Good morning, and welcome to this presentation of CapMan's 2023 financial results. My name is Linda Tierala, and I'm Director of Investor Relations and Sustainability at CapMan. Presenting today, we have Pia Kåll, who is CEO of CapMan. We have a Q&A session at the end of this presentation, and if you would like to ask a question, you may do so at any time throughout the presentation using the chat box at the webcast link. You may ask questions in English, Finnish, or Swedish, and we will answer them in English. But, without further ado, I'll hand over to Pia.
Thank you, Linda. Welcome also from my part. So in 2023, CapMan's fee profit continued to grow for the fourth year in a row. Our overall result was weaker. This is due to negative fair value changes in our investments. But despite these challenging market conditions, we continued to implement our growth strategy, and looking into 2024, it will be a year of growth for CapMan. During last year, we raised almost EUR 400 million of new capital to our funds. This comes from institutional investors, majority of them international from outside of the Nordics. Our fee profit continued to grow with 2%, reaching EUR 10 million. And we also continued our sustainability work, setting our Net Zero year to 2040, ten years ahead of the global target, and also committing as an early adopter to the Taskforce on Nature-related Financial Disclosures.
Looking into 2024, we have three new funds actively fundraising. Social Real Estate was established at the year end, made their first investment, continue to fundraise towards their EUR 500 million target over the next years. The real estate, Nordic Real Estate IV flagship fund is out starting fundraising. They target a first close this year and a target size of EUR 750 million at final close. Our third growth fund is also out fundraising, targeting a close already during the first half this year. We also continued active value creation in our funds in a slower transaction market, still at 12 new investments and seven exits across strategies, and further accelerated our strategy and our growth with the acquisition of Dasos Capital that we announced at the end of the year and which will be established as CapMan's natural capital investment area.
Our business model for managing funds through active value creation is, especially after the addition of natural capital, focused on real assets. 80% of our assets under management coming from real estate, infrastructure, and natural capital, complemented with specialized private equity and wealth advisory, as well as our service business. From this, we get management fees and also carried interest when we exit investments from our funds. In addition, fair value changes from our balance sheet investments impact our profit and loss statements quite significantly. Looking at the key figures for 2023, turnover at EUR 59 million, somewhat down from the year before, driven by less carried interest in 2022, in 2023, compared to a very strong 2022. Fee income flat at EUR 56 million, and comparable fee profit growing 2% to EUR 10 million during last year.
Assets under management at EUR 5 billion, a continued strong balance sheet, and the Board expects a dividend payment of EUR 0.10 per share in their proposal to the Annual General Meeting. Our fee profit continued to grow for the fourth year in a row, an average annual growth rate of 11% over these years. This is driven by successful fundraising, new funds raised during 2022 and 2023 that contribute to a stronger fee base, but it's also driven by improved relative profitability due to cost control and scalability. And this is something we expect to continue into 2024 with a continued fee profit growth. Our overall result, however, was weaker, and despite the growing fee profit, the weaker result comes from the weaker fair value development. So if we compare the years 2023 and 2022, EBIT bridge, we see that fee profit grew.
We had EUR 3.1 million carried interest in 2023, lower than in 2022, but given the slow transaction market, still a good achievement. However, the main difference comes from the fair value changes from our balance sheet investments, negative EUR 6.1 million in 2023, compared to a positive of EUR 36 million in 2022. The single largest driver in this difference are the external fund investments, primarily venture capital funds, that had a negative development in 2023, whereas they had a very strong positive development of EUR 23 million in 2022. So this explains the difference in comparable EBIT, where 2023 landed at EUR 6.7 million. Our balance sheet is invested diversifiedly across private market funds. Majority of these are in our own funds, and during the year, private equity and infrastructure developed positively.
Real estate, slightly negative development at year end. However, given the tough real estate market, I would say still a strong performance from the real estate team. The major decline, as said, from external venture capital funds and international fund of funds, who have developed strongly positive over a couple of years and now slightly came down from there. However, our balance sheet remains strong and our liquidity strong, with cash and undrawn credit limit above EUR 60 million in total. This means that we have the balance sheet to continue to support our growth strategy and our, our investment commitments. Moving into strategy implementation, through our vision to be the most sustainable Nordic private asset company, we are today building the society we want to see in 2035, 2040. Through our investments, we have a significant impact on the Nordic economies and communities.
Our real estate strategy of human-centric real estate works already today with 220 different properties, almost 9,000 tenants. In the private equity and infrastructure side, we support in total, at the moment, 46 portfolio companies in their transition towards more sustainable operating models. This concerns some 14,500 employees on aggregate, and an aggregate turnover from these companies of EUR 2.3 billion. We continue to systematically implement our growth strategy. We build on our competitive advantages, delivering top investment returns through active value creation, integrating sustainability as a core theme in everything we do, and developing CapMan as the home for top performers in the industry. Growth is driven by scaling up existing funds and strategies, introducing new and through acquisitions, and we are progressing towards our target to double assets under management to EUR 10 billion.
During last year, in a very slow, and somewhat challenging transaction market, we continued to systematically execute on our value creation strategies. In total, 12 new investments and seven exits across our different investment strategies, and especially real estate activated towards the end of the year, with several new investments across funds and also exits. Looking at our growth ambition for assets under management, it's driven by strong fundraising and also successful acquisitions. So during last year, we raised almost EUR 400 million of new capital, primarily from institutional investors, and international such. In addition, through the acquisition of Dasos Capital, we will, at closing of the transaction, add EUR 630 million of assets under management, and further continue to accelerate growth in that investment area.
Also, looking into 2024, we have several key funds out in fundraising that will drive growth for this year's assets under management. Our funds are attractive for international institutional investors. If we look at our assets under management by geography, half of it comes from outside of the Nordic region, and of our 400 institutional investors in our funds, they are primarily pension funds, asset managers, and other institutional investors. If we look at the assets under management raised during last year, it comes from almost 100 institutional investors, a third of these new to CapMan funds, proving the attractiveness of our fund strategies for international investors. Do our most recent funds also show this, this trend and the resilience of these strategies in the current market environment? The CapMan Nordic Infrastructure II fund is already nearing EUR 300 million in raised capital.
It's already 50% larger than the first fund, and 70% of the capital raised last year is from outside of the Nordics, 64% of this from new investors to CapMan. CapMan Social Real Estate Fund that was established at the end of the year, is targeting EUR 500 million of equity commitments, a total investment capacity of EUR 1 billion, also from international investors, and they, they made their first investment now in early 2024 in a school facility in Helsinki. If we look at the fundraising targets for this year, the focus is really on three flagship funds that are in the market and this newly established Social Real Estate Fund. So as said, the Social Real Estate Fund targets a EUR 500 million equity over the coming years. The Nordic Real Estate IV, the flagship fund in real estate, is starting up fundraising.
They target a first close during this year, and a target size of EUR 750 million at final closing. Also, the third growth fund is fundraising, has already attracted significant commitments from investors, and are targeting a close during the first half of this year at a size larger than the previous fund. Also, the infrastructure fund continues to fundraise during the first half of the year. With these fundraisings in the market and the preliminary interest we see from investors, we expect assets under management to grow significantly in 2024. In addition to the organic growth, we are also growing through acquisitions. In December, we announced the acquisition of Dasos Capital. Dasos is a pioneer and a leading European timberland and natural capital investor.
They manage 7 funds, currently in total, EUR 630 million assets under management, and net asset value of EUR 1.5 billion, and it consists of 265,000 hectares of land and timberland in that portfolio. So measured both on size of portfolio and the geographical spread of the portfolio, they are clearly a leader in this sector in Europe, and even on a global scale. They have delivered strong net returns throughout the years to their investors, and at the same time, their funds are a significant carbon sink, capturing carbon annually, corresponding to roughly 500,000 car emissions that they offset. The strategic fit of Dasos and CapMan, CapMan is excellent. For CapMan, this supports our sustainability ambition.
It's an important step on our growth strategy towards EUR 10 billion assets under management, and it's also, for us, a way now to expand into natural capital and timberland investment as an attractive new investment area. For Dasos, we can provide accelerated growth outlooks through support in fundraising, but also support from our platform expert services, which allows this investment team to then focus on scaling up their investment strategies. And already, we have several joint development opportunities identified to further accelerate the growth of Dasos. The process to close the transaction is proceeding as planned. CapMan's Extraordinary General Meeting authorized the Board to decide on the directed share issue for Dasos Capital in mid-January, and we have also received the approval from the Finnish Competition Authority for this transaction.
Further conditions for closing are the approval from FinFSA, and then also consents from Dasos fund investor, both of these in progress, and we expect to close this transaction during the first half of this year. At the same time as creating financial value, we are progressing our sustainability agenda, and we have set CapMan's net zero year to 2040. This is the natural next step after having set the midterm targets aligned with the Science Based Targets initiative. It means that CapMan's own emissions, Scope 1 and 2 emissions, should reach net zero by 2040. But it also means for our portfolio, that our portfolio companies in private equity and infrastructure, by 2032, all of them should have set their emission reduction targets aligned with the Science Based Targets initiative and reach net zero by 2040.
For our real estate side, it means a target to reach operational carbon net zero by 2035 already, and then by 2040, reaching total net zero, so also including the embedded carbon. CapMan's real estate is leading the way in developing the approaches here by being part of the Science Based Targets initiative by building pilot as a test project. Only reducing emissions is not enough when it comes to sustainability. The world is already overshooting six out of the nine planetary boundaries, and this is why CapMan has also started to build our approach for nature positivity across our investment strategies. This is about future-proofing our assets by incorporating nature impacts, risks, and opportunities in our value creation, but it's also around driving additional value by creating financial value within the planetary boundaries.
This is done also incorporating the social impacts to make sure that the transition towards nature positivity happens in a way that is also socially and equitable transition. We measure the progress in this, both through the Science Based Targets of Nature and the TNFD, where CapMan is an early adopter, one of only 300 companies globally being part of it. When it comes to building CapMan as a home for top performers, our employee satisfaction is on a high level, 51 eNPS score in the 2023 survey, but also our inclusion index is high at 81. We have also set our gender diversity long-term targets for CapMan. At the moment, we are looking at all employees, slightly above 40% women, 60% men. Our long-term target is that out of new recruits, a maximum 60% of any one gender.
When we look at the Management Group, 42% women, 58% men, and also here, a long-term target that maximum 60% of any one gender for new Management Group appointments. When we look at the investment teams, investment strategies, we have out of the investment partners, 4% women at the moment, and the long-term target here is that we appoint female partners to reach 20% overall when we get to 2033. CapMan's long-term financial objectives remain unchanged. We are seeking growth in our management company and service business of more than 15% per year, with a strong balance sheet, return on equity, and equity ratio. Our distribution policy is to pay sustainable distributions that grow over time, and for 2023, the Board of Directors expects a dividend distribution of EUR 0.10 per share.
In their proposal to the Annual General Meeting, they propose EUR 0.06 to be paid in spring and an additional EUR 0.04 to be paid in fall after a Board Resolution. Then finally, our outlook estimate for 2024. CapMan's objective is to improve results in the long term, taking into consideration annual fluctuations related to the nature of our business, carried interest and changes in the fair values of our balance sheet investments impact our results significantly, and there are several factors also outside the control of CapMan that impact, especially the timing of these. For these reasons, we do not give numeric estimates for 2024, but we do estimate assets under management to grow in 2024, and we also estimate fee profit to continue to grow also in 2024. Thank you, and with this, we can move over to Q&A.
Thank you, Pia. And, I would also like to welcome CapMan CFO, Atte Rissanen, to join us for the Q&A session. As a reminder, if you would like to ask a question from either Pia or Atte, you can do so by writing it in the chat box at the webcast presentation link, and you can ask a question at any time during the presentation. Right. We have some questions here from the audience.
Yes, good morning. Sauli Vilén from Inderes. Yes, let's start with the fundraising. Can you give us an update on CaPS, on the programs, the PE programs there, how they are progressing?
They are progressing as planned. So, launching a new generation of the, the program each year, also in 2023, with a growing amount of investors. So I think the total amount raised in those programs now is about EUR 200 million total.
I believe when you originally launched the cooperation with AlpInvest, I think you mentioned that you aim for, like, maybe, give or take, EUR 200 million a year run rate at some point. Do you still believe that would be a feasible level when the market is more normal to raise for those programs? Obviously, those were back in the days; they were new class for you, so to speak. So, I mean, obviously, that was more of a guess back then, I guess. Do you still believe that EUR 200 million would be a good proxy going forward?
I think it's a good target that we will reach over time in those, and, we are also looking at expanding the programs from the current one product. So I think in overall looking at the products, yes, that is still the target of the team.
Then, Infra II, can you remind us when, when is the final close on that? Is it summer?
So currently the final close is latest at the end of April this year.
That's like a hard cap, or can you postpone it still?
At the moment, that's what's been agreed with the investors and the Advisory Board of the Fund. And then, of course, it's always a discussion then with the Advisory Board on whether to close there as a hard cap or continue the fundraising. As it looks right now, we are targeting a hard cap there.
Then on the Nordic Real Estate IV, do you have any grasp, like, what kind of demand is out there? Obviously, I guess it's kind of a two-sided coin here. I mean, with the third fund, you basically sold it out in minutes, so to speak, and then obviously now the real estate market is, well, not so good. So I mean, what is the overall feeling regarding the demand at the moment, and how confident are you that you can actually land on the EUR 750 million target there?
So now the fundraising is only starting up now, so we will know more as it progresses. But the early soundings that the team has done with their investors, and especially when we think about the international investors, North American and Central European, they see a strong interest for this specific real estate asset class in the Nordics. So with that early feedback, we feel confident to start the fundraising now, and as I said, we target the first close this year, and then at the final close, the target size is EUR 750 million, which would be a natural evolving the strategy from the third fund.
Okay, that's all for me for now. Thanks.
Thank you.
Yeah, thanks. Joni Sandvall from Nordea. Maybe follow up on the fundraising situation overall, where you see in terms of allocations, where you see the most interest currently?
Across strategies?
Yes.
So I would say, there is interest for, actually, for all of the different strategies. It really depends on the investor situation and how they look at their allocations. The market continues to be challenging in the sense that, investors are waiting for distributions from investments they have already made. At the same time, especially the institutional large investors who are investing systematically over time, they start to see that now is an excellent time to make new investments in the market, so that increases attractiveness. So at the moment, we have interest across our private equity infrastructure and the different real estate funds, but from different investors.
Okay, thanks. Then question related fee income. It was EUR 2 million below last year in Q4. Can you remind us what were there some additional incomes in last year, Q4, or what was the main reason?
The main reason for the decline compared to Q4 2022, of course, as the business evolves, there are exits in the funds, there are net asset values in the funds that have been slightly going downward. That has had an impact. But there was also, during Q4, an adjustment made to management fee turnover, which was recognized in 2020, which had an impact of about EUR 1 million, a negative impact on the turnover, which, this, of course, so sort of when looking at the run rate, that should be taken into account. And also the real estate asset management fees to the market situation, there's not that much activity in terms of new rentals and whatnot, which has been partially leading to the decrease in the real estate asset management fees.
Those are the total factors contributing to the management company business top line, and the fee income.
That's visible on the service side, on the management company fee, if you, if you-
The real estate asset management, yes, yes, that's in the management company business.
Okay, thanks. Then maybe follow up on the Nordic Real Estate IV regarding the first close, have you set any target of the first close size?
No, as I said, we target the first close during this year, but fundraising is starting up, so we will get more concrete feedback from investors now during the first half of the year.
Okay, and, last question from my side: were there any additional costs in the personal expenses now in Q4? I'm just wondering because full year personal costs were down, but now in Q4, they were up. So was there any additional items there?
During Q4, we recorded some items impacting comparability, some EUR 2.0 million in total. EUR 0.5 million was related to the Dasos Capital acquisition, whereas EUR 1.5 million was attributed to the management company business. Those are sort of internal rearrangement or internal reorganization measures taken in order to better position the business for future development. But as mentioned, that's not an impact in comparability, and a one-off item.
Okay, thanks. That's all from me.
Thank you. Let's take a question from from online here in between. So there's a question from Jerker Salokivi from Evli, and he's asking about CaPS. CaPS continued good performance in in 2023. So what are your expectations for 2024?
Yeah, so that's correct. So CaPS, our procurement service, grew strongly in 2023, some 17% annually, and we see that growth continuing into 2024. So continue to expect growth in the CaPS business.
Thank you. A follow-up question from Sauli Vilén from Inderes.
Yes, actually, a couple of- couple of one, if I may. Yes, so, getting back what, what Joni asked about the management business and the management fees there. I m ean, if you look at the, just the management fee line and exclude the fees from the asset management, so to, so to speak, the, the- so the basically the fees from the funds, if I looked correctly, this is the lowest level you have been since Q2 2021. So I mean, it should, Is there, like, on, on the, on the fee side, is there, like, something dragging down on this, or should we see this Q4 as a run rate level from now, since it's kind of a big drop, almost EUR 1 million from Q3 level?
Yeah. Well, as mentioned, it was management fees in Q4. Those were EUR 1.6 million below the level of Q4 2022. And but that was explained by mainly by the one of negative turnover impact of nearly EUR 1 million due to the management fee turnover adjustment dating back to 2020.
Yeah, okay. Then, about the management business, the personnel cost level there, if you exclude the EUR 1.5 million, which the one-off, the number is just a tad up from a year ago, even though your management business EBIT is down quite a lot. So I mean, shouldn't there be more flexibility on the bonuses, so to speak, when the EBIT goes down? Or but I'm, but I'm, b ut since there, your personnel level is- should be roughly flat there, right? So I mean, what I'm missing here?
Well, yes, the total personnel expenses in the management company business, when you exclude the sort of one-off items, they're actually a bit down. But of course, there is some flexibility from bonuses. But when you also include, for example, the run rate impact of recruitments made during 2020, that has the full year impact for the personnel expenses there. But if you were to adjust also the top line related previously mentioned circa EUR 1 million negative impact, the relative profitability is actually quite stable.
Okay. Then finally, about the investor, let's say, sentiment or I mean, obviously, 2023 was kind of a turmoil in the private asset market, and a lot of your clients also were over have been in the stock with the over-allocations, et cetera. So what's the situation now? Like, has the over-allocation dilemma, is it vanishing a bit? How is the overall demand on the private asset side at the moment, if you, like, let's say, compare the situation one year ago?
Yeah, so I would say that, well, first of all, it's good to remind ourselves that this is a growing asset class. So there are continuously more investors investing into this asset class and increasing net their allocations to it. But, looking at the market sentiment, so 2023 was challenging, as you say, and for different investors, different reasons. Some had over-allocation to this asset class, especially when their listed equities came down, so in comparison with that. For others, it's really around the liquidity or cash flow development, so with the slower transaction market, there is less distributions and therefore less money to commit to new funds.
If I look at this year now or what it looks like right now, the market is still challenging, and one thing impacting is that the overall uncertainty, geopolitical risks, interest rates maybe have flattened out, but still there is uncertainty there and on inflation. All of this impacts the industry continuously into this year. So for some investors, I think it's easing up, but we do have a challenging market situation still also now going into 2024.
Okay. Now that's all from me. Thank you.
Thank you. And, we have a follow-up question also from the audience here.
Yeah, thanks. One follow-up related to Fair Value Changes in external funds. Can you open up what was the FX impact now in Q4, and what was actually the total, total impact? So I'm just thinking what part is coming from the FX.
Well, if you look at the total fair value impact, split into what is derived from our own funds and then the external funds, our own funds actually were performing on average, quite well, so mainly positive. But the negative impact basically fully driven by the external investments. And of that impact, as we all know, the Q3 exchange rate, euro dollar, it was about 1.05, and at the end of the year it was 1.1. So the 5% change in those was 5% of the change was driven by the effects. So that accounts for a bit over a half of the impact there in the external fund investments.
Okay, thanks. That's all.
Thank you. And, we have a question online here, this is for Atte. So, the share price is down some 30% during the year. Given that you project growth for 2024, are you considering share buybacks as part of the capital allocation strategy, and if not, why?
Well, of course, that's something that we have in the toolbox, but our primary way to distribute capital to our investors has been via dividend distribution. Share buybacks have not been on the agenda. We have the authority currently from the AGM to conduct those, but in the foreseeable future, I would say that that's not something that we are actively considering.
Then there's a question from Mika, who's asking about whether there's an increased demand for private debt or refinancing in this market.
So definitely, credit strategies or private debt is one asset class that has gained interest during the past year and with the current interest rate situation. When we see it both in our credit strategy having a really active transaction year last year, but also in LP appetite for that strategy. And they are starting to prepare now for the next fundraise, but it's still quite far out. They're focusing on their current fund.
Thank you. There's one question regarding the service business, and I noticed that you haven't really spoken as much about the service business as you have about the management company business. So how do you see that developing going forward?
As was already previously mentioned, so the service business for us today is primarily our CaPS Procurement Services business, and they had a strong growth in 2023, and we see that growth continuing into 2024.
All right, thank you. If there are other questions, either here from the audience or online, please feel free to submit them through the chat box at this time. Maybe one final question for Pia regarding the focus areas for 2024. What would you see as the three most important things?
So obviously, fundraising, these fundraisings that we have already mentioned, the flagship funds in the market within real estate, within growth, and infrastructure, and the new Social Real Estate Fund, fundraising success there, definitely a top priority. Also operational, when we look at the business, continuing to deliver top returns and also, you know, distributing returns in our investment strategies is key because that's the, what's funneling then growth for also fundraising and attractiveness of these investment strategies. Doing this in a scalable manner, I think there you have the three top priorities.
Yeah, if I still may, one more question. Sauli Vilén from Inderes. About your M&A appetite, obviously, you did the Dasos acquisition now, and you, well, you soon will be integrating it, but it's I mean, even though it's a strategically, it's kind of a big thing in, I guess, integration-wise, it's not a too big thing since there is, like, eight people or something in, in there. So I mean, are you, after the Dasos is said and done, are you, like, instantly looking for new acquisition? Are you open for them, or do you, like, need time to digest the Dasos first in your operations? How do you see this?
No, so acquisitions continue to be on our strategic agenda, and it's something that we continue to be interested in and continue to take discussions forward all the time. It is, like you say, the Dasos integration is not a massive organization, and the planning there has started. So I would not say that that is hindering new acquisitions, so that continues on the agenda as before.
Okay, thanks.
Thank you very much. Since there are no further questions, this will conclude this webcast presentation. I wish you a great day today, and please stay warm out there. Thank you.