Ladies and gentlemen, welcome to PATRIZIA's first half 2024 conference call. I am George, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Martin Praum, CFO. Please go ahead.
Good afternoon, everyone, and welcome to our analyst and investor call for the first half 2024 results. I'm happy to have our CEO, Asoka Wöhrmann; and our COO, Christoph Glaser, together with me in the room today. We will present to you an overview of the operating business, the strategy about the market environment, and the financials for the first half, and we'll give an update regarding the guidance for the full year. Certainly, there will be a Q&A session afterwards. We will refer to the results presentation for the first six months, which you can find on our website in the IR section home, under most recent publications. The presentation includes figures regarding the first half, details about the guidance, and as usual, in case of questions, the IR team is more than happy to take your calls.
This call will be recorded and will be made available on our website, and also there will be a call transcript for further reference. With that, I'd like to hand over to Asoka Wöhrmann to start the presentation and give an update on our strategy.
Thank you, Martin. Welcome, everyone. You have waited patiently for strategy update. Let me assure you that I wanted to get to know the organization first very well. Past one and quarter years have been a period of intense focus and dedication for all Patrizians and in an ever-changing market environment. With our strategy project, Fit for Future, we opened the hood of our company, analyzed strengths and weaknesses, and explored opportunities for growth. Today, I am here to share with you the outcome of this effort and our strategic direction. Also, we have learned from the past, and we are committed to making this truly transformational for the company. Looking ahead, our vision for 2030 is ambitious and inspiring, and let me share with you our roadmap for the next phase of our journey.
Our new vision is clear, to become the go-to manager for smart real assets, and we have a clear ambition to grow to EUR 100 billion AUM manager in 2030. We want to become a partner of choice for the large institutional investors worldwide. We need to, and we need to become bigger, but with a clear focus. Looking at section one of the first slide, you see that we want to grow with the CAGR of 9.3%. Why we will grow faster than the market? PATRIZIA has conducted a comprehensive market analysis to determine its corporate strategy 2030. In real estate, residential and logistics are highly preferred sectors for our global client base, particularly in Europe. Furthermore, we have identified significant appetite for higher risk return strategies in this period.
By focusing on the two identified growth areas, living and Value Add real estate, which offer particularly growth potential for PATRIZIA's real estate business, we are confident to grow faster than the overall European real estate market, covering all risk classes and in line with the global market. For infrastructure, we see a particularly strong market growth in Europe until 2030. With investors' clear preference on digital, renewable and energy infrastructure, in all of these areas of PATRIZIA has strong capabilities and long-lasting track record we can build on. In contrast, the market CAGR covers all regions and sectors. Furthermore, we have identified a huge growth potential for PATRIZIA in Re-Infra, an area which is not fully reflected in the infrastructure market forecast.
By focusing on the identified growth areas, we are confident to grow stronger than the global market and to arrive into our growth target. But how do we want to grow? Our strategic priority is to focus on five key growth areas shown in section two of this, of the first slide. Let me make clear here what has changed from the past. We are prioritizing our efforts to five key investment strategies for smart real asset solutions, where we plan to raise EUR 30 billion of equity, with the following focus: Advantage Investment Partners, our scalable fund of fund platform, real estate value add, European infrastructure, living, and infrastructure and smart cities. We plan to raise a mid- to large single million euro amount in each strategy.
Sorry, mid- to large single billion euro amount in each strategy over the course of the next five years. I touch on this briefly now, but I will- we will explore these focus areas in more in depth shortly on an upcoming slide. I'm sure you are interested in understanding how the 100 billion AUM goal in 2030 translate into annual AUM growth, shown in section three on this slide. Our strategy assumes lower equity raising targets for 2024 and 2025, and aim for, aims for steeper growth rates starting from 2026 onwards, in line with the market recovery over the time period until 2030, on the back of a strong fundraising of our five focus areas for smart real asset solutions.
We aim to increase the share of the Advantage Investment Partners fund of fund business, significantly amounting to around 10% of total AUM by 2030. We aim to increase the share of infrastructure assets to around 20% by 2030. We plan to further diversify managed real estate assets across Europe and Asia Pacific region. The new focus is, in fundraising goes hand in hand with our continued ambition to enhance earnings quality, shown in the Section 4. Even though our management fees are growing, they, at this point, don't cover our recurring costs. This means we are only profitable with performance and transaction fees, and therefore, too dependent on the market volume . We need, and we will change the structure of revenues and focus on optimizing our cost base.
This is an important point, and I will elaborate on this in just a few slides. With that foundational understanding of our new strategy in place, let me once more emphasize that our growth objectives will only be determined by organic growth, not involving any M&A scenarios. Let me therefore shed a light, a little more light on our five key growth areas and introduce these to you on the next page. Let's start with Advantage Investment Partners, called AIP. AIP is the international business that acquired in 2022. AIP is pivotal to our growth strategy for 2030 with enormous growth potential. Let me tell you what AIP does. AIP forms and manage investment clubs, which consist of institutional investors and high net worth individuals and family offices.
These investment clubs invest into funds raised by general partners as a single large, larger investor. Asset classes covered by AIP include infrastructure, credit, and private equity. The club concept is currently backed by Nordic institutions and provides high scalability across additional regions. We plan to expand capital raising into more geographies and to attract new investors. Furthermore, the AIP fund of funds platform can provide comprehensive wealth management solutions also for existing clients, enhancing our distribution channels and attracting additional deal flow. Moreover, there is sufficient flexibility to pursue further investment opportunity across sectors PATRIZIA is active in. The second area, real estate value add. Secondly, the real estate value add, where we are targeting to raise mid-single digit billion euro amount. Value add as a higher return strategy will be a rise in preference by investors.
Based on our strong track record that we have in value add real estate investments, we are confident that we can leverage our position as a leading European value add player to take advantage and drive market change towards value add investments. We have a great track record in relevant vehicles and best preconditions to capture capital for market opportunities. Additionally, we tap new regions outside Europe, for instance, Pan Asia. But last but not least, this also includes significant opportunity stemming from the decarbonization mega trend, flipping stranded assets into modern ESG-aligned buildings, meeting the need for lower carbon footprint assets. The third focus area is European infrastructure. With the acquisition of Whitehelm, we have deep experience across infrastructure, equity, and debt for over 26 years. This sector bears enormous potential with regards to the green transition and delivering sustainable transformation.
We will make this trend investable for existing and potential new clients via equity and debt strategies, focusing on attractive investments with strong ESG credentials. The fourth focus area is living. Here, we have a market-leading position, a strong track record, and strong skills and expertise across the value chain: asset management, transactions, fund management, and real estate development. This will help us to further leverage our sector excellence and deliver attractive products across the market cycle for different risk appetites. Furthermore, our great track record in value add, our development capabilities build a great basis for our growth ambitions. Last but not least, we will accelerate our impact investing activities. Re-Infra, this is by far the most exciting new investment strategy, as of currently, it is an untapped asset class.
Let me explain to you what Re-Infra is and what is—why is this so interesting for us? Re-Infra will combine real estate and infrastructure investments in a one product offering, enabling real estate sector investors and infrastructure investors to invest. Our Smart Cities strategy, for instance, is one strategy building block to initiate and scale. I will come back to this later and give you and a couple of examples what the Re-Infra strategy can look like. Let me conclude on this slide with the following takeaway: We now have dedicated focus on thematic strategies and flagship products. This is the clear path for growth to deliver success. Re-Infra is an entirely new asset class, combining real estate and infrastructure investment in one product offering, tackling investors for real estate and infra, and enabling cross-selling opportunities.
Investors currently only have the choice between either real estate or infrastructure products. We know investors look both ways to find the right mix to maximize their returns while minimizing their risk. For Re-Infra , PATRIZIA has the opportunity to identify opportunities for how it can reinforce an argument and differentiate PATRIZIA's existing products. In parallel, laying the foundation for it as a new product, service, product and service offering to the market. Let me give you some examples. We have the unique opportunity to lay the foundation for this emerging growth segment and develop first Re-Infra products and services for our clients. We are in massive opportunities, unlock higher and differentiated value for our investors and PATRIZIA. The last cornerstone of our strategy is to regain shareholder value for our investors and for us by enhancing our earning quality.
Follow me onto the next page, please. With two restructuring in the recent years, we have already set cost-cutting measures into practice. We already evidenced the first improvements in the cost base. Now, we are focusing on a sustainable improvement of earnings quality. First, by improving the revenue mix on the back of new thematic investment strategies just presented to you. It is an overarching goal to promote consistent revenue streams, to reduce volatility of our income streams, and transition into sustainable, recurring fee-earning business model. A clear focus on growth areas aligned with market expectation and supporting recurring fee income, and to further internalize, internationalize the asset and revenue pool to more balanced asset mix in line with overall growth scenario. It is an imperative to live cost discipline.
Additionally, we will introduce a more active management of our product shelf, reviewing our products with regards to profitability and performance on a continuous basis. Furthermore, we will set up organization for scalability to reduce operational complexity, enhance data delivery, and substantial platform productivity improvement in every growth scenario. Having that said, I come to the management changes we announced a couple of weeks ago and outlined in the next page. To effectively execute our new midterm strategy of PATRIZIA, PATRIZIA has established a new Group Executive Committee. Our new Group Executive Committee will drive our investment process end to end across all our asset classes, while continuing to enhance client sensitivity, efficiency, and innovation for the benefit of our clients and stakeholders. The Group Executive Committee replaces the previous executive committee and consists of six executive directors, all internally sourced.
Alongside the three existing executive directors, being Christoph Glaser, Wolfgang Egger, and myself, Martin Praum, James Muir, and Konrad Finkenzeller, have been appointed as additional executive directors. James Muir is appointed as the head of the investment division, being responsible for fund management, investment management, and investment strategy and research across all asset classes of PATRIZIA. Konrad Finkenzeller will head the newly formed client division, hence full focus on our clients and their needs on our new committee. Martin Praum, well known to you, is appointed to Chief Financial Officer. In this position, he will succeed Christoph Glaser, who will focus on his role as Chief Operating Officer. Thank you, Christoph, for your exceptional work and dedication over the two years in your role of CFO. You make fantastic job for PATRIZIA and for our clients.
I'm sure you want to say some words on your new role and your new focus. Hand over to you.
Thank you very much, Asoka, for your kind words. It's obviously been a privilege to lead the finance function for almost two and a half years, and it's also been a privilege to talk to our investors for that same duration of time. I'm gonna miss those calls, maybe going forward a little bit. But that said, you know, I had the opportunity to lead the operations division already in an acting capacity on a couple of occasions during my CFO tenure. Given the significance of the division for the company's success, as well as the importance of its productivity and its contribution to profitability, it is quite important and relevant to give it the attention it deserves.
It was focused on creating what I would call a future-proof platform, in support of the strategy, as just outlined by Asoka. And that's what I'm gonna focus on, going forward, and I look forward to doing so, to leading operations and to also, in addition to that, take responsibility for European business matters outside of Germany. So, so that's really it, and I'm quite happy to hand over to Martin Praum, our new CFO, who will lead you through the second part of the call. Thank you.
Thank you.
Thank you, Christoph, and hi, everyone. Let's continue on page 10 of the presentation and start with our key KPI assets under management. You can see that AUM went down by 2% year to date, and 3% compared to the last year. We did buy for our clients, especially in the infrastructure, logistics, and residential area, and also in the AIP fund of fund business, but at the same time, also disposed on behalf of clients, especially in the commercial real estate area. So these two acquisitions and disposal activities offset each other nearly. So the drop in AUM is actually driven by valuation, which is round about slightly below 2% impact on AUM. You might ask, what is the outlook for further valuation?
I think we can stick to our guidance for the year, that we continue to see some valuation pressure, probably in the full year by 3%-5%. So the guidance on that is unchanged, quite moderate. At the same time, we see first signs of a stabilization in certain market areas, and we might actually have the chance to come in at the lower end of this guidance, but we'll keep you up to date as the year progresses. So overall summary of this slide is that our AUM continue to be relatively resilient and holding up quite well. On page 11, we show you the usual split of AUM by geography, sector, and risk style. And I wanna focus today on the sector split.
You can see that PATRIZIA, meanwhile, has a bias towards four key sectors, which is residential, as the largest contributor to AUM, office, infrastructure, and logistics. And, and I want to reference to what Asoka just said. I think we have a quite diversified AUM, and, and we have a lot of, if not all, the expertise already in-house that we need to deliver on the new strategy, 2030. So we don't need any, additional M&A to deliver on the plan that, that we've just, published to you and to the market. We go to the next page to profitability. We'll show you on page 12, management, transaction, and performance fees. Let me start with management fees. They're down 4.2% year-on-year. This is primarily driven by lower AUM valuation, but also by a lower contribution from development service fees.
Around EUR 2 million of the decline is due to these lower development service fees that don't come in as equally distributed as management fees over time, but they depend on the progression in the developments that we manage for our clients. If you look at management fees quarter-on-quarter, you'll actually see a stable development, which is good and supportive. Management fees now reflect 84% of our fee income. Going to the next one, transaction fees, which is currently only 4% of fees. We have here a very positive development compared to the last year, up almost 20%. But to be honest, this is a very small level in absolute terms, and we don't wanna get overexcited because the majority of the fees came from disposals, not from acquisitions. Lastly, performance fees down almost 40% year-on-year.
If you look at the absolute numbers, it's down EUR 10 million, and this basically explains the drop in EBITDA. It is somewhat expected from a management point of view, given a limited amount of realizations for our clients. So in total, we continue to see revenue pressure on our business, with roughly revenues down 10% compared to last year. Looking at the cost side on page 13, the good news here is that we start to see first effects of the reorganization activities, which were so far overshadowed by inflationary developments. I wanna focus especially on staff costs, which are down 2.5% year-on-year. I'll come to that later. We also have a related positive item in other operating income, which is also related to staff costs.
Secondly, operating, other operating expenses are down 2.4%. In this cost block, there is a one-off item, of, close to EUR 4 million, and if, you would adjust for that, then other operating expenses would actually be down, more pronounced by, - 12%. Other expenses, EUR 8.4 million, down 2.3%. These are the usual label fund, expenses and are pretty stable. So to us, this is, the direction is right. The absolute levels are not, satisfactory, and that's why we'll certainly keep focusing on cost containment and everything we can do to optimize the efficiency of the company, especially in the current market environment. Going to page 14, there you'll see the overall split of revenues, costs, and EBITDA.
Here I wanna focus on two items, actually, a smaller one, which is net sales revenues and co-investment income, which is a EUR +1.4 million, but down 50% year-on-year. Here, you'll see the effect of negative impact from temporarily consolidated funds and assets that we have on our balance sheet, and that did have an impact on our EBITDA year to date. Secondly, you'll see that EBITDA has been significantly supported by other income, but this is not simply that we released liabilities or hidden reserves. It's also, to a large extent, driven by the release of staff cost provisions that we had in our books. So basically, costs that we booked last year, that we did release this year as part of active cost management by the management of the company.
So overall, if you look at the EBITDA quality, it is still driven by one-off items, especially by consolidation effects and also by other income. To give you a feeling, these consolidation impact on our P&L was roundabout in total, EUR 3 million negative, in the first half of the year. Another important thing to look at, if you look in the half year report, in the segment reporting, you can also see that the asset management business of PATRIZIA continues to be profitable, and a lot of negative items come from balance sheet exposure and temporary consolidation of assets and funds. If we move on to page 15 of the presentation, let's look at the balance sheet. Also here, we had some changes to previous quarters. First of all, what is unchanged is a relatively stable equity ratio, close to 58%.
But if you look down further, then you've seen that we've invested, together with our clients and also as preparation for further funds, via seed investments, for future clients in certain assets, with the balance sheet capital that we have. At the moment, we talk about EUR 400 million of assets that we have consolidated, and some of them have debt attached. That's why you see bank loans of close to EUR 228 million in this overview. Also, this means that for the first time in several quarters, we have a net debt position rather than a net cash position.
But again, these are from a strategic point of view, temporarily consolidated assets where our fundraising team is working hard to attract new clients, and at a certain stage, these assets and funds will be deconsolidated from our balance sheet. This would then also have a positive impact on the net equity ratio, which is now down to 64%. You might remember we came from 69%-70%, and certainly the target is to go back to these levels. In terms of liquidity, also due to the investment activity we did, we have somewhat reduced liquidity. Available liquidity now is EUR 133, and the bank balance, cash and term deposits is EUR 216. Don't be confused.
If you look at our balance sheet, you'll see cash of EUR 181 million only, and don't forget that we have part of the cash invested in term deposits, also to optimize our interest income. In terms of financial flexibility, also don't forget, we have treasury shares of PATRIZIA, of around EUR 44 million on our books, which is, in total 6.1 million shares. So summarizing here, the balance sheet has changed a little bit, still solid with a good equity ratio, and we still have good available liquidity. To give you more transparency on our co and seed investments, which is on page 16, not a lot of change here compared to the last quarter. We have 4 major investments on our balance sheet, a logistics portfolio in Sweden.
We have an infrastructure fund consolidated, in which we recently invested, in a waste management company in Italy. Then in terms of warehousing, we have two office assets in Hamburg and in Cologne on our balance sheet, and a residential project development in Augsburg that was actually just finalized and handed over to us on first of August. Letting activity is quite active because it's a very good location right to the major railway station of Augsburg. On top of that, as you all may know, we have other participations, especially Dawonia, on our books. If you look at the balance sheet 588, of that, if you look at after-tax numbers, around EUR 160 million is the 5% stake in Dawonia, and around EUR 290 million, the performance fee claim.
So a lot of balance sheet activity and balance sheet flexibility going forward. Lastly, on page 17, to give you an update on our guidance for the full year. You might have seen that, we have not changed the guidance. We, we left it relatively broad. Reason for that is, if you look at what we have achieved so far in terms of EBITDA, with EUR 19.2 million, there is little way to go to reach the lower end of the guidance. The EUR 30 million, upper end is EUR 60 million. If we look at the business at the moment, I think it's fair to say that, that we rather operationally are acting in the, the lower end, or lower to mid-range of the guidance.
But there are certain signs of market stabilization, and also some indications for higher client activity, which is why we left the guidance unchanged. Another point is, which makes guiding a little bit complicated, and we mentioned it also in our release, we have these consolidation effects that have an impact also on our EBITDA, can be positive and negative. And it depends on the timing of fundraising and timing of deconsolidation, how and if it impacts our EBITDA. That's again, why we also left the guidance range unchanged. Lastly, perhaps to summarize, I think we have a very strong platform and a very solid balance sheet. We have a lot of work ahead of us to improve profitability, no doubt about that.
And last, we have a clear strategy with focus on important enablers for scaling our business in key product areas, as Asoka mentioned in his introduction. With that, I'd like to hand over back to George, the operator, and start the Q&A session.
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questions from the phone are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. Our first question comes from Andre Remke in Baader Bank. Please go ahead.
Yeah, good afternoon, sirs. And, yeah, let's say thank, thank you, Asoka, for the presentation. Thank you, Christoph, for your CFO time, and congrats to Martin for your new position. Unfortunately, I also have some questions. Starting with the question on EBITDA for the first half, EUR 19 million. Martin, you mentioned several one-off, positive, negative. What would be an adjusted EBITDA without those effects, to sum it up?
Hi, Andre. If we look at what we achieved in the first half in terms of EBITDA, then EUR 19.2 million certainly includes a one-off legacy item, which was EUR 4 million, which we would classify as a one-off. So bringing the run rate EBITDA rather in the 20+ area.
Okay. You only expect further, let's say, one-offs or consolidation effects, no further tax effects, et cetera, for the second half, right?
Well, you know, the tax effects depend on the profitability of certain subsidiaries. If you look at PATRIZIA, we have currently consolidated 134 different subsidiaries, and some of them are highly profitable, and some of them are not. And we unfortunately can't offset the gains and losses with each other for tax purposes. And this is why you also actually in H1 see that we had a low profitability, but a relatively high taxation. So guidance on tax at the moment is that we'll have an extraordinarily high tax rate for the year, so don't expect a significant reduction there.
Okay. Then you mentioned the EUR 400 million on balance sheet investment at the moment, and you indicated to turn them into funds to increase the liquidity again. But could we not see this as a such a number as, let's say, usual business, or will you stop warehousing and seeding investments?
Well, I think we'll certainly continue to use our balance sheet to enable products at PATRIZIA. The special thing about the current environment is that some of these consolidated assets are highly profitable, and some of them are rather in a startup phase and create losses. It is actually not unusual that a fund in the first year of business creates losses due to startup costs. And these losses or negative earnings do actually impact our balance sheet and especially the P&L at the moment. Given the low absolute profitability we have, it is actually very transparent, has a major impact. You wouldn't feel this or see this if we talk about the profitability we had in 2020.
So also, technically, is these accumulated losses would typically turn into profit once we deconsolidate these funds from the balance sheet. So a large part of that is actually timing when it hits the P&L, and, and not an economic question per se.
Okay. Another question is, in the last call, you, I think Christoph mentioned this, you stated to be in active discussions with the Dawonia Investment Consortium, concerning a new contract. Anything worth to mention here? Is this still in negotiations, or what do you expect here?
Look, look, Andre, thanks for following up. As I mentioned before, we are in a very constructive dialogue with all the relevant 27 investors. The one thing I would say is that we are very close to an agreement regarding the future of our strategic relationships, and this is in line with the timeline we are following. So that's really it. We're on a good track.
Okay. Then some questions on your strategic agenda. Well, in general, got to have some long-term goals and numbers, even if, 9%-10% growth rate seems to be very ambitious, to me, after a decade of market growth. However, my questions, first, on the, on the target does not include any in M&A, and not, the North American market. What are the reasons for the exclusion of those?
Andre, thank you for the question. I think the two complexes, first of all, there's a disparity in CAGR between U.S. market as well, you know, and compare to Europe or Asia. We have been not active in the real estate in U.S., and we have also not intention recently to be there organically. Nevertheless, Smart Cities, the vintage series, are looking for U.S. clients. And therefore, we are tapping the market, but through different approach in the new strategy piece, through you know external client channels.
Therefore, you will not see that the U.S. will appear as a region in the strategy, but like a placement agent in the U.S. for our infrastructure strategy, and also, let me say, high octane real estate strategy, will be welcome. And we have also, in our strategy, this, items in place. So that will be a part of the distribution strategy, to look which kind of opportunities that will open up, which sleeves can be placed in the U.S. through, via, you know, external, consultants, but also, I think, placement agents. So that is exactly what we are working on. But nevertheless, we will not build up huge sales forces in the U.S. It's always, I'm skeptical on these things.
Okay. And the question on M&A, why you,
Yeah
I'll say in the past, you focused on both, combination of.
Yeah
Organic growth and based on a strong balance sheet, also, taking over expertise via M&A. Why is this explicitly excluded?
Yeah. Sorry, Andre, I don't want to avoid this first part of your question. You're right. PATRIZIA has been super, you know, successful, you know, doing acquisitions in the last 15 years, grown from more or less a low single or double-digit player to today, more or less EUR 57 billion player. But I do think, first of all, we feel we have to consolidate now all that in, and we have to take the time, and also say that with the market muted period, to consolidate the platform. That is important, that is a start for scalability, and we have to focus now organically on our expertise base area sectors to propel the growth. Is relevant.
And I think even we have a rich balance sheet, we feel we should do first organically, not means that on the way to 2030, we will see opportunity and not touch opportunities. But this strategy is pure, first, organically, and this can change over the time. But at the moment. Also, Andre, I want to say, that on my career, I think I don't want to solve, a problem of others. We have to solve our problems, become profitable, become recurring, a fee-driven, you know, organization, and create shareholder value, really consistently and, also, at best, organically. As I said, it's not a per se, let me say, no-go, M&A, but at the moment, not focused. I want to also give a clear message to the organization.
We will now grow ourselves with our expertise and with all the M&A transactions we've done, and we've done a great one in the last 12-15 years.
Okay, that's clear. Brings me to the last question. You partly already answered that, but, to rephrase it, while your transition towards a higher earnings quality, well, simply saying, over the last 10 years or so, AUM accelerated from EUR 10 billion- EUR 60 billion, expecting, based on the assumption of scale effect of the EBITDA margin, as well as net profit, fall from a cliff, so to say. Why should it be the case that you improve margins with the management of additional EUR 40 billion? What is the difference?
Yeah. So first of all, we are now really focusing on five growth areas. We are really designing these growth areas product by product. That's important that we have this focus in, and also build the expertise and reallocation resources into these growth fields. Same time, protect our, the base what we have reached today, the first. The second thing is important, in my opinion, Andre, is absolutely relevance to understand in the new strategy is the movement in the last year's very transactional driven model to more recurring. That means the discretionary, sizable, scalable products are less transaction fee driven, and we have to understand the scalability and efficiency will be important. That is why we have to focus on our internal efficiency measures.
The same time, focusing in the growth pockets in the fields where we can be, let me say, superior to the market, and that is why we have chosen these five areas. We said exactly in these fields we have to go and we want to go. By the way, there is also valuation effect in the EUR 40 billion from today's jump-off base. And, and, and i n real estate, by the way.
And if I may add to that, Andre, I think we can be transparent here that every M&A has a certain degree of integration pain attached, and we did these M&A transactions, and despite a perfect cultural fit, there are always issues that need to be aligned, adapted, ranging from regulatory requirements, et cetera, to really create a well-oiled machine. So we think we have a completely different starting point today than a few years ago. And as Asoka mentioned, I think the difference with the new strategy is really focus. That we focus on key areas as a driver for growth, and we're not gonna do everything for everyone in the future.
Yeah, but honestly, also in the past, I would assume that the former management focused on growth areas and not on, on boring areas, which lack with low prospects. So, but I will not judge it. I wish you.
Andre, but I'm not.
All the best for that.
Sorry, Andre, I'm not disagreeing. But the difference is really about the scalability of the platform, and their focus plays a major role.
Yeah, yeah. Understood. Okay, that's from my side. Thank you very much for answering questions.
Thank you, Andre. Thank you.
Thanks.
Our next question comes from Manuel Martin with ODDO . Please go ahead.
Thank you for taking my questions, gentlemen. Two or three questions, actually from my side, maybe one by one. The first question is on the new strategy that you have. It's a growth strategy, well understood. However, maybe you can give us a bit of flavor of the competitive environment in which you are moving, because I assume that other asset managers want to grow as well. And maybe you can tell us whether it's easy to grow the AUM, whether there's a lot of money, or whether the competition is becoming more fierce. So just the attempt to have an impression of the competitive landscape in which you are moving.
Mm-hmm. Manuel, if I allow to take the question, you're absolutely right. It's never easy to grow and not to also grow in some way in ambitious numbers, to EUR 100 billion. But again, in six years, means, 2025-2030, six years, that's a foreseeable time. That is a long, and let me say, it's the longest plan I created in my career, always three year phases. But in light of the market cycle, especially in illiquids, and also in my opinion, mood of this, let me say, in general market alignment, we feel that reasonable to look for this midterm strategy up to 2030. First of all, the competition will be also further high.
But I want to say, and Manuel, it might be you disagree or agree with me, last 15 years, through the quantitative easing cycle, many, many players performed. Normally, normal cycle create winners and losers, and I have the feeling last 15 years, through the very, let me say, propelling monetary policy, has created a lot of winners. I'm expecting next cycle, this coming cycle, we don't know exactly the recovery of the illiquid markets, real estate and infra, and in some, other strategies, alternative strategies, when that going to pick up. We are expecting end of the year, the year, beginning of next year, mid of latest next year, that will start. But this next cycle will create losers and, and, winners and losers.
The reason for that is, I do think to run a business, cost of business for many small players, if they're not specialized, will be very high. The regulatory cost, but also in platform cost, inflation, all that will stay. This cycle is completely different to the last part of the last cycle. So therefore, in my opinion, that will require us that we have to be competitive with others. We have to become efficient, and we have to create a scalable platform. That's the one thing. The second thing is, for us, is to be in areas where not everyone can be. In my opinion, Re-Infra is the try and start to say, we are seeing the convergence of the two asset classes, infra and real estate, very much.
Especially the theme like Urbanization 2.0 will require not only a new living approach. That is a little bit. The tech will be a part of living in the future, but also the alignment and urbanity, the urbanization will require the convergence of both asset classes. So I'm seeing really opportunities there, where we are in already, and we have to see that. That's why we are also bringing both platforms under one investment platform, to create the synergies. Second, in my opinion, PATRIZIA is coming. The heritage of PATRIZIA is managing their own money, but also developing, it was a real estate developer that moved 20 years ago into investment manager, but we still have development specialists on our platform, compared to many other players.
Like decarbonization needs, what we are seeing massively, what today can't be funded by our clients, will come, in my opinion, much more to play in the next years. And we are well positioned, because our value chain is deep. It was always costly to care, take, and main to maintain these things, but that will play very much with our whole value chain, what we have in real estate. But also now, the infrastructure itself, bringing the Re-Infra into play, but also the high octane strategies, like value add real estate, and logistics. All that can play very well into our growth ambition, and that's why we are confident that we can differentiate from others. The question is absolutely valid. We are not alone.
We have to differentiate from others, and especially in decarbonization, with all our experience and heritage, we have to differentiate very much, and tech and data can play also our data, data analytics team, which has been built 12 years ago, and today is an asset in our pitches with our institutional clients, our global institutional clients, can be a differentiator, too, against others. So I am very positive on that value proposition.
Okay. I see. And this leads me actually to the second question. Asoka, it's about the Re-Infra investing. When I have a look at slide five of the presentation, maybe I'm old-fashioned, I understand how to invest in data centers, smart buildings as well. However, is it the case that this Re-Infra idea is also kind of investing in startups, which are active in these fields, so partially maybe being a kind of private equity fund?
Again, our infra teams are more PE type infrastructure players. While our real estate, except of Dawonia, where we are the investment manager and, no, partially, no, owned, we are normally investing into direct investments. But also our AIP group in Copenhagen, very successfully, you know, investing in impact investing. As you know, last year we closed one of the investing first final or first close in impact investing last year. What we've done with EUR 280 million close was more PE-driven real estate. But again, to your question, we are investing in real infrastructure, more PE-driven. I do think the Re-Infra will be more PE-driven investments than direct investments.
So, that is, I think, answer to your question.
Okay, understood. Last question from my side. It's regarding one of your five pillars strategy. It's the AIP, the Fund of Funds. Can you tell us a bit about the Fund of Funds fee structure? Because it might be different compared to the other funds that you have. And how do these funds count in your AUM counting? Where is that equivalent to other funds in your accounting? So, for example, suppose you have EUR 5 million AUM which you advise through Fund of Funds, does it count with EUR 5 million or billion in the AUM? Maybe you can give us some background here.
Manuel, on the, on the Fund of Fund business, you will only see in our AUM the equity that we've invested. So there, there's definitely no double leverage that we use to show in our AUM.
Okay, understood. And structure or something?
Fee structures is nearly half of our normal average fees for our direct investments.
Okay. Thank you very much.
Ladies and gentlemen, there are no further questions. I hand back to Martin Praum for any closing remarks.
Thank you, George, and thank you for everyone who listened in to our call today. We very much look forward to seeing many of you on one of the coming road shows and conferences. As the next contact point for financials, we refer to the Q3 results, which we will publish on 14th of November this year. Have a good time, and thank you very much, everyone.
Thank you.
Ladies and gentlemen, the conference is now over. Thank you for choosing for this call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.