EBITDA margin, yes, Our particular focus is obviously on top line growth, but EBITDA margin would not decrease. So that's At least my expectation. And there's even the chance to increase slightly EBITDA margin, out of the fact that we also see some scalability here.
Channel comes from Michael Werner from UBS. Over to you.
Thank you very much, and thanks for the presentation. I have a question on costs. When it comes to Clearstream, we saw a noticeable uptick in costs on a year on year basis in the first half of 8 And it really kind of stands out relative to the very strong cost discipline we've seen throughout the rest of the business. So I was just wondering if there's anything one off there. I don't recall anything from a consolidation perspective.
And then just from a higher level perspective on costs, you indicated how The company has implemented very strong cost discipline this quarter and this half due to the cyclical headwinds. And I'm I'm just wondering if these cyclical headwinds persist, how much longer can you kind of keep those costs down? I know in the past you've talked about your desire to invest Into growth, we've seen you do that inorganically, but within the business. I was just wondering How much longer this cost discipline could, if it persists, could potentially impact future revenue growth? Thanks.
Yes, Michael. Thanks for the question. Yes, indeed, prudent cost management is important for us. So In times where we are, where we still have low volatility in the market and some cyclical headwinds, our management is committed to deliver on prudent cost management. With regard to Clearstream cost development, there is nothing very specific.
But in principle, we invest here also in our New digital infrastructure. So that's a clear commitment what we do have here because we think and you are aware of our Collateral management activities, what is now based on blockchain technology, and we continue to expand that To the different product areas, and that is key for us that we will continue to invest here to build up over the next years, a digital CLC and iCSD based on new technologies. From a longer term perspective with regard to cost, there's also a clear commitment besides the prudent cost management That we invest in our business, invest to ensure that the secular growth will continue to be 5% or more than 5% over the next years. And it's on us basically To increase the financial flexibility, doing again, putting cost management. So we are able with our Continuous cost improvement program that we are able to compensate at least inflationary pressure.
And so that's our clear commitment. So first, to counteract if you have cyclical headwind And secondly, ensure strategic investments to ensure the secular growth in the future.
Thanks, Peter.
The next question comes from Philip Middleton from the Bank of America. Over to you.
Yes, thank you. I wonder, could you say a little bit more about IFS? Obviously, that's a very strong growth rate. But could you put in context, please, the Growth rate that the funds distribution business has provided, what lies behind that? And also what you can see there in the future?
What will drive that forward in the future?
Yes. Thanks, Philip. Obviously, Investment Funds Services is currently the best performing asset. And the good thing is we expect that this will continue also in the future. And the reason is in both areas, so in the settlement and custody, but conference.
In the funds distribution. So in both legs, we expect double digit growth here. And the reason is very easy. We have introduced now a superior solution in the market, but it's very cost efficient. So With our Investima platform, we have a more than 50% cost advantage compared to the back office This is in the bank.
And therefore, the bank has a chance to do over 3 ways businesses with Investment Fund Services of Deutsche Borse here. So first is to connect basically to our platform second, to outsource the business And we are very open and flexible with this regard to the format. And we see here that we have a very long customer pipeline, customer demand. So that gives us high confidence that This will continue also in the future. And the same basically we see also in our funds distribution lag.
So having had now this experience with UBS, so we are also confident that this will continue in the future.
Okay. Thank you.
Next up is Ian White from Autonomous Research. May we have your question, please? Hi.
Thanks for presentation. I wondered if you could provide any extra data points around equity index derivatives trading at Eurex. So I'm keen to understand your confidence that what we're seeing in terms of the recent weakness is purely cyclical effects. So in simple terms, if I compare to 2019, equity market volatility has been higher in 2021, But equity index volumes at Eurex have been significantly lower. So is there any extra detail you can provide there to help us understand Your confidence that those headwinds are purely cyclical, please.
I wondered if you could share detail on the breadth of investor participation or something like that to Help them understand an extra level of detail there at all, please.
Yes. So obviously, as you rightly mentioned, so the volatility The level is currently very low. So if you take the VIX or the volatility stocks, Volatility back then in Q2, it was in the range of 15. If you take the Average of the last 5 to 10 years, then the volatility level was in the range of 20 to 25, so dominantly higher. And in COVID time, it was around 80, so in Q1 2020.
So that obviously is a strong indicator with with regard to the volatility and market activity here. As we are now really on a very low basis, so looking forward, So our expectation is really that volatility will increase over the next, let's say, 18 months. Due to the fact that we expect that the corona and COVID situation obviously can be handled in a better way, That the confidence in the market will come back, that we will see in general growth Already in the second half year, this year, but also in the next year. Therefore, our expectation really is That from a cyclical perspective, it should change now and starting really in the second half year, where we have also Clearly lower comps compared to 2020. And so that we will get back even to a situation where we get some Tailwind here from a cyclicality perspective.
But the Equity Index business, we see also secular growth opportunities here. And just to mention that, so the MSI derivatives topic here. So it's more than €20,000,000 We expect here really strong increase and the strong customer demand here. We have the total return futures, also more than €20,000,000 already that we see a strong increase and where we expected. In the dividend derivatives areas, good opportunity for us to grow.
So if you ask me for the outlook For the next, let's say, 24 months. So therefore, I'm positive from a cyclicality perspective, again, as the comps are now completely different. And secondly, also from a secular perspective.
Thank
you. The next question comes from Bruce Hamilton from Morgan Stanley. Over to you.
Thanks. Hi. Good afternoon, guys. Just on sort of capacity for M and A, I guess, on the sort of Net debt EBITDA metrics, you're at 1.8 times. I think that's slightly up on where you were post the ISS close, but it means you're basically at the sort of capacity level.
So what's the scope to run above that for a period without running the risk of a credit downgrade? Obviously, some of your European exchange peers We've been comfortable running quite a bit above. Or should we assume that any deals from here would need to be funded by share issuance, just to understand? And then secondly, so if I can be cheeky, on EEX, going back to Slide 12, I recognize pretty good growth. Although If I adjust the other, it looks like it was kind of flat on the trading businesses and other drove the delta.
So what exactly within other It is driving the growth and is that sustainable, please? Thank you.
Yes. So with regard to our M and A Capacity, yes, we are currently or temporarily above the threshold here. And obviously, we discussed it It's our waiting agency. So the general understanding is that we are very cash generative business And the cash will pick up very fast. And our view is unchanged with regard to our from M and A capacity that we still have capacity at the year end in the range of EUR 1,000,000,000 to EUR 1,500,000,000.
We also need some money for the closing of the crypto finance. Therefore, I say it's A little bit less than the SEK 1,500,000,000 I told you last time. But in that range of, let's say, SEK 1,000,000,000 to SEK 1,500,000,000, there's still Enough available M and A capacity without using any equity. And with regard to M and A, there are also other opportunities. So about the format, the partnership approach where you have seen There's not always a need to own 100%, so in Contigo and ISS, so we partner I had some external shareholders participating in that format or even we bring in something as we did with our stocks business in the Contigo.
So there are different formats available and to continue to do M and A. And in addition, that would be the 3rd step then, let's say, for a bigger strategic initiative, we would also Use our equity authority, what we got from our AGM. But obviously, the first two The priorities from a Deutsche Borse perspective. The second question with regard to EX, If I take the first half year, then our power derivatives business or The biggest contributor to the top line. There was a market reduction of more than 20%.
And the good thing is We were able to win some market shares. So the OTC poker business was more down compared to our business. And here also again, first half year, COVID is an important factor because in 2020, And especially in the first but also partially in the second quarter, we have seen high uncertainty in the market, so high volatility here. And that's why we still have this higher comp. That obviously disappears now in the second half year.
And therefore, we also expect and that's also supported by the market view that we had A lot of discussions also with the energy and energy providers and suppliers here. So All market participants expect increased market volumes already starting into second half year, And we should keep at least our market share and even most probably we can even increase it. From a secular perspective, we see also good opportunities to call in the renewable energies. So we talked about just recently about voluntary carbon markets, what is of high interest from politicians and regulators And also the hydrogen market. So that's what a lot of intensive discussions here.
And we will ensure that Deutsche Borse with EEX is best positioned also to benefit from that growth in this area of renewable energy.
Got it. And could I just check, sorry, the growth in other within EX? Could you just explain what was that?
Yes. The last quarter was So if you look at 2020, the level was lower than usual because of a couple of effects. But others, as Gregor has just mentioned, also includes the faster growing CO2 certificate market. So that contributed to growth.
Got it. Thank you very much.
The next question comes from Jochen Schmidt from Metzler. May we have your question please?
Thank you. Good afternoon. I have one question regarding the competitive landscape for European Equity Index Derivatives Trading and Clearing. What's your take on Cboe's recent plan to grow in or to expand into this product area? That's my question.
Thank you.
Yes. Thanks, Joven, for the question. Just to clarify here, so Cboe enters the market of equity Options and Futures or Single Equity Option and Futures and not at least today, not in the index Yes, yes. And therefore, yes, we will see that there are already many attempts of Other competitors to enter this market and obviously that's not an easy move, but concrete question, no impact on European index. Secondly, I would also like to highlight, I think you are aware of that, that the open access Provision, most probably extended by another 2 year.
So as EU Commission And also ESMA announced that due to the opposition of the national regulators that, That provision will postpone by another 2 years until mid of 2023.
Okay. Thank you. Maybe just a brief follow-up. I thought based on an article in, I think it was yesterday's German daily, Bursen Zeitung, the Cboe, plans to set up new equity index products in Europe. So we can be seized, but I will have another look on that.
So thanks for your answers.
It might be their own ones or other indices, but it's Certainly not the blue chip indeed sales. The market is referencing through which are traded at Eurex. I guess that's the difference. And obviously, we're talking about Highly liquid futures here, where as Gregor has mentioned, in the past, peers always found it Extremely difficult to match our levels of liquidity.
Thank you. The next question comes from Arnaud Schibla from Exane BNP Paribas. Over to you.
Hi, good afternoon. I've just got 2 quick follow ups, if that's okay. Firstly, since we're On EMEA, I'm wondering if you're earmarking any of your firepower for potential exits of General whether you've got an obligation to buy them out at some point? And secondly, on IFS, thanks for the update there. Could you perhaps give a bit more granularity in terms of the upsell potential from your acquisition of From the center and services into the existing or the previous IFS book, what sort of clients are you targeting to try and sell More from the subscription services to which countries, what sort of flows or uptake are you seeing from these new services?
Thank you.
Yes. So with regard to your first M and A related questions, And do we earmark something for the minority shareholders in ISS or in Contigo? Yes, there are some exit options, but I do not expect that this will trigger in a short term horizon. So our understanding is that that's roughly a 5 year investment From these external partners and therefore, there are no concrete elements To talk about or even to think about or to reserve some of our M and A capacities for these things. With regard to your second question around the investment fund services, obviously, We see here now combining all our activities here of the portfolio we acquired, so starting with And now we bring together here with our UBS Force Center As said, and so we are able to combine this and therefore, we have now a much Stronger position and what we can bring to the table and we are also able to combine both elements, also the settlement and And the custody function, including the distribution area.
So we and that's also a kind of Capability where you have better negotiation power and where you can also do some cross selling. And obviously, as I mentioned, we have a strong demand here from a customer perspective. And I don't want to share now specific customer specific information as these are also Confidential that you can assume that's a very broad interest from all banks to work together with Deutsche Borse in this area.
That's helpful. Thank you.
The next question comes from Benjamin Goy from Deutsche Bank.
Yes, good afternoon and thank you
for the additional with details on your minority investment portfolio and DB1 Ventures specifically. I was just wondering, conference. Or the strategic corporations? Or could we also see these becoming majority investments for you? And considering now your fair value approach, should So we assume then once there's a new funding round, ideally it's an up round, we will see some benefits in your strategic investment line And yes, implying that, I don't know, that the new run rate is double digits or certainly higher than the close to 0 we have seen pre-twenty 20?
Thank you.
Yes. Thanks, Benjamin, for the question, and thanks for highlighting that topic here. And you have seen our comments here. So we have done a lot of good things here, investing €200,000,000 over the last 3 years. And so far, we are not able to show anything In our P and L, all the positives and we talked about a money multiple of more than 2 times is It's shown purely in the equity, right?
And therefore and that changed at least for the one or the other investment now And it was Clarity AI. There is now a strong interest in the market where you see And that's a €10,000,000 contribution already in Q2 and most probably Also an increase in the second half year, but it's depending on transactions here. So in the future, you will see That kind of fair value valuation then in the P and L. So it's a kind of crystallization value crystallization also in our P and L and not just in our balance sheet. And the same is true for us for 360x, We just recently started, but the first round already took place so that we were Able to show another €2,000,000 But at the end of the day, with that asset, Well, we're going into completely nonfinancial assets, new assets like real estate, like art or e gaming, I'm using our technology power under the leadership of our entrepreneur, Carlo Kolsa, and we really expect That's a big opportunity to define here new markets.
And if we are able to do so, then you should also see nice increase here. And now we would see that in as a fair value already immediately in the P and L. So every Investment rounds you see here, then we have a new touch point for our fair value valuation. And then you would see that. That's when I see some comments here from you here commenting our I'm a result, and I've seen some odds.
It's caused by one timer. Yes, partly it's true, but partly it's not true because M and A is already part of our strategy, right? And we even guided a 5% M and A contribution. And now you see we are really delivering. Therefore, for me that These are not one timers anymore.
And even for this valuation topic, so Yes, obviously, it's not recurring, and I understand what you are interpreting that. But I expect in the future that you will see that on a regular basis. So coming and I don't want to give the guidance now, but It will come on a regular basis. And that's why we changed it. So you will see that with regard to fair value in on our P and L.
And depending on your other question, Ward, from a strategic perspective, yes, obviously, Currently, we see it as a venture portfolio, right? But if we see there's a strategic benefit for Deutsche Borse, Then obviously, we would also consider to acquire the majority for the Asset currently defined, so it's a venture portfolio, but we are very open and flexible. And if you see that, For instance, 360x would go into the direction what we hope for and it would be obviously a strategic investment And then we would try to get a majority and then we would consolidate it. And you would also see it immediately in the P and L via consolidation. So that's a little bit around that framework.
Thank you for the detail, Arthur.
Your next question comes from Kyle Voigt from KBW. Over to you.
Hi. Thanks for taking my question. I just had one follow-up regarding ISS. It looks like the EBITDA margin in that segment was Around 23% in the quarter versus I think disclosures when the deal was announced at around 35% EBITDA margin. I'm just wondering if the margin differential was entirely related to one off costs realized in the quarter or was that more around seasonality?
And if there were one time acquisition type costs in the quarter, I'm just wondering if you could quantify those costs that were realized in that segment. Thank you.
Yes. Thanks, Kai, for the question and the chance to clarify that a little bit. So first of all, ISS It's growing double digit. And that's obviously very good to see. And we were criticized when we said, look, it's It's 5% or 5% so with some criticism.
And it's now good to show and now it's the first quarter where we are able to show that. And therefore, that's double digit growth. And that's also our ambition level here. So that's obviously Good to see that IHS is contributing to our growth path here. Your second and your specific question Around the EBITDA margin, obviously, if you are able to go double digit, then you have also opportunity We have today the operational margin is in the range of 30% or slightly above that.
And as there are some Transaction related costs already booked here. You are aware of our all in costs and all in reported level. So it's 30% plus Already this year, and I would expect, with the continued increase over time that we will also achieve that 35 And what we communicated.
Understood. Thank you.
And the next question comes from Andrew Coombs from Citi.
Thank you. Perhaps just a quick question on some cyclicality. You talked a lot about the volatility, expecting that to recover from here. But one of the things we haven't touched upon is the MTI at Clearstream. You suggested it's probably trough this quarter.
We've obviously got Jackson Hole coming up, debate around tapering and then potentially Fed rate hikes as early as next year. So could you just provide us with an updated idea of sensitivity to Fed rates for the Clearstream NTI revenue, please?
Yes. So the €12,000,000 NII you have seen at Tier 3 is basically the current quarterly, one way to roughly, right? And the question is now with regard to And the upside potential here. So around we currently have some, let's say, EUR 15,000,000,000 customer cash. Let's say 50% is U.
S. Dollar denominated, 35% is euro denominated and 15% Other currencies. And most probably, U. S, the first one who would Great on the interest rate side, so assuming that. So if you see a 7 point €5,000,000,000 exposure and then increase of 1% would translate in €75,000,000 Additional NII on a full year basis.
So that's basically the sensitivity what we have here. And yes, it's about your judgment when that could potentially happen, but that's basically the math.
Ladies and gentlemen, it's a little bit unusual that I conclude the meeting without a Direct question. Peter speaking here. I recall exactly 1 year ago, right, after Q2, we had seen the That rate illustrates haircuts, right? And we had lift off and roll off 80 on the Eurex side. And everybody was Extremely concerned why is there any future at all for us.
And quite frankly, we have said that even at the end of Q2 2020, We have said, listen, don't worry. We will get it done, and we have delivered the guidance. And on top of that, we have done our ISM acquisition. Now 1 year later, right, we are somehow bottomed out in the market, right? Why is this the case?
Eurex is roughly double digit below last year given the exceptional high vola of last year, right? We are at a level of 15 on the volar side and only very few days we are above 20. And wherever when we are above 20, We can see it immediately in our numbers. So somehow, given the level of liquidity out there, given the nervosity, what is in the market, given the liquidity out there, Right. We need to assume that over the course of the next few months, right, nobody knows exactly some bolar will come back ultimately.
So cyclicality It's an option for us. Clearly, on the Clearstream side, it's very clear we have baked in all the negatives Right now, right. And the pickups we will see on the Corteva side, Axioma Analytics side, on the ax side and 360. T side, so overall, right, if I compare my own level of competence About do we achieve the numbers, the guidance of the year 2021 compared to how my confidence level was last year? I can assure you that our confidence level this year is not worse compared to last year, right?
And of course, Right. We have a couple of very interesting one timers in there. They are somehow recurring meanwhile. We have consciously addressed the topic of the venture, right, which we have not played out before. But all in all, right, I think we are pretty well positioned for further growth and especially also on On the bottom line side, that's where we are.
So we are looking forward with some confidence, right, to be very clear and open here.
Call. All right. Thank you, Severodon. This concludes our call for today. Thank you very much for your participation, and have a good day.