A very good morning to you all, and welcome to CapMan's result presentation for the first six months of 2020. My name is Joakim Frimodig. I'm the CEO of CapMan. The first half of this year has been exceptional, but it has also been very eventful, eventful in the market and eventful for CapMan. I'm happy that despite these challenging market circumstances and environment, we at CapMan have been able to advance several projects and also complete several projects that are of strategic importance to us.
Our growth strategy is advancing. At the same time, we have been paying particular attention to our balance sheet, which is solid, and to our liquidity, which remains strong. Let me start off by giving you some highlights of the first half of the year. Our management company business continued to develop strongly.
We saw growth. Top line grew by 7% in the first six months, and we saw a significant improvement in the profitability of this segment. The EBIT was EUR 3.5 million for the first six months. That's an improvement of 100% from the comparable period last year. On the service business side, we saw a significant impact of the COVID situation in the first half of the year and in particular in the second quarter of the year. So growth there:
minus 29%, but despite this, we are able to report an operating profit of EUR 3.4 million in the service segment for the first six months of the year. When it comes to our own investments, we saw a decrease in fair values in Q1, and now we saw a partial reversal of the fair value development in the second quarter of this year.
So in Q2, fair values plus EUR 3.2 million, but overall, given the decrease in Q1, the first six months minus EUR 5.3 million, our own fair value development. I alluded to strategic projects that we are advancing. One such is our new Nordic real estate fund, NRE III, which was established in early Q3. The target size of this fund is EUR 500 million, and when that is reached, this will be the largest ever fund of CapMan.
We see a strong investor demand towards this fund, and we expect to reach the target size during this year. This morning, we also announced the establishment of our second growth fund, which continues the success of the first fund, and it focuses on investment in fast-growing companies, mainly in the Finnish market.
Here, the target size is EUR 85 million, and we also announced the first closing of EUR 75 million, which was achieved in record time, so a very fast fundraising and also here strong investor demand. In Q2, we launched a new investment area. We call it Special Situations . This investment area focuses on turnaround situations and distressed investments.
Here, we have recruited a new team. We are working on fundraising, and we are working on our first investments, a very topical investment area where we see interesting potential in the future. Before I go into the result in more detail, a quick reminder of how we report our segments and what our earning model looks like. So we have three segments. We have the management company business, where we receive management fees and carried interest income from the assets that we are managing.
We have a service business, where we have service fee income to CapMan, and we have our own balance sheet investments, where we have returns from investments that are realized and then fair value changes of unrealized investments, and looking at the result through these segments, and starting with the management company business, the turnover in the first half of the year was EUR 13.7 million, and as said, plus 7% there.
EBIT was EUR 3.5 million, so that doubled from last year, and this is the part of our business where we have high earnings visibility and predictability, so recurring revenues 96% in the first six months of this year. Here we see continuous growth, and we have also been able to improve our cost efficiency, and we see these trends continuing.
The service business, the turnover there was EUR 7 million for the first six months, -29%, but EBIT was EUR 3.4 million, so a healthy profitability still with 49% margin. Here, recurring revenues in the first half of the year, 63%. And it was really the low transaction-based fee income in all the service areas that was caused by the COVID situation that impacted the service segment in the second quarter.
Worth also noting that the second quarter of 2019 was the strongest ever quarter of our service business. When it comes to recurring revenues, there we saw continued growth in the first half of the year and also in the second quarter, so recurring revenues grew by 23%.
As already mentioned, in the investment business, we saw a bounce back in fair values, so plus EUR 3.2 million in Q2, but overall still negative EUR 5 million for the whole year. The trend is right, and the development in most of the underlying assets is positive, but of course, there are a lot of assets and a lot of diversity between the assets.
When we combine the segments to look at the company as a whole, it looks like this. The turnover after six months, EUR 20.7 million, that's a decrease of about 9% from last year, and really the service business driving that change. In terms of operating profit, we are still negative, and really it's the fair values that impact that mostly, but a clear bounce back from Q1.
And if I open up the minus EUR 1.8 million EBIT in more detail in this bridge, you can see that the management fee profit, EUR 3 million, carried interest income in the first six months, EUR 500,000, and then service fee profit, I said EUR 3.4 million, and then the negative part comes from the fair value changes, EUR 5.7 million.
Worth noting here that most of these fair value changes are calculatory, not realized investments, and actually the ones that we have been realizing have been on positive fair value changes. When it comes to general costs, they are in line with last year, but worth noting that the first six months contain approximately EUR 1 million expense related to the share performance plan, which was not included in the comparable figures for 2019.
Then if we dig a bit deeper into our fee base and profitability mix, and we look back from the end of 2017, so the last two and a half years, you can see that our turnover has grown on an annual compounded annual growth rate of 18%, and our fee-based business has been growing with 18% as well.
And the steady growth is coming from the management fee part, and this is where we see the strongest growth going forward, stronger growth than we have seen in recent quarters. When it comes to the profitability, you can see overall profitability growing by 40% on average, but we have been able in the last two and a half years to triple our fee-based profitability, a slight decrease in Q2, but we expect an improvement in the second half of the year.
If we take the same time frame, the last two and a half years, and we look at our revenues and split them into recurring and non-recurring revenues, you can see that that recurring turnover has been growing at 15% and growing also in the first half of this year, and we expect this trend to strengthen and continue.
You can also see how our recurring revenue is in relation to our fixed cost, so we have been able to uphold and improve our cost efficiency in the beginning of the year, so recurring turnover in relation to fixed cost, 120% at the end of Q2. A few words about the impact of the COVID situation on our earnings, and we break this down into our earnings components. Starting from management fees, these, as said, are of long-term nature. They create stability for our business. They are very predictable.
The COVID impact comes really from the rate in which we are able to grow these going forward, and clearly some of our fundraising projects have been postponed due to the COVID situation. But despite this, we foresee growth in assets under management and management fees this year.
Service fees, as you saw, have about 60% recurring base, but there is a lot of transaction-based volume, and really you could see the impact of COVID in our Q2 numbers when it comes to the service business. But the prerequisites for a stronger second half of the year than the second quarter are in place for this part. When it comes to carried interest, when market situations are uncertain, it usually takes longer for funds to reach carry. If the market situation worsens or it prolongs, then carry may not be realized at all.
Currently, we are in a situation where we mostly see that these are pushed forward in time. Fair values have a significant impact on our group-level earnings, as you could see from earlier graphs. There has been a lot of volatility in those, but now the trend, as said, in the underlying assets is positive or has been positive in the second quarter, but of course, here the general market situation impacts greatly.
If we then turn our attention to our balance sheet and we start by looking at our investment allocation, you can see that from June last year, we have been able to increase the share of private market investments. This is in line with our targets where we say that we want to have about 80% on average in private market investments. We are now up to 70%.
You can also note that we have a good liquidity situation, so close to EUR 50 million in cash and marketable securities. Outstanding commitments at the end of June were a bit less than EUR 100 million, so the balance sheet overall is solid.
Equity about EUR 100 million, equity ratio above 50%. Liquidity is strong, so liquid assets, as you saw, close to EUR 50 million, and then we have undrawn credit limit of EUR 20 million, and overall our balance sheet allocation relatively defensive, so combining all of this gives us good financial stability. Our vision is to be the Nordic private asset powerhouse, and during the first half of the year, we have advanced many projects that take us towards this direction and are aligned with our growth strategy.
We can continue on the trend that we have seen in the last couple of years, and in the first half, as said, we have now established two new funds, Nordic Real Estate III , Growth II , and also launched a new investment area in CapMan Special Situations. If we take a closer look at the new funds, so the Nordic Real Estate III fund, the target is 500 million EUR equity commitments.
When that is reached, that will be the largest CapMan fund ever. We see a strong investor demand toward this product. We expect to reach the target during this year. Nordic Real Estate focuses on value-add investments in all the Nordic countries, and the predecessor funds of 2013 and 2017 have been highly successful and are giving support to the ongoing fundraising. This morning, we announced the establishment of our second growth fund.
There is a target of EUR 85 million equity commitments, of which EUR 75 million have been closed in the first closing, and also very strong investor demand, one of the fastest fundraising processes we have seen in CapMan history. This fund focuses on minority investments in growth companies, mainly in Finland, and the previous fund was launched in 2017.
If we look at the impact on CapMan of both of these funds, they are of course generating management fees for us as of Q3, so the impact of these funds is not visible in the first six-month figures, but will be visible from this quarter onwards. We receive a customary share of carried interest income and, of course, fair value proceeds of our own investments. CapMan's own commitment to both funds is EUR 10 million.
We are growing our management company business, and we are raising capital for several funds, and as said, we expect growth in assets under management and in fee-based income during this year. However, from our original plans, many fundraisings have been delayed due to the market situations by some months, but the recent developments indicate that investors have confidence and interest to make new investment commitments, and I think what I've mentioned about the two new funds reflects this trend.
In June, we launched CapMan Special Situations. It focuses on turnaround and distressed investments and is a topical investment strategy. It will, in the first place, focus primarily on Finnish unlisted companies. Investments will be both in the form of equity and debt or a combination of these two, and typical investment tickets will be EUR 10-20 million, but can, in individual cases, be also larger.
This strategy gives good companies a second chance to succeed. We have been able to recruit a strong new team for this. We are happy that Antti, Jari and Tuomas are joining CapMan's team, good new talent into our business. Next steps for this business area are the establishment of the first fund. The fundraising is ongoing and also deal flow origination, which looks strong.
We are also reorganizing our service business. The reporting business of JAM Advisors is separated into an own entity, JAY Solutions . JAY provides technologically based reporting, analytics, and back office solutions and has been developing and growing very strongly, and we believe as a separate entity, it will have even better prerequisites for further growth. We are also creating a new business area, CapMan Wealth Services.
Here we are combining the wealth management business of JAM Advisors and the investment solution business of Scala to create a completely new and comprehensive wealth management service in the private and public market space. This will be CapMan's spearhead towards family offices, smaller institutions, and high net worth individuals going forward.
CaPS continues in its current format. It is a highly profitable, growing business, and the focus there will be on international expansion going forward. Given these reorganizations, the JAM and Scala brands will be discontinued, as well as external private placement business, which we will not continue. With the help of these changes, we are able to clarify the profiles of the different service areas.
We are able to bring them closer to our strategic core, and we see a strong demand for these services, and we believe that this restructuring will build us a more sustainable base for future growth and value creation, and finally, if we look at our financial objectives, we have set a growth target of over 10%. We want to be highly profitable with return on equity over 20%, solid balance sheet with over 60% equity ratio, and we want to pay an annually increasing dividend.
Here, of course, the market situation has made reaching these figures in the short term challenging, so we have in the first half of the year a negative growth rate and also a negative impact on return on equity, and really the fair value changes are those that are driving the negative profitability.
Balance sheet, however, is solid, and our policy is unchanged when it comes to paying annually growing dividends. So the themes for this year and in the fee-based business, I repeat what I said earlier. We expect growth in assets under management. We expect growth in fees. We also expect to exceed last year's level of fee-based profitability on a comparable basis.
We do not provide exact guidance on carried interest income, but of course, market conditions are impacting the timing of these. And when it comes to the investment business, here again, no exact timing, and of course, the general market conditions impact greatly, but we have seen positive development in recent months, and dividend policy remains intact. Our outlook estimate for 2020, as it was presented at the end of quarter one, remains unchanged.
So to conclude, we could say that despite the Corona environment, we have been able to develop our current business and create new business, and I believe that the actions that we have taken during the first half of the year lay a good foundation for future growth and shareholder value creation. Thank you for your attention.