Good afternoon, ladies and gentlemen. A warm welcome to CapMan's Capital Markets Day 2022. My name is Linda Tierala, and I'm Director of Investor Relations at CapMan. Earlier today, CapMan announced our new strategy together with updated financial objectives. We have a broad group of speakers here from CapMan today to describe the building blocks of this strategy in more detail. Before we start with our program, a few practical details. If you would like to ask a question during this presentation, please you can do so through the forum at the bottom of the webcast. All questions should be asked in writing. I would also like to remind you that this presentation contains forward-looking statements. With these practical...
Practical matters underway, it's my pleasure to welcome our first speaker to the stage, Joakim Frimodig, who is the CEO of CapMan. Before he comes here with me on stage, let's first take a look at what working with and investing at CapMan might look like. I hope you enjoy this short film.
At CapMan, we build companies and assets for the long term. Our broad societal reach and a hands-on approach drives sustainable value creation. It is our Nordic pledge and privilege to build thriving societies for us all. What is yours?
A very good afternoon to you all, and a warm welcome to CapMan's Capital Markets Day 2021. Today, we have launched our new strategy and announced our new financial targets, and it's a true pleasure for me to be here with my team today to tell you more about the strategy and our business operations. CapMan's vision is to be the most responsible Nordic private asset company, and our high level strategic objective is to double the size of our business in the next five years. We have done this before. In the previous strategy period, over 4.5 Years, we doubled the size of our company, and now our intention is to do the same again. Where is growth coming from? Predominantly from existing products, existing strategies, and from a constantly growing international fund investor base.
We also have a firm view on adding new products and M&A to the mix. Consequently, with these objectives, we are raising our long-term growth targets from 10%- 15%, and at the same time, we are recommitting to the dividend target of annually growing dividends. Before we start to look forward, let me just take a few minutes to look backwards, what we have achieved in the last 4.5 Years. CapMan has gone through quite a transformation. We have a renewed board, management group, and strengthened investment teams. We have clarified our vision. The strategy has been to develop from a local Finnish private equity company to a truly Nordic private asset company. We are working with a new attitude, a new company culture. In short, you could say we have built a modern and growth-oriented CapMan.
This has laid the foundation for the ambitious plan that we are presenting to you today. Let's also look at what we have achieved during the last five years. We have grown substantially. If you look at turnover, 100% growth. EBIT, 135% growth. Assets under management, 65% growth. At the same time, we have developed our business substantially. I'm really proud of the fact that we now have a very international LP base in our funds. In 2017, 10% of the capital that we managed came from outside the Nordic region. Today, close to 60%. This enables growth going forward. We have access to capital. If you look at the type of products that we are working with, no longer just closed-end funds, but increasingly open-ended structures and mandates. This enables scalability, and this enables faster growth.
Also, if you look at our earnings mix, we have been driving up the share of fee-based profitability. We've quadrupled that in this time, and each share of earnings is constantly growing. I'm really proud of what my team has achieved here doing this transformation, achieving these results, because this lays the foundation upon which we can take the next step in CapMan's development. CapMan today, what type of a company is CapMan? We've been around for over 30 years. We've been a front runner in our market. We've been a visionary company, and we have been innovative. And that's part of our DNA that we need to take with us as we go forward because innovation is needed to achieve the goals that we have set ourselves. We are also a truly Nordic private asset company today. We have offices in all the Nordic countries.
We work with three main investment areas. We have 20 funds that we are actively managing, and we have over 200 targets in our portfolio. We have the best experts in the Nordics to do the business. Over 180 employees, a number that has grown in recent years. We follow a people-centric approach in all that we do. We realize that the experts within CapMan are the ones creating the value and driving the growth going forward. We also believe in entrepreneurship, and we want to encourage that way of working. That's why we have organized ourselves so that we have nine very independent investment and service teams. CapMan is also international, more and more so. I already mentioned the share of international investors, and the way in which we work follows the highest international standards. Our mission statement remains unchanged.
We build sustainable value for the enrichment of society through active ownership. This we are committed to. We are driving innovation in companies. We are creating jobs. We are creating better societies. In real estate and infrastructure, we are developing societies, cities, and the environment in which we operate. This is a core fundamental of our business. When it comes to our vision, we have renewed it. The vision is to be the most responsible Nordic private asset company. We are making a broad commitment to responsible practices that we want to drive through all of our actions within CapMan and within our portfolio. In a way, we are putting sustainability at the core of our operations, but for me, responsibility is more than just sustainability. We want to be a responsible long-term investor.
We want to be a responsible owner, and we want to take into account societal factors in all the business decisions that we make. To achieve this vision, we put forward five cornerstones that are important for us. We need to have top performance and create value in our business. We need to have access to capital broadly, both locally and internationally. We want to be a Nordic sustainability front runner, and I believe being a Nordic front runner means that we are a global front runner in this field. We want to be the home of top performers. We need to attract the best talent in the industry to CapMan. As said, we want to be innovative. We want to introduce new products, new solutions. With these five cornerstones in place, we can achieve our vision and our strategic objectives.
When it comes to our strategic focus areas for the next five years, we have laid down six areas that I will go through. First of all, we want to deliver top performance through active value creations. That's at the core of what CapMan does. You've heard me repeat it already three times. That's how important that is. What we want to do over coming years is to scale up existing strategies and products. We've launched many strategies recently. We see a lot of potential in the teams, the strategies, and the products that we already have in place. We are gonna integrate ESG as a core theme in all of our business activities, and we want to develop CapMan as the home of top performance. Shareholder value, we're gonna drive up through a combination of growth and improved earnings quality.
Also on top of the organic growth path, we are looking to explore new products and M&A in a proactive way. The ambitious target that we set ourselves is to double the size of our business, double assets under management from EUR 5 billion- EUR 10 billion in the next five years. Let me go through these six areas in a bit more detail and what we're thinking around these topics, starting with the value creation. The six factors that we've laid out here, we believe are unique to CapMan in the way that we can create value. We have a broad local presence in the Nordics. We have feet on the ground. We have 180 experts who know the market in which we are investing. We have a broad network in place.
We have access, for example, to proprietary deal flow in many of our investment areas. We have clearly defined focuses for our different strategies, and we've been actively looking for interesting spots within the Nordic mid-market to find blue oceans where we can truly create value. Top talent, responsible long-term ownership, I will come back to later, but also group level synergies. We have independent teams, but we are sharing a lot of knowledge within the company. Knowledge that we have today, knowledge that we have gathered through our history, and also what we are promising our investment teams is that they can focus fully on value creation and investment and get the full support of the group support functions. We must have performance, we must create value in order for us to grow. This is the starting point. If we cannot do that, we cannot grow.
We need to deliver, we need to earn the respect and the trust of our clients. When we do so, I believe they are willing to commit more capital to our existing funds and also support us in coming new product launches. When we are doing that, then we are growing and also delivering to our shareholders. This is where it starts. Here you can see how we have developed. The performance is improving. The number of funds in or above the hurdle rate rising from 42% to now about 80%. The target of course being that all of them should be at that level. The share of funds in the first quarter when we do ranking of funds in their own competitive space, before 2017, only 8%, now we're up to 40%.
We've set a target that over 2/3 of the funds should be in that bracket in 2026. That's how important performance is for us. I believe that the elements you saw on the previous slide, the six things that are unique to CapMan, are those that will drive this development further. Topic number two, scaling up existing strategies and products. This is what our assets under management development has looked like over a long history. If you look at the previous strategy period, 2017 to 2022, you can see that we've more or less doubled this size from EUR 2.7 billion to now approximately EUR 5 billion. What we are doing or setting out for the coming years is to double that again to a target of EUR 10 billion.
You can also see that what we're trying to highlight here is that large part of that will be done organically through existing products, through existing strategies. To reach the target, we also need to add new products and M&A. That's part of the mix. Worth pointing out, these are linear illustration. The real world isn't linear. There are cyclicalities, there are, timing issues, but this highlights the ambition of the target where we are going. From a refocus to growth state to an acceleration and scale-up state. How have we compared if you look at the global private assets market in terms of growth, and how is this plan in accordance with estimates of this market? Well, we outgrew the market in the previous strategy period, and we're planning to do the same again.
Currently, the estimate is that the global alternatives market should grow by some 74% over the coming five years. Our plan is over 100%. If you take out the M&A and new products from our plan, the organic growth is very much aligned with the overall market growth. We are looking to outpace the market going forward as well. It takes time to build up an investment area, and we have launched many new teams, investment areas, and products in the last few years, and there's a lot of potential remaining in all of these. We are on the right track. The teams are building up their size, their track record, their trust with investors, but also their product offering.
You can see from this illustrative slide that as the teams develop and as you can add more products, also the profitability is driven up in all of the business areas. The point I'm trying to make is that even though we have made advances in CapMan, none of our investment areas has yet reached its full potential. We are looking to shift all of them forward in the development over the coming five years. I think the best example I can provide from CapMan of a successful scale-up of an investment area is our real estate investment. There our successful flagship strategy has been developed over many years. The vintages have grown the size of the fund, but in parallel over recent years, we have added a number of income-based products, scalable income-based products.
We have raised close to EUR 3 billion equity since 2013, most of that from the international space. We see further potential in the real estate area to grow the products that we already have in place, but we also see opportunities to add products here, but especially to do the same journey with other investment areas such as infrastructure. Maybe to summarize our growth plan, where is growth coming from over coming years, splitting down first in product type. We see that about half of the growth is coming from existing open-ended strategies, and we are seeing that about 30% is coming from existing closed-end strategies and their coming vintages.
As said, new products in M&A also part of the mix. When it comes to sources of capital, we clearly see that the bulk of the growth will come from the international space. We will continue to source capital locally, that's an important part, but really the bulk of the capital is coming internationally. If you look by strategy, you can see that real estate a bit less than 50% of the planned growth, infrastructure 30%, and then private equity 25%. That's private equity, including also the access products of CWS that we will present today. Here you can see how the international investor base has developed over recent years.
Steadily the share of international investors growing and really proud to present names like those at the bottom of the page, the international investors who have placed their trust in CapMan and the number of names of that magnitude is growing. Let me turn to the third cornerstone, ESG as a core theme in business activities. As said, we are placing ESG at the forefront and making a broad commitment to these practices. CapMan is quite in a unique position to drive big change when it comes to sustainability. Through our portfolio, we have access to companies and assets that employ thousands of employees, rent out millions of square meters of lettable space. Really through our actions, we can make an impact. I think more importantly, we want to make an impact. What does that then mean in practice?
What are we going to focus on? Well, we're going to integrate ESG into all of our investment processes. We are going to set measurable targets. We are going to measure them, and we are going to communicate the targets. We are going to standardize the processes that we have in place, and we're going to be part of the community. We are not planning to do all of this alone. We are going to share our know-how, and we are going to receive know-how from others in the space. This requires also that we have the in-house expertise in place that we require. But here also, I think the front-runner attitude is important. Already what we have done recently, we are the first financial institution in Finland to commit to the science-based targets earlier this year.
We were the first to issue a sustainability-linked bond in the market, and we are among the first companies to link executive remuneration to ESG. We are already taking front runner steps, but we will do more so going forward. CapMan should be the home of top performers. We have about 180 CapManians at the moment. We are spread out to six offices, and we are a diversified group of people. We continue to grow our organization in a controlled manner, but so that there is clear scalability within our business. To have the right knowhow in the house is crucial for CapMan in order for us to deliver the value. As you remember, I said value creation and performance, that's the way it all starts. That's why it's important to have the right people.
We have been spending a lot of time on creating a new people strategy that we think is unique and by which we can attract the best talent in the industry. We want to operate with a unique culture as one CapMan family. We are providing our employees the opportunity to make a real change and impact in societies through the work that they can do at CapMan. We are enabling our employees to work with the best people, the top companies, and the best partners. There's a purpose for what we do, and we are ready to reward success to our employees. We believe that this is a unique mix that by which we can attract the best talent in the industry. Let me go over to shareholder value and how we're going to drive up that in coming years.
First of all, a brief reminder of our business model. We are reporting three segments: our management company business, the service business, and then our investment business. We have three main sources of income of earnings: fee-based income from the management company and service business, carried interest income from the management company business, and then returns from investments and fair value changes from our investment business. If you look at the businesses within CapMan, they have different contributions to these different earnings streams. For example, private equity is clearly a high-performing strategy which has a lot of upside potential. This has fee and profit potential, but not to the same extent as some of the others, but rather in our portfolio that provides a large upside opportunity for us.
Service business, on the other hand, doesn't have the performance-related upside, but they are very profitable and have a high recurring fee profitability. In between these, we have infra and real estate, a combination of upside and good fee profitability. In these areas, we see the largest upscaling potential over coming years. Here is the development in earnings mix. As said, the fee-based business has grown substantially over coming years, and this is also where we see that a lot of the value will come in coming years. We will continue to drive up that in absolute terms, but also in relative terms. At the same time, we foresee that we will have more funds in carry at the same time than before, so that we are getting a steadier and higher stream of carried interest income over coming years.
These are the two main components I would highlight when it comes to earnings and earnings mix. Improving the fee-based profitability and driving up the carry and making it a more steady component. This is nothing new. We are already on this growth track. If you look at our pre-fee profit development, 2017, starting off with a EUR 3 million level. Now we are around EUR 17 million level, and we are setting a strategic target of driving the margin up to above 40% in this strategy period. It comes to growth, it comes to scalability of the products I described earlier. Steadier flow of carried interest income. We have been able to move a few funds into carry during this year, and you can see we have a lot of potential remaining in existing funds.
The plan is here that those would move into carried interest, and that this stream would become more steady over the coming years. When it comes to the role of our own balance sheet, I would say fairly unchanged. We are not making any big, strategic, direction changes when it comes to the balance sheet. We are not gonna expand the balance sheet. We do not want to be an NAV company. We want to use the balance sheet to drive fee-based profitability to support our investment teams to seed new products and thereby create shareholder value. It's an important tool in this, but that's what it is. As I said at the outset, we are also recommitting to our dividend policy. We have been growing distribution to shareholders for nine consecutive years, and we intend to stay on that path.
From last year's result, we distributed EUR 0.15 out of a result of EUR 0.21. Year- to- date, the first six months this year, we have made EUR 0.16 in EPS. Good starting point for continuing on this track. As said, shareholder value creation is top of the agenda and has been also for the last years. If you look at how our share price has performed over the previous strategy period, the last five years, annual return of 18%. If you look at and compare it to the general market, we have outperformed in all of the time periods you can see here. Our ownership base has also developed. Today, we have close to 30,000 shareholders. That number has doubled in the last five years, and ownership base is diversified.
The largest owner holds 10%, the 10th-largest a bit over 1%, and then is very diversified after that. If you look at the share of shares owned by our board, our management, and employees, that's around 10%. Also the key employees have invested into a share-based incentives program. They've invested about EUR 5 million of their own money into the program and have upside through that. We have alignment with our shareholders to existing ownership and the share incentive programs. The last cornerstone here, to explore new products and M&A in order to accelerate the strategic agenda. Just to remind that we are seeing three sources of growth, expanding existing products, expanding existing teams and strategies by adding on new products, and then also looking for opportunities outside of this.
Potentially adding new teams or products within the private asset space and also looking at M&A as a tool to drive this development. We are more looking at the investment, product area than the distribution area when it comes to the M&A focus going forward. We are looking at the Nordics and potentially Northern Europe on this front. I'm coming to the end of the presentation, and here's a summary of the strategic focus areas and what we are targeting. To summarize, when it comes to performance, we are looking to have all active funds above the hurdle rate, two-thirds of the funds in the first quarter. We are looking to scale up our strategy so that our assets under management is doubled to EUR 10 billion in five years. We are integrating ESG.
We have a path to net zero when it comes to greenhouse emissions. We are improving gender diversity and also integrating ESG into our variable remuneration. When it comes to being a top house of top performers, we are measuring our net promoter score with a target of being above 50% there. When it comes to the shareholder value creation, as I said, fee profit margins above 40% and also a target to have multiple funds in carry at all times. To support the organic growth, to add on top of that, well-executed new product launches and/or M&A actions. Our renewed financial objectives. The growth of the management company and service business, here we are targeting over 15% annual growth on average. Previously, the target was over 10%.
If you look at what we have achieved in recent years and earlier this year, we are in line with our renewed target. Return on equity over 20%, that remains unchanged. Historically, we've been just below that. Recently, we've been above it, so we're trending in the right direction. Equity ratio was previously over 60%, now we are saying over 50%. This is in order for us to give a bit more flexibility when it comes to business development and potential new opportunities. We have a solid balance sheet around the 50% equity ratio mark. As said, we are recommitting to our dividend policy of annually growing dividends. That, in a nutshell, is what we are planning to do over the next five years.
We are gonna double the size of our business, and we are gonna do it in a sustainable way as one of the front runners in the Nordics. Thank you. Next on the stage, our CFO, Atte Rissanen, will go through the financials in more detail.
Good afternoon on my behalf as well. My name is Atte Rissanen, and I'm the CFO of CapMan. I've been with CapMan since 2017, previously as the head of Strategy and Business Development, and now since the beginning of 2022 acting as the CFO of the group. Today, I'll be presenting you with an overview of where CapMan stands today from financial perspective, but also we'll be going through how the strategic transformation that the company has gone through during the previous years has been reflected on our financials. To start off, I would like to state that CapMan is currently financially stronger than ever. Our AUM stands at the record level of EUR 4.8 billion. Our revenues based on the last 12 months, also at record level, EUR 61 million. That goes as well for the earnings before interest and taxes at EUR 56 million.
Our earnings per share from the previous 12 months, EUR 0.27, of which EUR 0.16 from the beginning of 2022. We have a very strong financial position. We have EUR 213 million of financial assets against EUR 93 million of interest-bearing debts. We have been able to grow our dividend distribution now for nine consecutive years. Looking at the top-line development, here on this slide, you can see the rolling last 12-month revenues going forward from the end of 2017, when revenue stood at some EUR 30 million, the current level of EUR 61 million. That's an increase of about 100%. When you put that into annual figures, that's the 16% growth per annum. I'd like to also state that the recurring revenue growth during that time period has been 18% per annum.
Driven, of course, by the increasing AUM as well as our well-performing service business. Looking at the operating profit, we have also seen steady and strong growth, currently standing at the record level of EUR 56 million, going up from the beginning point of some EUR 20 million. Strong growth there, steadily moving upward. Breaking the operating profit down to a bit more detailed level, here we have the EBIT breakdown as well as the percentage change from the one year prior, where you can see strong development in all of our business segments. During the last 12 months, the management company business has contributed to the operating profit by some EUR 19 million. Compared to one year prior, that's up 72%. Our service business also experiencing strong growth, 66% increase from one year prior, standing today at EUR 5.3 million. We've had very strong investment returns.
Last 12 months, nearly EUR 40 million. That's up 47% year-on-year. All this while at the same time, our group costs, i.e., the other and elimination segment, only increasing by 14% compared to one year prior when you exclude the abnormal impact of the performance share plan earlier this year. All in all, adding up to an earnings before interest and taxes for the previous 12 months of EUR 56.1 million. On the topic of costs, I wanted to share with you this slide, which demonstrates the share of fixed costs of recurring revenues and how it has been developing over the past 4.5 years. The starting point at the end of Q4 2017 was 98%. Today, that figure stands at 68%.
That's a decrease of 31 percentage points in the past 4.5 years. You need to take into account that during this time, our personnel has grown from 118 to, I think, above 119 if you look at the figure today. I think that quite nicely demonstrates the scalability of our business model, as well as it gives good insight on the underlying profitability of our operations. Which brings me to the next topic, which is fee profit development. Right now we are at record level and growing. The starting point at the end of Q4 2017, fee profit from services and management company business around EUR 3 million, now EUR 17 million. That's an increase of nearly 6 x and nearly 50% growth per annum.
When you add carry on top of that, the corresponding growth figure is 30% growth for the total management company and service business profitability. To continue a bit on carried interest, I've added here an illustration of how to think about carried interest or a rule of thumb, if you will, on what might help you comprehend the magnitude. Carried interest is typically 20% of fund profits as long as the return for investors exceeds the hurdle rate of 8%. Assuming that a fund would return 2x the invested capital, the total carried interest would be 20% of the original fund size, of which CapMan's share is 30%-50%, depending on the fund. We also have here the illustrative example on the right-hand slide, too, to further elaborate that.
First, the capital is invested into the companies, then investors get their investment back, and of the proceeds, investors get 80% and 20% as carried interest, assuming that we are above the hurdle rate. When you think about where we are right now, we have currently two CapMan funds in carry corresponding to AUM of about EUR 0.4 billion. In addition to those two funds, we have 12 funds that are currently actively investing or are in value creation or exit modes. That's EUR 2.5 billion of AUM that's eligible for, but not yet in carry. The achievement of the carried interest is of course reliant on achieving the investment returns, but so far we've been doing quite well on that side as well.
I move here to the final part of the P&L, which is the fair value changes. We have EUR 166 million of our own balance sheet invested in private assets. They're spread out across strategies, across asset classes, which have all different return targets, but on an aggregate level, we seek to achieve 10%-15% fair value changes on an annual basis. Like I stated, the beginning of this year has been very strong in terms of fair value development, 35% on an annualized basis. Even when you take a longer perspective, since 2016, the performance has been approximately 13% per annum compared to that of the public market during the same time period, 7%. That's an outperformance of 6 percentage points, so very meaningful. We also have very solid and strong balance sheet.
We have good liquidity. Our equity currently EUR 126 million, our equity ratio 48%. These figures already take into account the dividend that is to be distributed now in September. Our cash balance currently nearly EUR 60 million, and in case we need further liquidity, we have an undrawn credit facility of EUR 20 million in place. This strong liquidity provides us with the ability to do new investments and to support the growth of our fee business going forward. The financial stability also provides us with good security against evolving market conditions and potential times of uncertainty.
Looking at our investment allocation, how we have invested our financial assets, so EUR 213 million in total, about EUR 60 million in cash, and the remaining part invested entirely into private markets, well diversified across strategies and asset classes, mainly into the own funds managed by CapMan. Here on this slide, we have the evolution of the balance sheet exposure during the past 12 years. I think this quite nicely also demonstrates the transformation that CapMan has gone through from a private equity house to a true multi-strategy manager and how that is also visible from the balance sheet perspective. Still 2016, 2017, nearly 80% of our investments were in private equity, whereas that figure right now some 30%.
Well diversified balance sheet in terms of the investments that we have right now. As mentioned, our dividend distribution has increased now for nine consecutive years. For 2021, the fiscal year, we're paying EUR 0.15 per share in total, the first installment of which was paid in March, and the second installment now in mid-September. The earnings per share in 2021 was EUR 0.21, and now during the beginning H1 2022, EUR 0.16. Our objective is to continue to distribute an annually growing dividend to our shareholders. My final slide is the updated long-term financial objectives. I won't be going through them in detail as Jokke already did, but just to highlight the changes.
The growth of the management company and service business, now the new objective, 15% average annual growth compared to the previous target of 10%, and an equity ratio of 50% down from the previous 60% more in line with our strategy. To conclude, I would just like to state that, as mentioned in the beginning, CapMan is right now financially stronger than ever and extremely well-positioned to execute on our strategy going forward from a financial point of view. Thank you. That was all from me. Next up, I would like to present Anna Olsson, our ESG Director, who will be talking to you about the topic of sustainability. Thank you.
Hi, my name is Anna Olsson, and I'm the ESG Director at CapMan. I joined CapMan about a year ago. I will build a bit on Joakim's presentation and dive a little bit deeper into that. As you heard, integrating ESG as a core theme in all business activities is now part of CapMan's overall strategy. I will share with you a bit what that means in practice for us. ESG, as you know, is quite broad. The first thing that we need to do is identify the key aspects or the most material aspects for our business. In that way, we understand what's relevant for us to focus on. This is pretty basic for all businesses out there.
As we are a private market sector, what we need to understand or what we need to keep in mind as well is that we need to do this in parallel tracks, both as a corporation, but also as an investor. It needs to be relevant for our investment teams. Of course, for the investment teams, while we do this exercise, we need to also keep in mind the differences between the teams, and we need to keep the aspects on a good level so that it is relevant throughout all of our investments. Once that has been done, when we have identified the ESG aspects, we set long-term environmental goals, social goals, and governance goals. This is where we want to end up.
From there, we backtrack and establish annual ESG targets, and these targets need to be measurable. We also need to identify how we're supposed to get there, determine associated measures. Of course, as we want to be accountable and transparent, we also need to report on progress. We've gone through this process at CapMan, and we have identified three focus areas under E, S, and G. We drive climate action based in science and promote life cycle stewardship. In this way, we are preparing for the challenges that are brought by climate change and resource shortage. Under social, we create strong and equitable businesses and provide meaningful work. One thing that we learned from the pandemic is that people want their jobs to mean something.
With satisfied or happy, motivated employees, this will result in corporate cultures that ultimately will bring both financial and societal profit. When it comes to governance, we are diverse, transparent, and accountable for our actions. This is how we believe that you build strong and responsible, profitable businesses that will stay relevant in the years to come prepared for the future. These, as you can see, the focus areas are linked to sustainable outcomes. These are the goals, the end goals that we have identified, such as net zero economy, more diverse workforces and decision makers, more meaningful jobs, and more diverse board representation. From here, we have developed a path by setting quite ambitious yearly targets.
The targets here are set on CapMan group level, and on private equity and infra team level, and real estate level, and these are the different tracks that I was talking about. Under environment, for this year we are focusing on climate, and we are committing to Science Based Targets initiative. This target is relevant across all of our operations. Science-Based Targets, if you are not familiar with them, are emission reduction targets that are based on the latest climate science. By setting Science-Based Targets, we get a clearly defined path to reduce emissions in line with the level of decarbonization that is required to keep global temperature increase within 1.5 degrees.
By doing this, we will be in line with what was agreed in the Paris Agreement. This is the only environmental target that we have for private equity and infra and for the corporate side. As real estate is a little bit different, we have a few more environmental targets linked to the real estate investments. For social, we are focusing on employee satisfaction and setting numerical targets as Jokke also shared across CapMan Group and our PE and infra investments. We're also focusing on getting the right policies in place for diversity and inclusion. We are pushing for more diverse workforces, and this is the first step in getting there.
For real estate, we're focusing on tenant engagement and also human rights and labor rights in construction for contractors and in the supply chain. Under governance, we are focusing on executive level diversity and accountability. On diversity, we're setting numerical targets again for appointments to board and management teams across the private equity and infra teams. We are tying executive remuneration to ESG targets. This is a pretty big one, I would say. It's not that common in the financial sector to do so. Other sectors more common. This is a way for us to make sure that we put ESG on the agenda and that not only us, but all of our investments are prepared for what's coming.
These are the 2022 targets. It's looking quite good. For the first one, we have already committed to science-based targets. We're now in the process of setting them. For most of the other targets, we are on track, and looks like we will be able to achieve them by end of the year. This is something that we will do on a yearly basis moving forward, so we are now working on the targets for next year to make sure that we end up where we want to be the end goal. I just wanted to also show you the ESG organization because this is something that we have developed over the past year.
I'm responsible for development and implementation of ESG strategy, but ESG can never be a one person or one team job. To really make sure that you accelerate sustainable change within the organization, everyone needs to increase their knowledge and competence in this area. It needs to be integrated. Of course, it needs to be integrated in the investment teams, but also in risk and valuation, in legal and compliance function, and in communication. It needs to be anchored in management. If you don't have management behind you here, you will never be able to drive anything. We're building this out, and we're on a very positive path. At CapMan, we build sustainable value for the enrichment of society through active ownership.
We see that we are, as we are a Nordic active and significant owner, we are perfectly positioned to actually drive the sustainable or accelerate the sustainable change. We also see being a sustainable and responsible investor, it makes sense for us because we see that strong ESG performance is linked to strong financial performance. Then, of course, naturally, we aim to become the most responsible Nordic private assets company. Joakim also talked a little bit about this, but this is about how we get there. I just talked through the integration of ESG and how we are integrating it into our operations. Of course, we also have processes in place to integrate ESG throughout the investment process, so from pre-investment to exit.
We are constantly developing those processes. When it comes to accountability and transparency, as I mentioned, we set clear targets. We follow up on them, and we are transparent in the process. We are also creating and have been during the past year, a systemic approach within our organization that is based on global standards, best practice, and regulation. Of course, always being mindful that this ESG field is ever evolving. We are staying in touch with everything that is happening. Also, our active approach and front-runner mindset, this really allows us to be part of developing private markets best practice and standardization.
Joakim, he already mentioned that we were the first financial institution in Finland to commit science-based targets and issue a sustainability-linked bond. I just wanted to also mention that this is the, this sets the tone for what's to come. This is the path we want to continue. Again, with collaboration, I think ESG is. There are only benefits, basically, from collaboration. We are doing it internally, when we have a shared mission across all of the investment teams. But also externally, we're open to collaborations with...
Here it's really important to have collaborations with academia and with expert organizations because we need to make sure that we have the best knowledge and the most recent scientific results to be able to make good calls here. Last but not least, ESG expertise. So we are expanding our ESG resources. As I said, I started last year and was the first position in CapMan that was fully dedicated to ESG.
Since then, we have hired three ESG managers, one that's working directly with real estate to develop the real estate specific approach, and then one that actually started this week will be working closer with the PE and infra teams to make sure that we integrate this fully also within our investments. We have hired a person who is responsible for ESG reporting. This is also important because then we can track what we are doing, we can be transparent and share with you our progress. Through these resources and with the knowledge that we already have in-house, we're strengthening the ESG competence and focusing on institutionalizing ESG knowledge.
With that, I would like to introduce my colleague, Mari Simula, who is Head of Fund Investor Relations.
Good afternoon, everyone. My name is Mari Simula. I'm heading fund investor relations at CapMan. I've been with the company for 15 years now, and for the past five years I've been part of CapMan's management group. Together with my team of six, we have group level responsibility of coordinating fund investor relations and fundraising activities at CapMan. We work very closely with all CapMan's investment teams. Today, I'd like to tell you a bit about current fundraising environment. Before that, let's take a closer look at our investor base today. As our CEO, Joakim, mentioned in the beginning, we've seen very strong growth in assets under management for CapMan over the past five years. In 2017, we had assets under management of EUR 2.9 billion, and that has grown now up to EUR 4.8 billion.
We have today 290 investors. At the same time, we've been able to diversify our investor base, both in terms of geography but also in terms of investor type. While in 2017, we had only 10% of our capital coming outside of Nordics, that figure is now 55%. We see strong growth potential in this dimension. We've been able to diversify our investor base also from traditional pension funds, insurance companies, fund of funds, and government institutions towards smaller institutions like family offices, foundations, universities, municipalities, unions, and so forth. The share of these smaller institutions has grown from 5% in 2017 to 12% that it is today. Here as well, we see growth in the future as well.
Over the past 12 months, we've raised EUR 820 million of new capital to CapMan funds, and 60% of that capital has come outside of Nordics. We've been able to get 30 new investors for the group. Let's take a step back and look at the global private markets and how those have been developing over the recent years. Private markets have been growing fast over the past years, both in terms of assets under management and also in terms of capital raised. Private markets are still very small compared to public markets. If you look at annual volume raised in 2021, which was the record year, it was still only 2.5% compared to public market market cap.
If we take a closer look of capital raised annually for different types of private market strategies, there is annual variation. In 2022, we've seen very strong growth for infrastructure as investors have been seeking inflation protection. Capital raised for infrastructure funds during the first six months have already exceeded the full year figures that were raised in 2021 globally, which was the previous record year. At the same time, we've seen somewhat weaker fundraising volumes for private equity, VC, and growth compared to the record year of 2021. Why do investors invest in private markets? The simple answer is performance and diversification.
If we look at the highest and lowest five-year annualized performance between 1995 and 2021, we can see that during the best five-year period, buyouts and private credit have been able to outperform their public counterparts. Even in worst five-year periods, buyouts and private credit have been able to produce positive returns. Investors have also been pleased with the performance of their private market portfolios even recently, and this is reflected in a survey conducted by Preqin in Summer 2022. There, 83%-90% of investors stated that they'd been pleased with the performance of their private market portfolios over the past 12 months, and the performance has either exceeded or met their expectations.
The only exception to this was hedge funds, where the same figure was 53%. Strong performance has also caused one challenge for the whole industry. As this has been combined with decline in public markets, many investors that have been very experienced in private markets have been meeting or exceeding their allocation limits. However, many experienced investors still prefer to deploy to private markets throughout cycles, as they do not want to miss any potentially really strong vintages to come. This is also reflected in the Preqin's recent survey, where 80% of the investors stated that they plan to commit the same amount or more during the next 12 months compared to the previous 12 months. How do investors do this? How are they able to continue deployment while they're at the same time reaching or at their allocation limits?
There are multiple ways for that. One is obviously, some may be able to increase their allocations temporarily or permanently, or some may be looking to sell some of their non-core assets in their private market portfolios in order to be able to commit to new funds also in the future. If we look at long term, where do we see the growth potential in private markets? We see long-term growth potential in both institutional and private market segments. In the same Preqin survey, 94% of respondents this summer stated that they have invested in private markets. However, 45% had only invested in one or two of the sub-asset classes.
Typically, investors start by investing in private markets, by, private equity and real estate, and only later on then move on to private credit infrastructure, natural resources or hedge funds as their private market portfolios and programs develop and they seek diversification. Another interesting, segment for the whole industry, is within private wealth. Here we're not really talking about retail investors, but really established family offices and high-net-worth individuals. This segment has already now represented some 25%-30% of the private markets over the past years. The potential is really great in this segment. If this segment would increase their allocations to private markets by 1%, that would would increase the size of private markets by 10%.
This is the reason why CapMan, as many other, private market fund managers, have been developing their products to meet also the need for smaller investors. Where do investors see the most interesting, strategies at the moment in the current market environment? If we first look at private equity and private debt, you can see on top of this list the all-time favorites of small and mid-market buyouts, growth and secondaries. In these current, more turbulent times, investors also believe that there is interesting market opportunities arising for special situations, distressed debt, and direct lending. If we look at the top seven strategies on this list, we're very glad to see that CapMan is active in five of them. If we then look at the same picture for real estate and infrastructure.
Here as well, value add, core, and core plus strategies continue to be on this list year after year. What is specific for this time and this market environment, you can see on top for three infrastructure strategies: infra value add, infra core, and infra core plus. Here as well, if you look at the top seven strategies, we're glad to see that CapMan has a product in five of them. On this last slide, I'd like to show CapMan's current fundraising pipeline. As you can see, we have busy months and years ahead, which we are very excited about. You will hear more today about these strategies when team heads are presenting their businesses and market opportunities.
I'm glad to say that we in fund relations are super excited as we believe that we have very attractive and high-quality product portfolio to offer to investors who are seeking to invest in the Nordic private markets. Thank you.
Thank you, Mari. CapMan is a unique company in the way that we are a private asset firm, but we are also a listed company. That's why I'm very pleased to introduce our guest speaker today, Mr. Mark Florman, joining us from London. Mark is the chair of LPeC, which is the global industry body for Listed Private Capital, and he's here to tell us about this unique market and how a listed private company provides growth opportunities, but also and also access to private capital to a broad group of investors. Mark, do we have you on board with us?
Absolutely. I'm here. I hope you can hear me.
Yes, we can hear you well. It's very good to see you.
It's very good to see you again. I wish I was with you in Helsinki, but I'm broadcasting from London. The flights are so difficult these days. I wanted to be there, but I followed the whole morning, and many congratulations to all my friends at CapMan. It's been a fantastic session so far.
Thank you. I think we're ready for your presentation now, Mark.
Thank you.
The floor is yours.
All right. Thank you so much, everyone, and very nice to see you all. I'm sorry, as I said, that I can't be in Helsinki. I've spent actually many years of my life traveling to Finland and spent the first six months of the year 2000 living in Helsinki, so I know your market well, and I know the Nordic markets very well. I've actually followed CapMan from the day it was founded, and it's fantastic to witness the developments over so many years. My name is Mark Florman. I'm actually half Swedish, half English, and have worked in private equity and venture capital in the United States and in Europe for 35 years, almost since the beginning of the industry.
I know many of the managers that CapMan have supported, and I know the portfolio of CapMan quite well. I think you've built a great company. I currently chair an organization called LPeC, and it's the Listed Private Capital Association for the world. Our mission is to promote listed opportunities for investors, both in management companies and in funds. I also run a company called Time Partners, and we're based in Parliament Square in London, where I am today, and we work with private equity funds and venture funds across Europe and America. In my earlier career, I was chief executive of the British Venture Capital Association, and I led the negotiations in Paris for AIFMD, the regulatory framework for our industry.
I also started a fund called 8 Miles, and I was at Doughty Hanson, a European GP, for many years. I'm gonna take you through a few slides now, and I look forward to answering some questions with my colleagues at CapMan at the end. Here on this slide, just to say a little bit more about us and our association. CapMan, of course, is one of the leading members and is on the board of the association. We only invite the leading managers in the world to join the board. It's an association for listed private capital companies and funds from the United Kingdom, Europe, and North America, and we promote listed private capital. The reason for the association is that we need to explain often how we work and how funds and different companies work.
The job of our leadership team in London is to promote the industry and to explain it, sometimes to market participants and often to investors. We outline the investment case for private capital and the role it plays in funding growth and sustainability. What we hope to do is to develop the industry so that it brings more opportunities to a wider range of investors. Sometimes we say that it democratizes the access to the asset class. We want private capital to be available to everyone, whatever the relative wealth or savings of the investor. This mechanism allows that to be done, and it has proved very successful all over the world.
Our members, who I'll show now, include, as you see, CapMan, but others, such as Eurazeo, based in Paris, Neuberger Berman in the United States, Gimv in the Benelux, CVC, and others. Very well-known firms, and we're growing the membership each year. I'll say a few words now about how I define this asset class. We make private equity accessible, so principally private equity, but also other assets like infrastructure and venture capital, so the full CapMan offering. We provide opportunity to buy shares in direct funds, a fund of funds, or a private capital firm like CapMan that has access to a wide portfolio of successful investments. The investment is available on the stock markets across the world, and our members are listed all over the world, and their funds are listed.
No two firms are exactly alike, and that's what we really appreciate. We want a big variety of opportunities for investors. All of our members share a commitment to generating strong returns by creating value, as Joakim was explaining earlier, really working hard on creating operational change and improved value creation opportunities in a responsible way for their investors. The members all represent that. We think at the moment there's a new wave of interest in private market investing. It hasn't actually been displaced by the crisis across the world. It might have been enhanced.
For many of the investors that we work with, we see increased interest at the moment in diversification of their portfolios away from general public equity and fixed income in favor of the private equity markets, and it's this route that allows them that access. It's been quite a success story as I reflect a little bit on this page, and I'd be happy to share later performance data from across the world to show that listed private equity actually outperforms private equity listed equity and has done for the past 20 years, 20 years in a row. If you have exposure to equity generally but can't access a small number of private funds, it's this mechanism that provides that access. It's very well appreciated, in particular in the U.K.
We have a very large number of equivalent firms called investment trusts, and it's been part of the fabric of British investing for over 150 years. Strong outperformance continuing. Of course, at the moment, there's a dip along with other classes of share. We're rather positive towards the outlook for most of our members. You'll have heard from Joakim earlier, and in the presentations that are coming after me about how value is being created, especially in tough times. In fact, that's when private equity comes into its own. The diversification element we must always point out because each manager is successful in building a portfolio of funds or a portfolio of direct investments.
That very diversification creates a balanced growth trajectory, as you've heard, and as you'll hear more later, especially in the private equity class. On this slide, we just want to look generally at the economic environment for a moment. Of course, we've just come off the back of extreme success over many years with markets globally peaking and now declining. As we advise on building investment portfolios and asset allocation for many of our clients who are institutional and private, we always recommend a portion in private equity. Sometimes you can't see the changes. They're less visible immediately. What they represent is disciplined, hard operational value improvement business by business.
The sort of funds that we like and the sort of work that CapMan represents is this hard industrial attitude to taking on the challenges and making improvements and making good capital gains out of companies that they've invested in. A few comments there on the recent performance. We follow an index in listed private equity called LPX. The composite has fallen, of course, since the middle of June. Relatively speaking, and we can provide this data later on, we're in a rather strong position compared to other markets. I show here on this slide that history, and I think the future will show a positive outlook for listed private capital generally. Overall, the market is growing worldwide. We have many very strong performing funds and members.
You see more management companies becoming listed. It's quite a trend and has been for a number of years. Firms similar to CapMan, both in Scandinavia, in Europe, in America, taking their companies public, and through that, raising capital to allow their expansion and their development. You can see from what Joakim was saying earlier, how that capital is invested in people, in systems, in discipline, and of course, in ESG skills, which is critical to, in fact, improving value as well as reducing risk in portfolios. At the moment, you'll often see comments about discounts to NAV. This has been typical for those of us who follow investment companies generally in the Nordics. If you look at, say, Investor, there's never a year when there's not a comment on the discount to NAV.
This is built into the business model, and it's known across the world. It's been built into the business model in the United Kingdom for 150 years. I wouldn't always pay so much attention to that, but more to the skill and capacity and the people and the strategy of each of each business. Overall, there are more than 150, maybe 200, opportunities across the world now representing listed private capital. More are coming to market and more funds are coming to market. I'd say, CapMan is a little bit ahead of the game in terms of developing this business and the other members that we represent, in particular in Germany, Benelux, France, Switzerland, the United Kingdom, and in the United States.
They're also advanced in their business models and represent interesting opportunities for investors. We feel relatively confident that the sector is going to come through this downturn in good health. Why is that? Well, for those of us who've been in this industry for all our careers, we know how private equity works. We work very hard. We're aligned with the outcome. We build great companies. We know roughly where we're going to be selling them before we buy them. We know the timeline of our investment, and we build alignment with those leading the company. The asset class is in extremely good shape and is growing.
Some comments you'll always see about the amount of capital that is available to go into the market, and I normally counter that with a comment to say that look at the number of companies that are now available to be invested in compared to the opportunities to going public. The exits for many private companies are with firms like CapMan and other members that we have. There are no other very interesting exits or partial exits. We do represent that opportunity for businesses to grow and develop under the watch and under the leadership of listed private capital managers. We like the resilience in the sector.
We like the diversification and the relatively low leverage, which is often misunderstood across the world by many analysts, but relatively low leverage, often compared to public equity, and the strength and skill of the management team. You'll all know that the Nordic countries are absolutely the leaders in this asset class. Years back, and I'm talking almost decades, I had the privilege of working at Enskilda, SEB Bank now in London, and we helped start Industri Kapital. They started on the desk next to me. In that year, in the early 1990s, we wondered whether there were gonna be any companies to buy. Now many decades later, there's so many opportunities, and this is an established part of normal business, and I'm happy to say it's being accepted across Europe, Britain and America more than ever before.
I think the industry overall is in very good shape. I think I'll stop there. I've spoken enough, but I think, I'm willing to join and keen to join the Q&A, which I think now follows. I'll pass you back to our host in Helsinki.
Thank you, Mark. That was very interesting, and we do hope to see you during the Q&A as well. During the first Q&A session for this event, we have our speakers from the first half joining us, and I'd like to remind you that if you would like to ask a question to the speakers, you can do so by submitting that question through the form following or below the webcast screen. Now let's move on to the first Q&A. Welcome. Let's start the first question for you, Joakim. We see quite a lot of headwinds in the market at the moment, and you have just announced a very ambitious strategy to double the AUM. How are you planning to execute on that?
Well, I think the basic plan we went through, but of course, if there are strong headwinds in the years to come, that really puts a turmoil on the economy as a whole. Of course, that's gonna impact us and our plan as well. What we do believe in is the long-term positive trend of the private asset market, as Mari has been describing and what Mark was alluding to as well. We've seen that for several decades already, the megatrends when it comes to outperformance, when it comes to new investor access, when it comes to increasing allocation targets and new segments of the market. That we strongly believe in. There could, of course, be some short to mid-term turmoil that could delay our plan, but we believe in the long-term trend.
Maybe I would like to add a few more points still to that, the outperformance is clearly visible. As we can see from the data, in times of distress and downturn, actually the private market is outperforming. Actually, if you look at our assets under management of approximately EUR 5 billion at the moment, we have EUR 1.5 billion uninvested as dry capital, and it could be a very interesting time the coming years to deploy that capital. The last thing I would perhaps add there is that of course you've seen the organic plan. We said that we have a new product, M&A component. If we would have more headwinds, maybe this latter component could take a larger role in achieving the goals that we have set ourselves.
Thank you very much. Now the next question goes to the CFO, Atte Rissanen. You talked about performance and the performance for different funds and what your expectations and the targets there are. Could you give us any indication on how the performance varies between different teams? Like, for example, what percentage of funds are in the top quartile for different teams?
Well, of course, yeah. Performance varies across teams, but also across funds. I think it's safe to state that perhaps the strongest performance right now can be seen in real estate, infrastructure, growth equity. In those investment areas, I think nearly all of our funds are above their hurdle rates.
As mentioned, the target is that in five years 100% of our funds will be above the hurdle rate. In terms of what we have the funds now that are actively investing, they are on track to achieve those targets.
Thank you. Now we have a question for Mari Simula and fundraising. Given the current market turmoil, have you seen any changes in investor behavior? Are there any particular strategies that interests markets or investors more in this market?
Yeah. As I mentioned in my presentations, especially in the markets, we've seen very strong interest for infrastructure. Already during the first half of the year, more capital has been raised for infrastructure globally compared to the record year of 2021 as a whole. We see the same interest also at CapMan. At the same time, we've been also able to attract investors for our latest and newest strategy, CapMan Special Situations, and investors see that there might be interesting opportunities arising for this strategy. At the same time, we've also successfully raising our real estate funds. Good combination, and we think that for this market environment, we have really interesting opportunities to offer for investors.
Great. Thank you. Actually, let's continue, Mari, with you. Because your target is to expand the assets under management outside the Nordics. How do you see that growth coming from existing investors versus new investors? Are there any specific key drivers for investors to select CapMan as a partner?
Yes, that's good question. Historically, we've been able to have a really high re-up rate for CapMan funds. Many investors, as long as we've been performing strongly, we've been able to attract those investors to commit to our future funds. Also if the investor has a very positive experience with us, they've been committing to other CapMan strategies. At the same time, we do have a very ambitious plan to expand our investor base going forward. For international investors, we want to position ourselves as a Nordic expert, be locally on the ground and be their partner for those investors who want to allocate capital to this region.
We believe that the future growth comes from both ends, so existing investors that are hopefully re-upping to new products but also looking at other CapMan's product offering, but also the new investors who wish to allocate to the new region. Finally, we see great potential in smaller institutions that are under-invested in private markets and are looking for local markets first, maybe, if they are looking to make first commitments and team up with a manager that they know well.
Great. Thank you. Now a question for Anna regarding our ESG strategy. CapMan's vision is now to become the most responsible private assets company in the Nordics, and that's quite an ambitious strategy. How are you planning to measure this and to live up to this vision?
Good question. It is a big commitment, I have to say. By setting these annual ESG targets and going public and following up on it and reporting on it, we can be measured on that as well. These targets of course will be developed each year, so we will keep taking the steps forward.
Mm.
Maybe I would add that there are clearly measurable targets, but then there's also targets in the way that we act, the responsible ownership, the long-term view that we take, and how we take into account all the social aspects when we are making our investment decisions and business decisions. Part can be measured, part are in the way that we work.
I think that's always true.
Great
When it's ESG, you cannot measure everything. Yeah. That's right for sure. The next question goes to Jokke. You mentioned M&A as being part of your toolbox. Do you see opportunities to expand the service business through M&A?
That's also a possibility. Primarily, we are looking at the investment business and the way to accelerate the path there, but I'm not excluding M&A on the service business side either, but focus more on the investment part.
Are you willing to use your own share in M&A or are you open to more larger M&A or that type of deals or mergers?
Definitely not excluding anything at this point, and actually using the share could be a good way to incentivize the teams and the companies that we are buying. Open to different types of deal structures depending on the target and the situation.
Thank you. One more question for Atte. Inflationary pressures are high and they affect most companies, and CapMan most likely is not excluded from this. What would you say are the most, like, pronounced effects from inflation on CapMan?
Well, from the operational point of view, for CapMan as a company, of course, most of our costs are related to personnel, so there might be some inflationary pressures related to the wages. However, I'd say that we don't have any indexations in our employment contracts or anything like that. So from that point of view, as a whole, CapMan not that much of an impact, especially given that we don't have any purchases or raw materials. On the investment side, it's of course a different story. There might be different sorts of impacts depending on strategies, but it's quite safe to state that asset classes or real assets, real estate, infrastructures, those are actually the types of assets that have been performing even better in inflationary environments.
For private equity, of course, it mostly impacts those companies that have high costs of goods sold and high raw material intensive industries. I'd like to say that I think that mainly our portfolio is in that sense in a quite good order that the inflation will not be hitting as hard as I think the market in general.
Great. A follow-up question on that. Given these growth targets, how much would you have to ramp up your fixed expenses?
To achieve those growth targets?
Yes.
We need to invest in growth. We have been doing so right now. I'd say that in terms of how the platform or how the group functions are built right now, most of the heavy lifting has already been done. I'd say that we of course need to make some targeted recruitments as our business grows, but I expect that the same type of trend within the fixed expenses in terms of recurring revenue, we target that to improve also in the future.
Great. Thank you. One more for Joakim, and this is maybe more on opinions, but in retrospect, do you think that we did have a bubble in private assets in and after the corona or COVID-19 crisis? At least it seems that the private valuations have exceeded the public ones these last years.
It could be that some segments of the private market have seen that. I'm more thinking on the venture capital side, where of course CapMan doesn't have its own investment activities. There I could see some signs of that. More broadly speaking, at the moment, I wouldn't talk about any larger bubbles there. Of course we need a bit of more track record to really see historically how that turns out.
Great. I think that's what we have for questions at the moment. This is just the first part of the Q&A. We will have a second Q&A session at the end of the event, where we have the presenters from the second part of the event speaking. Now we have time for a few minutes break. We'll see you shortly. Thank you. Welcome back. I hope you've had a refreshing break. Now for the next part of our capital markets day, we'll hear some presentations from our investment and service teams. First up, we have Mika Matikainen from CapMan Real Estate.
Hello. I'm here to give you an update to our real estate business. Briefly just introducing what we do and who we are and a little bit of background. Business was established in 2005. It started expanding across the Nordic countries in 2011 with support from a very global investor base. Today we're nearly 70 investment professionals across six different offices, one in each of the Nordic capital cities, one in London and one in Jyväskylä. For us, real estate is very local business, so for that reason, obviously we need to be present in the locations where we make investments. Since the beginning of the business, we have accumulated over EUR 4 billion of real estate across different funds and products, and we continue to grow.
We seek the growth through two different business areas. First, we have the value-add funds, which is our traditional business. This is the typical private equity type real estate investment area where you have a investment period up to four years, fund life up to seven to eight, maybe sometimes up to 10 years. Closed-ended funds. Asset level business plans ranging from three to five years. You make exits, and then the big driver is carried interest at the end of the day. Our first Pan-Nordic value-add fund was established in 2013, followed by the second one in 2017. This was a slightly bigger fund at the time. Then again, in 2020, we raised our third value-add fund, again, slightly bigger.
This fund is about 50% invested today, and we continue investing as we speak, with the aim of having that fund fully invested by the end of next year. Which means that we can start preparing our next fundraising towards the end of 2023 with the aim of getting the first closing done on the fourth Value Add Fund at the beginning of 2024. This is what we're aiming for today. The fund is expected to be slightly bigger. The working number is anywhere between EUR 650 million-EUR 700 million, but could obviously change depending on where we are at the time of what the markets look like. The second business area is the income funds.
These are long-life, open-ended funds where we continuously grow the mandate. The first area is the residential funds. Actually the first fund that I'm gonna talk about is the new residential fund which we launched June 2021. The fund is about one year old. So far, we have raised over EUR 700 million of equity into that fund. This follows our successful mandate from one of the largest European pension funds, and the strategy is pretty much the same. The second line is the commercial income funds, and this was originally aiming capital from smaller investors, those types of investors that were typically not investing in our Value Add Funds, at least not to the larger extent.
We see a lot of potential in this area, and for that reason, we are actually working on setting up a side fund with the structure that could be suitable for larger international institutional investors. This is a project that we're working on as we speak, and hopefully we will have that fund up and running by the end of this year, maybe early next year. We have hotels. We started investing in hotels already in 2008, but then 2019, end of 2019, we did a big restructuring on the fund. The original closed-ended hotel fund into an open-ended fund. Corona came. Things went on hold on the fundraising side, but now we're back on track.
The idea is to continue fundraising now again on that fund with the plan to continue growing that fund across the Nordic region like we do on all of our other real estate funds. The newest one, the bottom line here on the income fund side is the social real estate fund which we just recently announced. This is a completely new product for us. We're aiming to have the first closing done this autumn and hope to do the first investments out of this fund already this year. This is again a fund that will continue growing over time. A very interesting area providing a good inflation hedge with long leases.
If we look back now since we started raising capital for our Pan-Nordic funds, we have cumulatively raised nearly EUR 3 billion of equity across different funds. Going forward, we aim to speed up the process on the fundraising side and with the offering of multiple products, more products than what we had when we started on the Pan-Nordic side, we expect to raise over EUR 2 billion over the next 2.5 years. Clearly, we are speeding up the process on growing our business. Now having said this, relatively ambitious target for our fundraising, this doesn't come in a very easy environment. Obviously, there are a lot of things that are impacting real estate market as well. Real estate is not isolated from other industries.
We are seeing the same negative factors impacting our business, and oftentimes these factors are also connected. If you look at rising inflation, obviously it will have an impact on our business, but real estate, on relative basis, typically provides a better hedge against inflation. Actually it may be even a positive thing, especially with the long leases, or to give you an example, residential, where house prices may be out of reach for some people, and that obviously supports the rental market. It's not only negative when it comes to inflation and when we look at real estate. Increasing interest rates can have multiple impacts. Obviously, it will have impact on returns.
For that reason, it will have impact on the transaction volumes as well and the pricing. When the pricing doesn't meet the seller's expectations and sellers are not necessarily willing to sell, it could result in lower transaction volume. It could have multiple impacts. The uncertainty in geopolitical environment will result in uncertainty and hesitation among investors, both direct investors and indirect investors. It could result in longer decision-making times when it comes to considering investments in our funds, but also when they're considering and the investors are considering buying real estate. Supply chain challenges will have an impact on new developments for sure and prices again linked to inflation.
COVID-19, hopefully through the worst part of COVID, we're still seeing that, but COVID definitely had an impact on the real estate side. There's of course a lot of debate on whether the office demand will ever be the same after COVID, since the remote work seems to be the new trend. We don't see it that black and white because there are clearly areas where there's a lot of demand for offices, then there may be some remote areas where the demand is not going to be as high as it used to be. Retail environment is changing. This already started changing well before COVID, but COVID only accelerated the change with the penetration of online shopping taking over from the traditional retail.
Clearly a big impact in that particular sector. There is the climate change, and obviously climate change will set huge demands for real estate investments and developments as well. Now, a lot of negative things, but the way we look at this thing is that any change in the market always creates also opportunities. We're not seeing this only negative. Obviously, there will be pricing changes. It could maybe a good thing that in the real estate market in some areas is let out from the real estate market, creating interesting buying opportunities. Also we're making investments over long times through different cycles, so we need to be able to make investments in different market environments, and this is exactly what we're trying to do.
For that reason, we are clearly and very carefully trying to identify the different investment areas for our different funds. Here's a sneak peek into some of these areas that we have identified for different funds. On the value add side, the established office locations continues to be the big theme for us. We still believe that modern, flexible offices will continue to be the winning concept in the real estate market. Then there are certain mega trends that support real estate investments. You have aging population, changing demographics, resulting in bigger demand for healthcare, nursing homes, and so forth. You have urbanization, resulting in bigger demand for different living concepts and opportunities, but also some real estate infrastructure, such as schools, nursing care, daycare centers, and so forth.
In terms of retail, I already did mention that the environment is clearly changing. We're very cautious about retail, but we still see some pockets of opportunities there. This is something that we keep as an item and theme for our value-add funds. For the residential fund, this is obviously the long-term investment vehicle, so it's a little bit different approach to residential than what we do on the value-add side. We buy modern existing buildings or new developments, but we also buy older assets in central locations where we can see rental uplift potential. Sometimes the assets may need refurbishments or upgrading, and again, creating opportunities to increase the rents and the returns for our investors.
For the commercial fund, again, offices is a theme, but here over long term, we have identified that these are the areas where long term there will be continued opportunities. Tech, lab, and life science offices will continue to outperform the traditional offices, and we believe in that sector extremely strongly. Light industrial is one area where we are heavily investing today. Again, this is supported by the changing retail market, because the online shopping requires distribution centers closer to the end users, so last mile logistics, as an example, is an area we invest in. There's certain niche living that we believe in, student housing as an example, and necessity-driven retail. This is interesting when you buy a food-anchored retail center, for example, where you have a long lease with a solid operator.
It provides a very good income hedge and stable returns over longer time. Very interesting opportunities there. For the hotels, I already mentioned that we have ambitions to increase the size of that fund over time. It's great to see that the hotel market is coming back strongly after COVID. Here we are very much focused on full-service hotels where there are two different areas that are supporting the hotels. The rebounding business travel is one area, but then the strongly growing leisure market is the other one. For the social real estate fund, healthcare and education will be the main themes, but then there may be some other social real estate sub-sectors that we will be focused on.
This could be emergency assets such as police stations, fire stations, and so forth, and multiple other assets with long leases, again, providing a very good inflation hedge over time, especially in this environment. It's not only identifying different areas, but it's also the operational leverage we rely on heavily. Here's a good example of what we do. Operational leverage is things that we do ourselves to improve the assets and improve the returns to our investors. I will now show you a brief video of a very interesting asset in our second value add fund, which we just recently exited.
Welcome to the Red Warehouse building, a building that is dating back 140 years when it will open next year. The building was originally built in 1883 by J. C. Jacobsen.
T he founder of Carlsberg. It's located in a quintessential place in the Carlsberg City, overlooking the old garden of J. C.'s son, Carl Jacobsen, who was also a part owner of the brewery. Over the past 50 years, it's been used for different sorts of uses, and now with our purchase of the building, will be transformed into modern offices. Building offers more or less 2,000 square meters per floor, so ground, first and second floor will be used for office space. The new second floor, as you see here behind me, is a fully glazed curtain wall addition to the building and will allow us also to establish a roof terrace on the building of around 700 square meters.
From a life cycle perspective, we're gonna take this 140-year-old building and give it new life. The building has some outstanding qualities that you wouldn't see from a building today, and that's exactly what businesses are looking for to create brand and strategy. With all the new elements and technology we're putting into the building, it will fulfill all the requirements of the tenant today, and adding a twist of flavor 140 years dating back. We'll preserve all the architectural elements and twist it with the new technology. Today's tenants are looking for a mix of highly efficient technology, modern workplaces, but with a twist of flavor, adding brand identity elements which this building holds 100%.
From an ESG perspective, more on the certificate side, we are gonna aim for a BREEAM In-Use Excellent certification, which the next months and processes are gonna show whether we can reach that exact level. On the tenant side, the building has been leased out to Boston Consulting Group. They will move into the building 1st of June, 2023. Right now it will undergo over the next 12 months a dramatic change in services, identity, and branding elements that suits exactly Boston Consulting Group.
I'll finish my presentation with a very quick summary on the focus areas for the next two years. CapMan Nordic Real Estate I will be fully exited over the next 12 months or so. This fund is already in carried interest and therefore assets remaining as the outlook for the fund is very, very good. The second value-add fund is actually following up the first fund very closely. This fund is in a very good shape, and we expect that fund to be substantially exited, if not fully exited, within the next two years. The new income funds will be launched, as I already mentioned at the beginning of my presentation. The CMNRE III, the Nordic Value-Add Fund III, will be fully invested by the end of next year.
That's our expectation, which means that we'll be out raising our next value-add fund at the end of next year, hoping to close it at the beginning of 2024. Then obviously, self-explanatory, we aim to increase the volume on all of our different income funds. That's my brief summary of the focus areas. Next up I have Ville Poukka, Managing Partner for CapMan Infra. Thank you.
Hello, everyone. I'm Ville Poukka, Managing Partner of CapMan Infra. I'll talk to you today about the Nordic opportunity and infrastructure that CapMan Infra is working on. Why is there a need for private capital in infrastructure investing? Largely our infrastructure that we see around us today has been built 30, 40, even 50 years ago. It's aging fast and will require a lot of refurbishment going forward. At the same time, changing demographics in our society is putting a lot of pressure on the public sector. Public sector actually struggling to maintain all of this infrastructure and private capital is needed in cooperation with public sector as well. There are new dynamics in infrastructure. Digitalization, for example.
Use of data requires use of mobile devices, requires a lot of new digital infrastructure, fiber connections, mobile towers, data centers and so forth. There are also continued trends like urbanization, climate change, decarbonization of society, electrifying transportation, for example, that will drive a lot of infrastructure investment needs. Lately, we have obviously discussed about security of supply in our energy markets, and that will certainly require infrastructure investments as well. Why is the infrastructure market attractive as a class, especially now? We think that infrastructure overall offers quite attractive risk-return characteristics. In this market, obviously, the fact that inflation protection is often baked into the assets and the contracts is a very attractive characteristic.
These are real assets, heavy investments, so their yield characteristics are quite appealing, and that's obviously important now that we still are in a relatively low interest rate environment. We talk about climate change, how to invest in climate change. I think infrastructure is one of the best places to put capital to work in a sustainable manner. For CapMan, as a manager, as a private equity specialist, you can obviously see how much the market is growing in infrastructure. The asset class has been booming and is looked to boom in the coming years. That offers interesting growth avenues for CapMan as a private equity house. What do we do in CapMan Infra then, and what kind of investments are we looking for?
We're investing in operating businesses in three different target sectors: energy utilities, transportation, and telecommunication infrastructure, and all of those subsectors. Obviously, energy and utilities, for example, is very versatile in terms of subsectors that we can invest in. Well, what kind of businesses are these? These are businesses that are essential services for the society, usually with a strong downside protection, limited volume pricing risk, often monopolistic characteristics that are based on the real asset that the company's operating. I can name, you know, examples like district heating or public transportation with long-term contracts. These are very stable businesses. What do we do with the businesses that we invest in? We want to improve them and grow them as CapMan does with most of its assets. We do smaller deals than our peers.
We do it more locally. We buy small, grow them, and develop the assets, and then obviously exit to potentially larger investors. We are very focused on sustainable investments. That's our strategy in brief. What has CapMan Infra then achieved in the last five years we've been around? You can see the development of our assets under management here. We have created two client mandates and invested them in a local DSO, Elenia, and Överturingen Wind Farm, onshore wind farm in Sweden. After that, we have created two funds. Our Nordic Infrastructure I is fully committed now, is not looking to do further investments but is looking to grow and continue to grow its assets.
Overall, we have done seven standalone investments, significant amount of add-ons to those investments, and we've also created some EUR 90 million of co-invest opportunities for our limited partners. Also, we just recently announced our first exit, which is obviously a successful exit and building a good track record for our strategy. What kind of assets have we then invested in during the last five years? I think it's a portfolio of diversified and sustainable infrastructure businesses across all of the target sectors and across the main Nordic geographies. We've been able to diversify in terms of sectors and geography already in the first five years. To give you a bit of flavor of what we do, we provide renewable heat to properties across Nordics.
We're electrifying public transport, both on the roads and on the sea, and we're building digital society by connecting communities with our fiber business, Valokuitunen, here in Finland. It's quite a range of businesses in terms of size and type. Nydalen Energi is a modern district heating, district cooling network in Oslo that has two people working in the business currently. Koiviston Auto, largest bus operator in Finland. We have over 2,000 people working in that business. The range is quite wide. All of these companies are growing. We're investing and developing them, and many of them actually have quite strong ESG characteristics. What do we do in real case examples with those businesses? How do we support them?
We're adding really value to our companies, to our investors, and to the society by growing and improving the infra businesses we invest in. To name a couple of examples, just to give you a bit of flavor, the fiber business, when we bought it from Telia and put it in a new business, it had six employees and a start of an access network. Today, we have a team of 90 people working on fiber to the home and rolling that out in various communities in Finland. I would dare to argue that we're the largest constructor of fiber connections to single-family houses in Finland currently. As I said, growth is very important.
We wanna buy small and exit larger businesses, so we're putting capital and work and effort to growing these businesses. For example, seven add-ons done in Portfolio One or Fund I assets to date, and we still have dry powder to continue adding small pieces to grow these businesses in our Fund I. Operational excellence, of course, improving, strengthening the management team and bringing new processes to the businesses to improve them operationally is very key. ESG performance, what does that mean? For example, in Norled, during our whole period of three years, the CO2 emissions by that fleet has decreased 30%, as a matter of fact, because we have invested heavily in low-emission, zero-emission ferries and express boats in Norway. Sustainable investing is really at the core of the strategy.
We want to put capital to work in sustainable infrastructure, and we're really committed to be measured against this target, and to have, obviously, explicit targets in terms of ESG. We've been compliant with the GRESB reporting, which is pretty much an industry standard these days in infrastructure from day one, with Fund I. We have a score for the whole management company, the whole fund, and individual assets. This year we're seeing significant improvement in some of the assets in terms of their score. As for the whole CapMan, we're committed to the Science Based Targets Initiative and setting detailed targets to follow that. Now with the EU SFDR regulation, we've gone through that quite in detail for our Fund II and our marketing Article 8 fund.
That's obviously targets reporting, important processes to put in place, but what are the case examples? We bought a district heating business in Oslo, and today it's using 100% renewable fuels in heating parts of Oslo or cooling them, and predominantly based on geothermal heating. I talked about Norled cutting their emissions during our holding period by 30%. We are trying and willing and aiming to do that same in Koiviston Auto by investing significantly in electric buses. We've already committed to EUR 30 million investment in electric buses in Koiviston Auto here in Helsinki Capital Region. To conclude, since the Infra team was established 2017, we've experienced strong growth. We've built a track record and are very focused on our performance.
We've grown the team from basically me joining early 2017 and now 12 people in the team, and we continue to grow. We're really keen and motivated to raise the second fund and deploy that as successfully as we've done with Fund I. We're really looking to grow CapMan Infra along the lines that Joakim and the rest of the team have told you today in terms of our strategic growth ambitions for the whole of CapMan. Thank you.
Thank you, Ville. Before we move on to presentations from our private equity investment area, I'd first like to take a moment to introduce the whole investment area to you since we only have two teams presenting to us today. First we have Growth, and Growth is a significant minority investor investing in the Nordics. Then we also have Buyout. Buyout is a Nordic pioneer. This is where CapMan started our journey 30 years ago. Buyout makes the majority investments mainly in Finnish and Swedish companies at the moment. Our newest team in the private equity investment area, Special Situations.
The Special Situations team, they are investors that pursue an event-driven strategy and they invest in transformations and businesses that are undergoing changes. Then we also include credit as part of the private equity and credit investment area. The credit team, they mainly do mezzanine type of private debt investments in Nordic privately held companies. Today we have presenting Growth and Buyouts, and we'll start with Antti Kummu from CapMan Growth.
Hi, my name is Antti Kummu, and I'm one of the founder of CapMan Growth, and I've been with CapMan since 2017. First I'd like to give an update to our investment strategy. We are a minority investor, but we don't take technology risks or invest in a heavily loss-making company. We are not a VC fund, and that is a very important distinction between us and the, let's say, broad category of VC funds. Our target companies are fast-growing, but they are usually already profitable. In many cases, we buy shares from the owners, and we don't invest that much to the companies because in most of the cases, company doesn't need that much money. In some cases, of course, we are able to invest.
Most of the companies are service companies, but they are doing things a little bit differently. They use technology, they have processes, or somehow they are a little bit different than the other operators in the same market, so they can grow faster than the companies in the market. We have, since the beginning, few principles in our investment operation. We want the entrepreneurs to keep the majority in the companies and run the business. They know the business better than we do. Our role is to support the growth or internationalization or M&A or bring expertise from other growth companies. But we don't want to run the daily business and be the one who decides how to price the products or et cetera.
Another principle is that we don't take leverage against the company, so the companies are more solvent after the investment, and they are able to take leverage in the company and invest more to the growth than in other scenarios. Our target is with the entrepreneurs is the growth companies larger and sell it together with the higher value valuations, and we've been very successful in this strategy. Here's how we see the market today. We position ourselves in between VC and buyout markets. We think we are much closer to the buyout market. Our companies are very similar to small buyout companies than they are to the VC companies.
In some cases, we can be alternative to buyout investor investments if the entrepreneur or majority owner doesn't want to sell the majority of the company, but they still want the investor to participate in the operation. Growth is a new segment in the market. We think there is a little bit less money and competition still in the market than there is in buyout and VC, but the competition is increasing also in this segment. There are a lot of new funds coming or trying to raise money for the growth segment as well. We are one of the first funds in Finland in this area, so we see that we have a clear advantage in the deal flow and reputation-wise. Still, we think that competition will increase in the future.
If you look at our first fund, which was raised in 2017, the size of the fund was a little bit less than EUR 90 million. It is one of the best-performing funds in Europe at the moment. We are very happy with the results we've been able to deliver with the fund. We have invested in 12 companies. We have so far exited six of them if we include Avidly, which should be secured within this month. In addition to this, we have made several partial exits to our portfolio companies, selling part of the shares and still keeping the upside and also as they are very profitable and low leverage, there has been significant dividend income from our portfolio companies.
As you can see from the numbers on the left, we've been able to support very high growth in these companies and still improve the profitability. That has been our focus on the companies, that not only to focus on growth but have the main focus on improving profitability of these companies. Here are a few examples of our value creation work which we have done. These are a few companies that we have been able to grow much larger in size and exit them with very high multiples. Fluido is a good example of a local company which we are able to expand Nordic-wise to market leader in Salesforce consulting with average growth of over 50% and still keeping up a good profitability.
The company was sold to Indian tech giant Infosys in 2018. The other example is our one of the latest exits is Picosun, which is Finnish high-tech company, which we were able to help to grow from pilot phase company to industrial scale production. The company was sold to leading U.S. semiconductor company Applied Materials this year with very, very high valuation. If we look at our second fund, the fund was raised during the COVID years, 2020. The size of the fund is roughly EUR 100 million, and the fund is performing according to plan. We have already made six investments, and we are very happy with the portfolio. All of the companies are growing, all of them are profitable, and they practically have zero debt in those companies.
Portfolio is very well positioned even if the potential downturn in the market comes. You can see from the growth and profitability figures that, on average, the portfolio is performing very well. We expect that the second fund will perform as well as the first fund did. Here is the summary of the fund timeline. Like I mentioned, the first fund has been already invested and it's in exit phase. We expect that we are able to exit the portfolio within one or two years. The fund is in carry. All of the future exit will bring carry to CapMan and to the investors of that fund.
We are in the middle of investment period in Fund II. We have invested roughly half of the fund. If we think about the first investment capacity, which is roughly 2/3 of the fund, is now investing at the moment. We expect that we are able to invest that fund within 12-18 months going forward. We will start to raise our third fund most likely at the end of this year, beginning of next year, and we expect to have the third fund ready next year or year after that, depending on the investment phase of the second fund. Our portfolio gets very strong sustainability score as well.
We have been also doing a lot of work regarding the ESG awareness in our portfolio companies especially, and the work is still continuing. We have also made Upright analysis of our portfolio overall impact to the society and to the environment, and the score has been very positive. Our portfolio creates much, very positive impact to the society compared to the resources they use. Most of the our portfolio companies are such that they don't use very much environmental resources. They are usually consulting or tech companies or such companies that is, let's say, environmental issues are not that big problem in those companies. On the other hand, we have lots of companies that helps society, helps people, takes care of people. There is a lot of positive impact in those companies. Thanks.
This was my part, my update. Next, I will call Pia Kåll, Managing Partner, CapMan Buyout to the stage. Thanks.
Good afternoon, everyone. The next 15 minutes, the objective is really to spend a bit of time on going deeper into who we are and what we do at CapMan Buyout. Starting off with the big picture, I mean, what we do is majority investments into Nordic, small or mid-sized private companies. We look for opportunities where we can accelerate growth, where we can support the entrepreneur or the family in achieving a growth leap. We look for companies that are niche market leaders and that have a strong winning company culture. We have more than 30 years of experience, so Buyout is where CapMan started more than 30 years ago, and that also means that we are now investing from our 11th Buyout fund. All of these funds have been in the same size segment, lower mid-market in the Nordic region.
It also means that we have supported close to 90 Nordic companies in taking the next growth leap and taking the next development step forward. Sustainability is also something that has been on our radar or part of our DNA, basically from the beginning, from the original mission of increasing value also and enriching the society. Already 10 years ago, we subscribed to the PRI, to the Principles for Responsible Investment, and we have been top rated in that one over the last years. We have also continuously developed our ESG approach in the sense that going from only risk assessment to really incorporating value creation, and earlier this year, we committed to the SBTi, so we are committed to help our companies onto a net zero pathway with the science-based target initiative.
We are a Nordic team, that means in practice that we are split between Helsinki and Stockholm, but we work as one Nordic team, basically looking at regardless if a new investment or if it's a portfolio company from our side, really looking at who has the best capabilities from our side to support the company in the current situation. We have also built the team so that we have very diverse and mixed experiences and backgrounds. You can say, basically say that a bit simplified, we have 1/3 of our team who comes from operational line manager roles, industry or management consulting. We have roughly 1/3 who have an investment banking, transaction structuring, finance, a little background and capability.
We also have colleagues who have close to or even more than 20 years of Nordic private equity experience, which means that now when COVID hit over the current macro economy, it's not the first time that this team sees real changes in the market and not only a continuous growth. That also builds a lot of toolkit and experiences in how to support our companies in the current situation. If we then look at what type of investments do we do or what type of companies are we looking for? There's three main criteria that we wanna see. We are investing across the range of different sectors and different industries, but the companies we invest in need to have three things in common. We support growth, so we want to see that there's growth opportunities also going forward.
It can be organic growth or it can be, acquisition driven roll-up M&A type of growth, and always with a positive, strong cash flow. We want to invest in and look for companies that are niche market leaders in their industry, and for us that means basically two things. One is that we want to, in this criteria, understand where in the value chain are there, and is that value chain position sustainable? Is the position towards suppliers, towards customers, is it solid? In current situation, that also puts a lot of emphasis on, say, pricing power. Do you have a good negotiation power towards your suppliers? Can you pass on costs to your customers? Are you in a part of the value chain that's not very cyclical, but rather kind of stable?
The other part of niche market leadership for us is around, is there something unique in the business model of that company? Do they have something different that differentiates them from competition? That can look very different depending on what company it is, but it's still something that needs to be there. Just to give a couple of concrete examples. Forenom, for example, that you could say it's the Airbnb for corporate. They rent service apartments for companies who have needs for their employees. They're basically creating a market in between traditional hotels and the traditional rental real estate market. We have helped them grow from a Finnish company to now one of the leaders in Europe in this niche, creating this niche. It can be like Hydroware.
They are active in elevators or lift modernizations, and they have very unique solutions, a one-stop shop for elevator modernizations, which no one else in the market can offer, which would put them in a very strong position there. Like you see, it spans the range, but there's always something specific around what the company is offering, how they're offering it. And then the third criteria, which is equally strong emphasis for us as the two other ones that are more financial, and this is what we call winning culture, so winning company culture. What we mean with that one is really that it's not only about do you have an entrepreneur, a founder, a CEO with a vision and a direction where he wants to take the company?
It's around, do you have that same view on where the company is going from top management all the way down to shop floor, factory operator, or sales rep? Do they have a common view on where they're going? Do they have the capabilities to execute on the plan that we create together? Do they have the ability to renew as a company, as an organization, when things around them change? This is something that we are assessing very systematically, analytically already before we do the investment, and it's something we work with our companies with throughout our ownership period in strengthening and supporting management in developing it further. In addition to these kind of three main criteria, there's two other metrics you could say that we look at already from investment phase. One is around sustainability.
We don't look for specifically green companies or kind of impact investments. We invest in at times very traditional industries, but with the strong belief that there is within sustainability value to be created, both financially and for the environment and for the society at large. On emissions side, we have for long already been following the CO2 emissions relative to sales. When it's growing companies, is the intensity going down? Now committing to SBTi, helping companies really to a net zero path. We're also measuring job creation under social metrics, because with growing companies, we should be able to also create more jobs, and we have been very successful in doing so in our investment.
We work actively with gender diversity, both on the whole organization, management levels, and of course in the board of directors. We look at, as the last criteria, on a clear exit route, because we're never the final owner. We are there for four to six years, and then the company needs to move on to the next owner. There, the key criteria for us is that there needs to be an identifiable strategic or industrial buyers already at the time when we make the investment. For us, it's a sanity check on that whatever we're setting out to create together with the company, it actually makes sense in that industry because there are industrial companies interested in it. It's also a hedge when IPOs, the stock market of course is an option for us, but that's not always open.
It's too narrow to count on that there will always be a financial sponsor interested. That's why this criteria also comes in very early. If this is what we look for, if we then go deeper into what do we do with the companies or how do we work with them? We are very active owner, hands-on supporting the companies. Management, of course, continues to run the daily operations. The governance model is very clear. We are an owner, but we're an active owner who can support. One of the things where we can practically support is just resourcing. The companies are often very small. They don't have all the capabilities, either knowledge or just hands and legs to get everything done at once. We start off always with three to four persons from our team supporting the company.
We make sure that we have a board of directors with experts, be it in that industry or be it some functional team that the company needs support with. We support when it comes to really setting the targets, the strategy, the business plan, and larger business development projects or topics. We're never the expert on that industry in specific, but we have a broad view on what works and what doesn't work, and dos and don'ts when we look across our portfolio and across different situations. Very often, where we bring a lot of value is in prioritizing and narrowing down and making sure that there's a clear view, clear kind of focus on where to go. Then, of course, financing is something we work with daily.
Is it then debt in the company and kind of financing later, is it add-on acquisitions? That's a natural part for us. But then also making sure that we have an opportunity to offer key employees in the company, the opportunity to become shareholders and owners or different incentive programs. It also helps the companies to then attract and keep key people in the company. Plus, for our side, make sure that we all have the same view on, as owners, on where do we want to develop the company. If we take a look at them, does it work or what results do we actually achieve there? Here I picked out the three companies that we have in our 11th fund that we have now owned for a couple of two to three years. They're very different companies.
You have BDS Vision. It's a B2B software reseller from a Nordic origin to today a global leader in its field. You have MM Sports. That's direct-to-consumer Swedish company within sports nutrition, a company that we earlier this year helped expand into Finland. You have Pharmia, which is a contract manufacturer, a Finnish company. They are active then in the towards the pharma industry and medical devices. Different industries as you see. When we look at the performance, and here you actually also have it during the COVID years, 2020- 2022, we have an average annual growth rate in sales of around 46%, and we have an average annual growth of EBITDA of 49%, so even slightly faster than the growth of top line.
These are not the three ones that I picked up because they actually showcase the kind of strategy we have, but actually the same elements hold true if you look across several of our funds backward and see where's the value created, where is it really that we bring something. You see the same recipe across. Really the value comes from, on average, our companies grow 2x-3x in top line during our holding period. They do so with, on average, maintained relative profitability. That doesn't mean that we don't work with profitability. There's a lot that's done on the commercial side, pricing, efficiency, fixed costs. On average, that gain that we get there, that's reinvested into the businesses for achieving that growth.
They are financing the growth with their own cash flow in many cases, and that means that the relative profitability more or less stays. Then as the third value creation lever, they maintain solid cash flow, which basically means that with strong cash flows, we finance growth, but we also pay down debt in the companies, increasing the equity value. Then finally, something we don't systematically count on when we do the investment, but in practice, we usually see it happening, is then what we call strategic repositioning. From a small local Swedish or Finnish company into an international Nordic or even more international company in a different size segment.
Usually, we see a higher, clearly higher, valuation multiple when we exit than when we entered, so creating their additional value, which on average then adds up to a 2.5x-3 x return on investment. Basically, in short, it's companies across industries, where we can support growth. For us to be willing to step in and support, we need to see that they're market leaders in their niche, and we need to see that there's a strong winning culture in the company that can maintain and sustainably hold that growth journey ahead of them. We come in as majority owners then actively supporting the management and the other owners in achieving that ambition. I hope this gave you a bit of a more overview on what Buyout is about and how we work.
After this one, it's actually time to move on to a slightly different part of CapMan. Next up, we have Mikael Falck from CapMan Wealth Services.
Hi, everyone. My name is Mikael Falck. I represent CapMan Wealth Services. I joined CapMan a little over a year and a half ago. Before that, I spent a fairly long career as an institutional investors. Within that, 12 years at Nordea, in their Nordic alternatives investment team. Then just prior to joining CapMan and more specifically CapMan Wealth Services, five years at Kåpan Pensioner, which is a Swedish pension fund, with the overall responsibility for alternative investments. I'm now gonna give you a brief overview of what we do at CapMan Wealth Services, and concentrate especially on the managers selection work we do within private and public markets.
Although CapMan Wealth Services represent yes a bit of a different business line and one of the I would say newer business lines the origins of the company and what we do dates back already 10 years. We've been at the wealth asset management business already for a long time. Dating back a few years we joined CapMan. Now we're totally integrated and rebranded into the group. What do we do? Well we claim that we provide comprehensive wealth management services in both yes public and private markets. We're a 13 people strong team based out of Helsinki and Stockholm.
Looking first at the private market, we provide access to CapMan's in-house managed alternative products and as you've heard today and know from before, it's really a wide range covering all of the different alternative asset classes. We provide access to, on average, smaller investors, our wealth management investors to these funds. There's an active cross-selling into our client base to CapMan managed products. But to complement that and broaden the investment scope on the international side, we've actually launched the first international alternatives product, which is the private equity fund of funds. I'm personally responsible for it, which is why I get really excited when I talk about it.
It's a deep and unique relationship with one of the biggest private equity investors in the world, AlpInvest. Let's come back to this in a short while. Besides that, we also provide a liquid private equity or private markets alternative for those investors who, for one reason or another, prefer liquidity or just look to gain more quickly an allocation into these asset classes. On the public side, this is really the origins of the company and the business. We provide manager selection mandates, and there's four of them today. We'll look at this a bit more closely too, but the whole idea is through our robust manager selection process, really give access to what we feel are the best managers out there.
First of all, CapMan Wealth Services investment partners program. This is private equity, essentially a private equity fund of fund that provides access to very sought after, often oversubscribed U.S. mid-market private equity funds. Funds in the size range of between $1 billion and $3 billion, say $4 billion. These are funds that outside investors practically cannot get access to because they're top quartile performers and we gain access to this fund through AlpInvest. AlpInvest, for those of you who probably don't know them or haven't heard of them, it is a company that was formed year 2000. There is the two biggest Dutch pension funds behind them, so APG and PGGM.
In the year 2000, they just simply merged together their private equity portfolio and with that became one of the biggest investors in the private equity sphere. They only do private equity fund investments, direct co-investments and secondaries. What's unique about their background and history is that the founding partners, again, remember the two Dutch pension funds, they only invested their own balance sheet money starting out from. If we look back 10 years, 80% of all of the capital that's committed into underlying fund comes from the balance sheet. Me, with the institutional background, I find that this gives a really strong alignment of interest. Every fund investment that AlpInvest provides us within this investment partners program, AlpInvest looks to invest themselves in with their own money.
Really a strong alignment of interest there. Another unique thing about the partnership is that AlpInvest provides us with the veto right on all the fund investments that they present with us, I mean, CapMan Wealth Services. We get to choose among a set of very high quality funds, and that means that the portfolio management or more the portfolio construction stays with us. With that, we can guarantee that there's not, you know, risk concentration in terms of certain sectors or in terms of investing style, value versus growth and what have you. This is really a unique program. There's only three of these in the world. This is a 100% primary investment program. Actually one that I established at Kåpan, and then there's a Danish and a Spanish relationship.
It's really unique access we provide to our Finnish investors through the first feeder fund and the program. By the way, this is a program, it's an annual program. Investors looking to get diversification, time diversification, vintage diversification over the years can either join and invest every year or every second year or every third year, whatever suits their program. All of this might sound interesting, but at the end of the day, I guess the proof is in the pudding, right? Looking at performance from year 2009 onwards, U.S. mid-market funds that AlpInvest have invested in have returned an average 22% net return after fees, which is quite competitive, we feel.
Just quickly, this is a snapshot of the first fund in this program. We launched it at the end of last year, in the beginning of November. It's been really interesting to see that the quality of the underlying funds that's been presented to us are really high quality. Already now with five funds being secured, and I'm happy to say with all of the allocations we asked for, again, these are highly oversubscribed funds, most of them, and then three more pending funds, we're already talking about 90% of all of the capital for the first fund.
That is why we launched the second fund, with the first closing just before the summer break, and now looking to have the second close of that second fund in roughly a month's time. Moving over to the other side, the public side. We strive at giving access to the best managers in the world through the relationships we have. We look at a truly global fund universe. We find it kind of interesting that there's some local managers that look to populate their fund of funds with funds that are registered in Finland, as this only makes out for less than 0.5% of the total fund universe you see in the world.
For us, it's totally indifferent where the actual manager is registered per se. And with that, we feel that we can secure you know a high enough quality to look at all of the different managers in the world and select the best ones from there. We look at active managers, and I say that we're truly independent in the manager selection process that we do here. Why can we claim that? Well, first of all, CapMan, as you know, does not manage any equity, liquid equity or fixed income funds in-house. We're not biased towards populating these fund of funds with our own managed funds. And the other big thing here is that our fee model is really straightforward.
We charge a fixed management fee, for our clients, so we get no retrocessions, we get no kickbacks, which would bias us also in terms of choosing managers that would give us the best deals. It's been good to see that, as much as 73% of the active managers we've backed have actually outperformed their relevant ETFs. In the cases where we don't find interesting enough, good performing enough managers within certain market subsectors or strategies, we just go for a more passive alternative, an ETF, basically. Here again, the proof is in the pudding. It's been nice to see this is the year-to-date performance of our flagship mandate, which is a 60/20/20 mandate. 60% equity allocation, 20% liquid alternatives, and 20% fixed income.
It's outperformed the other Nordic peers, as you can see, by a wide margin, offering really a nice downside risk protection in this very volatile market. This is the year-to-date performance period, as you can see. Lastly, looking forward, where do we see the growth opportunities for our business? It's mainly four areas. We will continue the expansion of our Finnish client base, and we're looking to build up with resources in Sweden too, looking to build up a customer base in Sweden. Probably more with an approach of spearhead products and probably the investment partners program there too. We're looking for volume growth in the CWS mandates.
I strongly believe that with the type of risk-adjusted returns we've been able to provide on a year-to-date basis, that's doable. We will continue distributing CapMan products whenever they're out fundraising. Remember, the CWS Investment Partners program is only the first example of an international
The private market product. There's plenty more to do as long as everything we do complements and does not compete with what we manage in-house at CapMan. Thank you for that. I think we're moving on to the second Q&A session, right?
Thank you, Mika, and thank you all presenters today. We are now headed towards the end of our capital markets day, but first we'll have time for a brief Q&A, mainly for the presenters for the second half of the event. Again, if you have a question, please feel free to ask that question by submitting it through the form below the webcast screen. Now let's move on to Q&A. Welcome, and thank you for the presentations. The first question goes to Ville. You are now raising the second infrastructure fund, and you are looking at a target size of EUR 400 million, and that's more than double than the size of the first fund.
How do you see fundraising in this market, and how do you expect to reach that target size?
Good question. I think one needs to take into account that the strategy is the same between Fund I and Fund II. Originally, Fund I had an ambitious size target, which we didn't as a first-time team reach. First-time fund is always a tricky journey, and we've done a good job now showing and evidencing the strategy. I'm pretty confident that we'll get to the target this time around. We've soft circled already more capital in closings and due diligence than what we have in Fund I. It's been a good momentum in the start.
Fundraising actually in infrastructure has persisted quite well, and it's been actually more of an issue to get attention from large investors because it's such a busy market with a lot of mega funds on the market at the same time, and we're still obviously a niche product in infrastructure. Looking very good, so I'm confident that we'll get there.
Great. Thank you. Let's remain with infrastructure a while. Do you see any ways to speed up the infrastructure ramp up? Would, for example, a pure play energy fund be a way to complement your portfolio?
Well, when we spar the strategy with Jokke, I get questions about new products and when and what. I think we need to execute on the flagship now and make sure that we build a strong track record there. I think there is room to grow that in fund three in terms of size. Admittedly, we do get a lot of deal flow that looks like energy transition or core and we've seen a lot of competitors come out with new products. That's always something to keep in mind when we analyze the deal flow. At the moment, I think the acceleration needs to come through investing quicker and better and growing the team at the same time.
Great. Thank you, Ville. Now the next question goes for Pia in Buyout. Looking at both your current portfolio and then as you are investing from your 11th Buyout fund, are there any particular sectors that are more susceptible to the current economic conditions with rising energy prices and general inflationary pressures?
Yes, I think I would almost put it that way, that I would say in every industry and every sector, there are companies who are struggling right now. I think for us, the way we look at new investments and what we see in our current portfolio is that with that focus on niche market leadership, we also look very carefully on where you are in the value chain. That kind of pricing power in today's market is extremely important. Do you have a negotiation power towards your suppliers, and can you pass on costs to your customers? I think that's what we see is happening very nicely in our current portfolio, and it's also something we put a lot of emphasis on in new investments.
We still look across all industries because I strongly believe you have pockets in every value chain where you have good performing companies in good positions.
Great. Thank you. The next question goes to Mika in Real Estate. In retrospect, did you raise and deploy too much capital during the zero interest-rate era? Do you see this yield pickup affecting any carry potential of the funds deployed during the zero rate environment?
No. Well, not really. Obviously, we're seeing repricing in the market taking place, and as I was touching in my presentation, the interest rates obviously will have an impact on the returns and therefore the underwriting of the deals and,
People will adjust their models to reflect that. There will be repricing. There's a lot of talk about repricing. Once there's enough talk about repricing, there will be some repricing. We've always been very conservative in our underwriting, and we put a lot of focus on downside protection and downside cases and money back cases and so forth. We always leave a lot of upside also in our underwriting on the table. It's not that we go all in on our base case assumptions in our deals. We actually feel that our portfolio as today is in a very good shape and very protective for repricing.
That was also in my presentation, that's in how it's less driven on the financial leverage when it comes to the returns on our investments. We use very moderate leverage on our deals. It's more about the operational leverage. It's not only on the value-add side, but also on the income side. It's just a longer-term investing. There are always opportunities to increase value even on longer-term investments. We drive value by things that we do ourselves, so it's not really so sensitive to the repricing in the market as we see it. My answer is that, no, we're not too worried about it.
Obviously the other thing which creates a good opportunity for us is that we have a lot of firepower that is unused. We didn't go all in on our third value-add fund, for example. There's only half invested, so there's another half that we can still invest in the market where the repricing is already taking place. We're quite optimistic about it.
Thank you, Mika. Then a question for Antti and the growth strategy. The first growth fund is now in carry, and we are keenly now expecting exits from the fund. Could you elaborate a bit on the remaining carry potential for the fund?
We have six companies left, and we expect Avidly to be exited this month if the deal goes through. I think the biggest carry potential is of course in Coronaria, which is our largest investment. But we also have a major stake in Digital Workforce, which is a listed company and then we have potential smaller companies also in the portfolio. I think there is many good exit possibilities left if the market situation gets better.
Thank you. A question for Mikael and CWS. Could you elaborate a bit on the role of CapMan Wealth Services in CapMan's overall strategy? What are the synergies that could be further expanded?
Good question. I alluded to it shortly in my presentation. I think probably the most obvious synergies would be what we call cross-selling. So, we've had fairly good success in, you know, introducing CapMan's own in-house managed product into our, on average, a bit smaller clients and into our wealth management client base per se. But I think also there are synergies in the form that expanding just the product and service offering, you know, into different markets and CWS Investment Partners is a good example, you know, offering access to U.S. mid-market private equity funds. I don't believe it's in the cards of CapMan to delve into that market so by using a good partner, giving access there.
I think that's the kind of a two-way street that benefits both.
Could you expand a bit about the cooperation with AlpInvest? Could this be somehow expanded into other fund classes or products?
It could. If you remember, as I mentioned, AlpInvest is only focused on private equity, which has its benefits, right? But we're now only working with their primary private equity fund investments. They have fairly big co-investment and secondary programs. That could be an obvious way to expand either through standalone co-investment and secondary opportunities through funds, or then add a small allocation to our investment partners fund whenever their co-investment and secondary funds are raising. Lastly, I would say that this cooperation now is so far only with the New York team investing into U.S. managers. But they have a fairly large European and Asian team too.
Geographically expanding that too could be in the cards in the future.
Could there be any M&A opportunities with CWS as well?
Yeah, possibly, but I’ll leave that to Jokke.
Sure. That's fair. The next question, this actually goes to both, to Pia and Antti. Looking at the current economic situation, there's quite a lot of discussion about the universe of investable companies and valuations as well. Both of you have funds now investing, so how do you see the market for making such investments at the moment? Pia, could you start?
Do you mean both in terms of valuation of assets for new investments or-
Yes. Well, both the valuation, but then also.
Availability
The availability of good companies to invest in.
No, I think, well, the availability of good companies has not gone anywhere. I mean, the good companies are out there, and I think actually from our perspective, the deal pipeline is even I would almost say even stronger right now. There's a lot of entrepreneurs and founders who have started first due to COVID, and then the Ukraine war, and then the current inflationary situation, thinking about, you know, they have growth ambitions, but they need a partner to support them with kind of broader shoulders to take share risks, but also be able to execute on those investment opportunities. We see a lot of those discussions happening now, where people are really looking for a strong active partner to come in. The pipeline in that sense is very active.
Also in valuations, there's been talk around have they been too high? I think actually what we have seen is they've been high in certain segments, like healthcare or technology. A lot of the companies where we look at kind of more basic industry, if you want, there they have never really even started to increase.
I would add on that, let's say it's more easier to agree on a valuation today than it was few months ago, because, let's say the highest outliers have been gone also in the stock market, but also in the private market. Of course, there is a lot of uncertainty in the world at the moment, and of course we will be careful for next few months and to see where the world is going. Definitely we will look for a new investment all the time, and there are good companies that are able to price their products in uncertain situations. Like Pia said, there is good companies out there, and this could be a good opportunity to invest in those.
Good. Thank you, Antti. One more question for Mika. You have launched quite a few new funds and strategies recently. Do you see pressure to also increase team sizes now?
Yeah. Our team has increased-
Mm.
Obviously, there's need for more people. I mean, we do a lot of things hands-on in-house. When the volume of our business grows, we will need more helping hands inside the team. We want to be less dependent on third party service providers. We feel that the closer we are to our assets, the more we do ourselves, the better value we can create for our investors. Obviously we will need more resources, but it doesn't mean that the top line wouldn't grow faster than the cost line. Our businesses are very scalable, so we see that there's a lot of potential to improve the bottom line by adding more resources into our business.
Obviously, also on the fundraising side, we need help and support. That's one of the things to support our growth, one of the areas where we need some help going forward.
Good. Thank you very much. This concludes the Q&A for the second part of our event. Now we'll move on with conclusions and a summary from Jokke, our CEO.
I would simply like to conclude by thanking you all for following our event today. I hope that you have got good insights into our strategic plans, into our business operations and our teams. We, as a management team, look forward to the challenge of rapidly growing and developing our company. We are gonna double the size in the next five years. We're gonna do so in a responsible way. We are gonna do so in a way where we create value to our fund investors and clients, and first and foremost, we are gonna create substantial value to our shareholders. Thank you for following the event today.
Many thanks, and have a great evening.