Good morning, welcome to Bridgepoint's 2022 results presentation. I'm William Jackson, Bridgepoint's Chairman. I'm joined this morning by Adam Jones, our CFO. Many of you will have met Adam. Raoul Hughes is with us today, our Group Managing Partner. Raoul leads our business development activities. Andrew Konopelski, who's the Managing Partner of Bridgepoint Credit, is also here today. Lots of interesting things going on in the credit world, Andrew's gonna be available to answer questions later on that may come up on that area. Firstly, it's a real pleasure to welcome everybody to the call. Importantly, an even bigger pleasure to present a strong set of results for Bridgepoint for 2022. It was our first full year as a listed business. This morning, I'm gonna cover three main topics.
Firstly, a summary of our full year results. Adam's gonna dive into those in a bit, a bit more detail later on. I'm gonna give you an update on our capital raising activities. Very important, I know, to many people listening in. Thirdly, I thought today we'd do a deeper dive than normal into our underlying fund performances because it's our fund performances that are really driving our company's performance. As I've said many times as before, to our shareholders, if our fund investors do well, so do our shareholders. I hope that additional performance focus today on our funds will provide some insight into how we're approaching investing in the current market conditions as we acquire and provide credit to high quality growth companies.
These are companies that typically benefit from niche or sale sector tailwind, and in doing so, we build fund portfolios with smart risk profiles. This, from a performance standpoint, has been very much a winning combination for Bridgepoint in recent times. Adam's then gonna talk through the details of our 2022 results, and he'll be followed by Raoul, who'll provide a short update on our ongoing business development activities. Of course, we'll conclude by opening up for a Q&A, and Levi from our BT call group is gonna manage that for us. I'd just like to start with a quick reminder of what Bridgepoint is really all about.
In short, we're one of the world's leading middle market alternative asset managers, focusing on supporting profitable growth companies that typically have an enterprise value of up to about GBP 1 billion when we start working with them. At the end of the last financial year, we had EUR 38 billion, sterling... Sorry, GBP 38 billion of AUM across three fund strategies in each of our two business lines, private equity and private credit. Importantly, Bridgepoint has genuine depth and strength in our core European middle market space. In fact, what I sort of think of as total immersion in that space. We've got a team of over 190 investment professionals spread across ten local offices around the world, and some 300,000 people now working in Bridgepoint-backed companies. Turning straight to our company financial performance for 2022.
We've delivered robust growth and strong investment returns across our funds over the last year, despite what I think we'd all recognize was a much more challenging macro. That fund performance lies behind our strong and resilient company performance, which has been ahead of expectations on all earnings measures. In summary, revenues have increased by 13.6% to GBP 307.4 million, and EBITDA has increased by 23.2% to GBP 140.3 million. We've also seen a 21.3% increase in Fee-Paying AUM to GBP 23.4 billion. That's up from GBP 19.3 billion in 2021. FRE, Fee-Related Earnings, which is a key performance metric for us, has also grown by 55.5% to GBP 75.4 million.
Our FRE margin, also very important, has grown by 7.5 percentage points. That's arisen from both growth in our underlying AUM, but also pretty careful cost control in an inflationary environment. Adam's gonna cover that in a little bit more detail because some of that cost has been deferred, sensibly into 2023. Our capital deployment of EUR 4.7 billion in 2022 was in line with our expectations. Interestingly, BE VII, our latest flagship equity fund, is now 12% invested, and BDC IV, our other main equity fund at the moment is just coming up towards 50% invested.
Whilst in credit, where there are some really interesting benefits from current market conditions, as Andrew might talk about a little bit later, we've now deployed 57% of Bridgepoint Direct Lending III and 54% of Bridgepoint Credit Opportunities IV. Finally, very importantly, and I'll cover this in more detail a little later, we've made really good progress on our capital raising since the half year. Especially because the second part of the year is always a bit quieter for fundraising. BE VII is now has EUR 5.4 billion of closed commitments after generating strong further interest from LPs as markets recalibrated in the second half of the year. BE VII's target remains EUR 7 billion with closing plan for the summer. I'll come back to that, as I said, a little bit later.
These results were driven by strong and resilient fund performance. Very important that. During 2022 our funds have continued to perform well with our equity fund values either growing or holding flat year-on-year. Mainly as a result of strong underlying company growth and EBITDA growth in our core investment sectors of healthcare, advanced industrials and business services, where you find the majority of our equity fund investment. We've also made some fantastic exits through 2022, which influence our results. I'll just cover four elements. 3.7 times the original cost. Miller Homes, four times the original cost. A super result at HKA, I'll come back to that later, seven times and Betalynk, 3.5 times cost. Both those last two investments were realized in the second half of the year, you know, important point to note there.
These are from a range of sectors and geographies, and that's notable in a market that's become very used to having breakout returns, mainly coming from the tech sectors. More broadly, our wider credit and business platform today still has multiple routes for delivering performance. With strong medium-term tailwinds behind the alternative asset sector, we continue to have significant growth potential. As we look to the future, I'm pleased to report a couple of other developments for our organization. We continue to invest in our platform, further deepening our sector-focused, based investment activity. We've also tilted that strategy to make the most of the current time. This has already started to throw up some really interesting opportunities for our new flagship fund, BE VII, and BDC IV is making the most of those opportunities as well.
Fund VII has had a strong start to its investment activity and now has two investments in the portfolio, 12% of its capital committed. Over the last year, we've also strengthened our governance at a PLC level, and we were delighted to welcome Cyrus Taraporevala to our group board. Cyrus brings huge experience of the fund management world and also, very important for us, has a deep specialist knowledge in ESG. We've made progress with our business development, Raoul's gonna talk about that a little bit later. Just before going deeper into our performance, a quick reminder of why we're excited by Bridgepoint's future, 'cause of course, as a team here at Bridgepoint our major shareholder is ourselves.
We think our company has great positioning, supported by those long, by long duration capital with organic growth tailwind and fund capital, which is on average locked in for 7-10 years. We've significant organic growth potential, both for our existing strategies as well as the opportunities to develop complementary products over time, as we've done successfully over the last decade. We have a deep and resilient investment track record developed over 30 years with over 400 PE and credit transactions, which certainly resonates with fund investors in these times and people doing due diligence on our new funds. This is accompanied by a deep and highly experienced leadership team weathered by cycles. You can probably tell that looking at the three of us this morning.
All of which has helped us build a resilient investment performance using a really special platform that has significant operational leverage, which drives our financial performance, as you'll hear from Adam. Of course, if that drives our financial performance, it in the medium term drives shareholder value as well. We've got a strong balance sheet that remains asset light. With high unstable margins, with strong cash generation, we have over GBP 650 million of cash and investment on our balance sheet out of our current market cap. Of course, we have a pretty good dividend yield at the moment as well. All of that comes together very nicely. To illustrate this, you can see on this next slide, our progress since the IPO. Assets under management is up, are up 43%.
Operating income is now over GBP 300 million. Underlying FRE has grown by over three times, and underlying PBT is up 126%. Just turning to fundraising in more detail. I think anybody looking at the market at the moment in alternatives will know in this sector, is well acquainted by the fact that fundraising in 2022 was well impacted by some market challenges. However, during the year, overall, the overall fundraising market, I think has recalibrated quite a lot, with many investors focusing now more than ever on realized returns as the best performance benchmark. This has resulted in a shift towards proven private equity and proven credit strategies. Bridgepoint's strong investment platform, its disciplined investment strategy and highly experienced teams are really relevant in this point in the cycle.
I think are proving increasingly attractive to fund investors currently in due diligence as markets go through all the ups and downs that we're seeing at the moment. We've got a number of funds in the market, and we continue to make good progress with our original fundraising targets, despite those market issues, with good support from both existing investors and actually strong commitments from new investors from around the world. As I noted earlier, that's reflected in the progress of BE VII in particular, which over the last six months has made good progress. We've now closed on some EUR 5.4 billion of commitments for BE VII, up from EUR 4 billion closed at our half year point at June 2022.
I'd also note that we've made, we're also actively in the market with Bridgepoint Credit Opportunities IV and Bridgepoint Direct Lending III, and also Bridgepoint Growth II. We've just recently launched our fourth CLO. Looking ahead, we've got a strong pipeline of investors in diligence, which gives us real confidence that macro shots notwithstanding, we should close our flagship private equity fund raise for BE VII, as well as BCO IV, BDL III, and BG II, during the course of 2023. By the end of the year, perhaps maybe just into Q1 of 2022, we'll be back in the market with three further funds, Bridgepoint Development Capital V, Bridgepoint Direct Lending IV, and Bridgepoint Credit Opportunities V. The credit funds seem to just roll on one after another.
Lots going on in that space. Two last. The last two topics I'd like to just cover before handing over to Adam are to share with you just some detailed thoughts on our investment approach and review our most recent fund performance, both of which are key to our overall business performance. I'll say again that if our funds perform well for our investors, which is always the absolute focus and priority of our business, our shareholders will do well. Investment focus and discipline is key to that. Let me summarize what that means for Bridgepoint. Across both private equity and credit, discipline means creating well-structured portfolios backing consistently high-quality businesses. That's obviously what we try to do. Importantly, we're focused on delivering absolute return. That's why people invest in alternative assets.
Doing so with a smart risk profile. The two, I don't think are at all inconsistent. The way we think about this is by using the depth and strength of our middle market platform, we create portfolios that have breakout potential in our equity funds to deliver absolute returns, but also have measured diversity by sector, by geography, and very, very importantly, by vintage year. This provides significant advantages in volatile markets. We build portfolios well suited to the current times, as you see on this slide, investing in growth companies with strong sector tailwind. Most of those companies are actually in specific niches which have tremendous market growth potential. Those are the companies where operating growth, not leverage, is really driving our returns in our equity portfolios.
It's this company resilience with growth that has helped us deliver exits through cycles. Because acquirers will always pay up for well-positioned growth companies. In credit, well-constructed funds are delivering target returns with both smart risk profiles and currently boosted by higher interest rates that we're seeing across the markets. I can illustrate this with reference to the slide we're now looking at. If you take private equity first, companies in our funds typically have high levels of contracted revenues. They have high margins and are price makers. Very, very important in an inflationary environment. Strong cash conversion post important maintenance Capex. That's driven a low loss ratio for those funds since the GFC, less than 2%.
In credit, our exposures are mostly senior first lien positions, right up there in the lending stack. Again, in high margin companies with strong equity cover and generally lending to high, highly cash generative businesses. To date, that's resulted in zero losses for our direct lending business since inception. These metrics help us to address some of the obvious concerns that people would have about the market today. Macro volatility, company performance, interest rates, and of course, fund valuation. How does that then manifest itself in fund construction? Well, I often talk about the value of our investment platform. I've done that seveRaoul times already this morning. Professionals on the ground in local offices with strong insight and a thematic approach to investment led by our sector team.
We use that to develop real conviction about the types of assets that we want to bring into our funds and make sure that we're acquiring them at fair prices. The evidence of this can be seen when you compare our entry multiples in our equity business to those of relevant transactions done over the previous decade. You can see this on the slide we've got up at the moment of Bridgepoint six, just as one example. What this shows is that we are consistently buying in the third or fourth quartile of the long-term sector valuation ranges, often because we're acquiring companies that have tremendous potential that hasn't yet been fully delivered, and where we have the capacity to help them deliver that potential. We're doing that with relatively low leverage for the alternative asset world.
In this Fund VI, the average leverage is less than five times. Revenue and EBITDA growth is key to our return. We're focused, as I said earlier, on absolute returns with smart fund construction. We're doing that by sector, by geography, and very importantly, by vintage year. That provides some macro protection against having bought assets in only one or two vintages in a through the cycle. Not surprisingly, all of this goes to fund performance, which I'd like to just spend a minute on now. I'll do that by looking at, to start with, at our performance of Bridgepoint's equity funds on a slightly longer term basis. What you see on this slide is the average money multiple for investments made in each three-year rolling period.
It's a synthetic investment period if you think of it like that mirrors a sort of a fund. The page just covers Bridgepoint Europe Fund, it's the same across most of our investment strategies. What it illustrates is that we're making good returns on capital deployed pretty much regardless of the year invested. When you look back at the last 15 years for Bridgepoint, you see strong and consistent returns that I've been talking about this morning. It's a testament to our investment approach and to that fund construction. That's our long-term performance, I mentioned earlier that in 2022, our company performance has been driven particularly by strong fund performance during the year.
For our latest fully deployed P- funds and in our flagship funds, that's Fund VI, in BDC, that's Fund III, on this page, you can see what's driven valuation changes during the year. Those returns are driven by performance and not by large valuation increases. In fact, 70% of our valuations have either stayed flat or gone backwards. Where there has been an uplift, it's one or two particular assets that have significantly outperformed in their space. If you take BE 6, our flagship equity fund, which completed its portfolio halfway through last year, it remains immature, but it's grown in value despite the market environment.
That growth has come from the underlying portfolio of businesses, which as a whole, grew organic EBITDA by 16% and total EBITDA by over 30%, including the bolt-on acquisitions we've done during the year. That interestingly compares to an average EBITDA growth of 3.6% in the MSCI Europe Index for quoted companies in 2022. Quite a contrast there. Similarly, if you just look at BDC performance, BDC three's performance was driven by a fantastic year of exits. As you can see, the growth from portfolio trading performance in BDC three was also strong. It's a much more mature portfolio.
In addition, significant fund value growth has resulted from four exits at prices above the valuations we were holding at them, in the Q2 valuations before that event. Across those four exits, the average ROI was 4.1 times the original cost. That's just a snapshot of our equity fund. This slide shows excellent fund performance across a range of funds that we have. With BE VI and Bridgepoint Development Capital III ahead of plan, and both BE V and Bridgepoint Growth I on plan. BE V numbers in particular are also largely based on realized investment performance. Very important. A lot of capital has gone back on that fund in the last 12 months. It's worth mentioning Bridgepoint Development Capital III here.
The fund grew valuation from 2.4 to three times in 2022, well ahead of plan, and actually is currently one of the best performing private equity funds for its vintage in Europe. BDC III is particularly important because when BDC V comes to market, the next fund that we'll raise for BDC, it will be the track record of BDC III as the mature fund, that is the real focus of diligence, and that gives us great confidence about that new fund when we launch it, most likely next year. In summary, we're definitely not immune to macro trends, and I can assure you, not at all complacent.
We do think we're well-positioned for the current market conditions and our middle-market growth positioning where we still have access to leverage, where we're seeing interesting opportunities in the market for new investment is a really great place to be in these times. Couple of more points on exits, because this is an important driver of what we do, and our ability to return cash to investors to return their investment is the true determinant of performance in our market. I'll focus again on PE rather than private credit because obviously private credit isn't driven by exits in the same way. If you take 2022, we continue to achieve strong exits with over GBP 4 billion of capital returned to investors during the year.
On this slide, you can see some examples from Bridgepoint Europe and BDC. I just pick up HKA again. HKA was originally the construction claims group of Hill International. The business has been transformed into a global leader in claims consulting and expert witness services for the construction and infrastructure sector. It's just a great example of the opportunities available in the mid-market and what private equity can do to help companies grow. With Bridgepoint's capability to capitalize on really interesting niches and subsector opportunities. It's a landmark result for the second half of our year, which delivered really what we can only think of as an eye-watering seven times return on original capital. The other key thing I just draw from this slide is the valuation uplifts we've been getting on exit.
We try to take a fair but conservative approach to valuing our fund investment. That's a big topic at the moment for investors when they look at private versus public markets. When you look at this slide, you can see that we have a very strong track record of exiting businesses for higher valuations than we held them in the last couple of quarters of reporting to our fund investors. Yes, I think inevitably those uplifts will be more muted during times of dislocation. It's a proven characteristic that I think stands us in good stead in more uncertain market conditions. Looking ahead, we remain optimistic about exit potential despite current markets. We again, can't be complacent. The value of growth certainly remains at a premium in the current market.
I think safe strategic assets remain highly sought after. Embedded and portable leverage is also quite attractive to buyers at the moment. Mid-size companies are also attractive to large corporates in cautious times who just don't wanna bet the farm on one strategy at this point in the cycle. Finally, I think it's also worth mentioning that 98% of Bridgepoint's realizations over the last 20 years have been delivered by private transactions rather than IPOs. We're not dependent on public markets to deliver returns to investors. Covered a lot there, and with that, I'm gonna pass you over to Adam to run through the details of our financial performance for 2022. Adam, over to you.
Thank you, William. Good morning, everyone. William's already given you the financial headlines. The next few slides, I'll run through the 2022 performance in more detail to give you some additional context and a few points to help you update your forecast for 2023 and 2024. First of all, let's look at AUM, assets under management. Assets under management grew by 15% to EUR 38 billion over the 12-month period to December 2022, really driven by the positive fundraising momentum in Bridgepoint's flagship Fund VII, direct lending three, and credit opportunities, the four fundraisers, as well as valuation gains which have been really linked to the resilient fund performance during the year that William just referenced. Those valuation uplifts of some EUR 2.5 billion in total were really trading driven, as William said.
The weighted average earnings growth in BE VI was 16% last year and 24% in BDC III. Again, that, you know, significantly outperforming the MSCI Europe Index that William referenced. Importantly, 70% of the unrealized valuation multiples were either flat or reduced in the year, and that really does underscore the strength of that earnings performance by all our portfolio companies. Both AUM and Fee-Paying AUM growth is net of that significant capital distributions that William referenced back to investors, principally driven by those six realizations that were just covered in the previous slides. Fee-Paying AUM grew by 21%. Reflecting both the switch on of the BE VII fees from May 2022, as obviously well as the deployment progress that's been made across all of the recent credit strategies.
Fee-Paying AUM also includes an adjustment for the step down in fees associated with BE six, transitioning its fee charging basis from total capital commitments to net invested capital at the point of transition to BE seven last May. Let's look at sort of revenue and fee margins. As we outlined in the IPO, we've delivered strong growth of 60% in group revenues since 2020, and 14% over the last 12 months. That obviously reflects the material increase in management fees from both equity and credit strategies. In 2022, this increase was largely driven by obviously the BE seven, as well as increased invested capital in our largest credit strategy, BDL three. In 2022, we delivered another strong year of investment returns driven by really excellent performance, in particularly in BDC three and BE six.
The ratio between management fees and investment returns is in line with our previous guidance, and in the short term is expected to be in the 80-20 range. Fee margins remain stable and consistent with prior year. Please note that given the expansion of our CLO strategy, those numbers now reflect the CLO strategy, and the prior year numbers have been restated accordingly. Now let's look at operating costs. Those totaled GBP 167 million for the year and grew just under 7% year-over-year, despite inflationary pressures that are evident in our cost base. People costs obviously remain the most material driver of cost. They represent about 75% of our total costs. Full-time employee headcount grew by 10% to 372 by the end of 2022.
Nearly 40% of that total headcount growth since 2020 relates to investment in the centRaoul functions to really support life as a public company. Investment team hiring has been more modest, we have sort of prudently phased personnel investment and managed cost growth in light obviously of the current macro environment. We do expect those inflationary pressures to continue in the near term. Turning to other expenses, those grew by 17% to GBP 41 million. That was really driven by the costs associated with the long-planned relocation to this building, our new London headquarters at Marble Arch. Higher legal spend associated with the expansion of our regulatory footprint in both Europe and the U.S., as well as a more normalized year of travel spend post-COVID.
Let's take the combination of those two into EBITDA and fee-related earnings. With obviously revenue growth significantly ahead of corporate operating cost growth, which obviously does reflect the strength of the operating leverage inherent in our business model. 2022 saw a material increase in our EBITDA to GBP 140 million with the expansion of our EBITDA margin from 42% to 46%. Underlying fee-related earnings grew by over 55% to GBP 75 million, with FRE margin moving up to 31% in 2022. That's up from just 17% at the time of the IPO. Really terrific progress towards our longer term FRE margin target, which is 45%-50%, which will really be conceived after conclusion of the BE eight fundraisers sometime in the future.
Medium term FRE margin guidance, which has been 30%-35%, remains absolutely unchanged. What I would say in 2024 is that we expect to be slightly below the bottom end of that range, which is really due to the typical profile of the private equity cycle. Obviously, fee income will start to decline as we successfully exit businesses over the next two years and return capital to investors. Obviously, very important part of success in driving future fundraisers. Let's turn to the balance sheet. Here's a sort of a high-level summary of the underlying Bridgepoint balance sheet. And you can see the net asset position of GBP 773 million includes over GBP 650 million of just cash and investments.
Those investments, which really represent both the co-investment, into equity and credit as well as performance fees, represent just 1.1% of total AUM. That really does underscore the capital-light nature of our business model, again, that William mentioned. The company's borrowing facility is currently GBP 125 million, and that has been undrawn since the IPO. We have significant cash resources to support our growth agenda, including M&A, that Rao will be touching upon shortly. As a final point, accounting rules require us to significantly discount the unrealized value of performance fees. The balance sheet actually contains potentially significant future value in excess of what's actually been reported here. One final point on the balance sheet, which relates to our CLO strategy.
The previous page showed the underlying balance sheet. We are required to consolidate three of the four CLO vehicles that we have invested in to date. This makes the group's net exposure to the CLO strategy rather hard to identify. I thought it'd be useful just to clarify that number and to explain the accounting treatment. Those three CLOs that have been consolidated have about GBP 740 million worth of assets. In accordance with the risk retention regulations, we obviously provide equity in those CLO vehicles and are therefore deemed to control them and therefore consolidate them. Bridgepoint net exposure to the entire CLO portfolio is GBP 60 million. Obviously our balance sheet has been inflated by the difference which represents all of the third-party interest in the CLO strategy.
I appreciate the accounting rules make this rather confusing, but certainly at least to me. We put some additional disclosures into our annual report to help provide some more clarity on that. Finally, I think I'll close with the dividend and guidance again for your for your modeling. Our proposed final dividend for 2022 will be 4.0 pence, which is consistent with the interim dividend that was paid back in September. Our dividend is expected to grow progressively over time as our business scales. Now, let's turn specifically to guidance. As I said before, management fee margins are expected to remain stable across the entire business. The pace of fund deployment remains absolutely unchanged despite macro conditions and in line with previous guidance. Importantly, the fundraising target for Bridgepoint seven remains unchanged at EUR 7 billion.
Investment income is expected to represent 20% of total income in the total revenue in the short to medium term before growing perhaps a little bit more as the performance fees start to increase in the business. Our co-invest commitments for future funds is unchanged also at 2%-3%. A word on costs. As I said, the inflationary pressure on costs is expected to continue in the short term and obviously in addition to those investment team hires that were delayed from last year. Taking the two factors together means that we do anticipate high single digit cost growth in the short term before more modest growth in the medium term.
The FRE margin short-term guidance remains unchanged at 30%-35% ahead of a further step up in fee-related earnings margin at the completion of the BDC five and BE eight fundraisers. The 2024 FRE margin, as I said, we expect to be slightly below the bottom end of that range, which is the completely normal profile of any fee cycle through a period of successful divestment ahead of its the next material new fund. That fund will be BDC five. The deployment is absolutely on track. We'd expect to complete the BDC five fundraise during 2024, we won't actually switch on fees until January 2025, based on the normal deployment cycle of four years. Finally, the effective tax rate guidance of 5%-10% remains unchanged, subject of course, to any potential changes in the UK tax code.
With that, I will hand over to Raoul.
Thank you very much, Adam. I'm gonna take a few minutes to bring you up to date with Bridgepoint's business development strategy and talk a little bit about where we stand today. While we have lots of dialogues ongoing, I thought I'd say up front, perhaps to dampen expectations that we're not gonna be announcing anything specific today. How we think about AUM development has not changed. We still see it as a three-pillar strategy. The organic expansion of existing fund strategies, the development of new products within existing strategies, and the development of new business lines in adjacent asset classes. Turning to each. You will know that we have three mid-market investment strategies in each of private equity and credit. Over time, these strategies will continue to grow through controlled growth in core successor funds.
As we have seen more and more particularly in the credit business, the growing number and scale of Separately managed accounts, which are broadly aligned to a particular strategy but not entirely consistent with it. Continuation funds will also be an increasing function of our market. To facilitate this growth, we'll continue to invest in our platform and exploit the opportunity in an evolving middle market. In addition, over time, it is our intention to introduce new products within our credit and equity businesses. This is about utilizing the strength of our platform, origination capability, domain and sector knowledge, and strong centRaoul functions. In the past, Bridgepoint Growth is a good example of this approach, as indeed was BDC prior to that.
In credit, our CLO business, which had not launched when we acquired the EQT business in 2020, now has in excess of EUR 1 billion of AUM. The final area is building new investment strategies. We'll have some relatively recent experience with this in the building our credit business, which now stands at little over EUR 11 billion AUM. There is significant scope to further enhance Bridgepoint's scale and market positioning and create platform synergies through the entry into other adjacent alternative asset classes or geographies. In relation to this, I want to touch on where we stand today. Since the IPO, we have reviewed a number of potential opportunities and in the current market, have seen an uptick in the quantum.
We remain very disciplined and will draw on all of our M&A experience in the core investing business to set a high bar for any opportunities that we consider. We are a people business, and anything we do will need to comprise a team that is motivated to continue to deliver quality investment return and growth in their own franchise, but within the safe harbor of the Bridgepoint platform and culture. On the page, you can see the seven key criteria we use for assessment of opportunities, and I'd like to highlight three of those today. Firstly, and most importantly, shareholder returns. It is absolutely front of our mind, especially in the current market, that anything we do will need to be absolutely accretive. Secondly, scale and international growth potential.
Any deal needs to be or capable of becoming in a reasonable time frame, meaningful in the context of our existing strategies. Finally, standalone team. We are looking to partner with expert investors in their sector, motivated to deliver incremental growth through leveraging the synergies of the Bridgepoint platform. Geographic coverage or LP relationships are two examples of this. We are confident that despite these tight criteria, there are firms that meet our expectations and therefore significant opportunity to add further verticals to the Bridgepoint platform through M&A exist. As we've mentioned in the past, the obvious asset classes for acquisitive expansion will be infrastructure and real estate. Finally, on this, in the last 12 months or so, market pricing has come towards us. As I've said, we will remain disciplined with regard to investor returns.
I focus here on our strategy to grow our investing businesses and with that, our AUM and FRE income. Before I pass you back to William, I just wanted to briefly touch on the other side of our business model and our thoughts on diversifying our fund's investor base. I should stress how privileged we are at Bridgepoint to continue to enjoy great relationships with the largest and most well-respected LPs in the market, and our existing investors will always be our number one priority. We do, however, see the opportunity to continue to significantly increase the amount of capital we raise from Asia and the Middle East as historically the majority of our capital is from Europe and the Americas.
As well as investing in our investor services team to meet the increasing number of fundraisings that are ongoing, as William outlined earlier, we are growing our global coverage, looking to have dedicated fundraising resource on the ground outside Europe. In addition to growing LP coverage, we are beginning to look at expanding our capital raising to encompass more retail-like investors. We'll be thoughtful in our approach to this and try and learn the lessons of some of the early adopters in our market. It is clear that there is a significant opportunity in providing private market access to non-institutional investors. We think that the combination of Bridgepoint's strong, consistent investment performance, increasingly diversified product offerings, and excellent risk metrics will mean that we're well suited to this market.
Naturally, we will keep shareholders up to date on this and business development more generally as our plans progress. Now with that, I'll hand you back to William to conclude.
Great. Thanks, Raoul. Some really interesting points there. Just on this on the final slide that you can see in front of you now, we've enjoyed as a company a really strong 2022. That's been mirrored by a good start to 2023. I think the organization is in good health with robust and resilient financial performance. Our business continues to have multiple avenues for organic growth, I think not least with good momentum in the funds that we've got in the market at the moment, including BE7 obviously, but also strong prospects ahead for BDC Five and the other funds that will come to market over the next year or 18 months.
We certainly remain committed to deepening and broadening our middle market platform by acquisitive growth, just as Raoul has been talking about. We'll only do that if it's obviously accretive. That's very, very important. We're a balance sheet light company with just over 1% of our total AUM on our balance sheet. The assets we do have on the balance sheet are a really valuable part of the current market capitalization of our company. Growth and value is really at the heart of the Bridgepoint investment case. We've covered a lot of ground there this morning. I'm now gonna pause and hand back to Levi at BT, who's gonna manage the Q&A session that we're going to open. Open Levi to Q&A.
Thank you. Ladies and gentlemen, we will now take questions from those dialed in. If you are dialed into the call and would like to ask a question, please signal by pressing star one on your telephone keypad. We will pause for a moment to assemble the queue. We will take our first question from Arnaud Giblat of BNPP Exane. Please, go ahead.
Yeah, good morning. I've got two questions, please. Firstly, could you expand a bit on the current environment? Is there a significant opportunity for private debt to be stepping in where the banks are retrenching here, particularly given what's happening in the banking sector right now? Specifically as well, if you could expand a bit as well on CLOs. Understand that the syndicated loan market is a big area of sourcing. Is there any potential for disruption in terms of new insurance? My second question is on.
On the deployments in private equity. With the increase in the cost of debt, I was wondering how prices may have evolved given you've closed on two transactions. Have the purchase price multiples come down to the extent to compensate for that higher cost of debt? How's the outlook looking there for new deals in 2023? Finally, thank you for the update on your strategies in private equity and credit. What sort of new products specifically could you be envisaging to develop organically in the near term? Is this core private equity or anything else? Thank you.
Arnaud, great to have you with us again. Thank you for those questions. I'm gonna ask Andrew to cover the credit environment and CLOs, and I'll cover PE, and Raoul will cover new strategies. Just one point of clarification. One of the things that we've done, you'll see in the numbers this time, is our CLO business has grown a lot during the last 12, 18 months. We've brought that AUM into our calculations. That's behind the shift, the restatement in 2021 of the number. Again, it's in this year's numbers. Credit environment, Andrew.
Sure. Yeah. I think you actually made the point for me, you said... Oh, sorry.
I think during times of uncertainty and volatility, private credit certainly comes to the fore. You're right. As banks retrench, there is, you know, an even better opportunity for private credit lenders like ourselves to step in. I'm thinking direct lending. Working with the mid-market companies that we traditionally lend to, both to support them in their continued expansion of their business models, so, you know, add on M&A, also then to underwrite new transactions. I'd say there's a second opportunity, which really comes down to the bit of what you were suggesting on the CLOs, which is the secondary market. We are seeing a wider dispersion in prices. The market is differentiating between the quality.
In times of nervousness, you tend to see credit spreads step out a bit, which usually provides a nice opportunity for us to step into the market on some of the high quality businesses that we tend to invest in to add to our portfolios, primarily in credit opportunities. On the CLO side, I think there are probably two factors that I'd mention on CLOs. You know, one is just on CLO creation is very closely linked to the syndicated debt market as well. When new deals are being issued, you tend to find more CLOs being issued. They kind of work in a balance.
What we're doing in our current CLOs, we actually came into this, the good thing about CLOs is the market data or the data on all the CLOs is quite public. We are well positioned, I think, with one of the highest quality, highest priced portfolios in the market, which I think stands us in very good stead coming into this period. What we're using this period to do is to rotate. Where we can take profits on some of the old loans and/or move into ones that we think are more attractive on a relative risk reward basis, just to try to generate attractive returns. It does provide a good opportunity.
Great. Thanks, Andrew. Just on the deployment point, I think a couple of interesting things there. Firstly, mid-market is open for business because you can certainly get access from the credit, the fund credit markets for debt that supports those acquisitions. That debt is typically GBP 200 million, GBP 300 million. It's not GBP 2 billion or GBP 3 billion. Yes, the cost of debt has gone up, but actually most of our acquisitions leverage is relatively low. So, you know, as I said earlier, it doesn't form a huge part of our return. We don't like to be charged higher rates of interest, but it's not that material in the overall fund return.
In terms of market pricing and deployment, what you see in these times, as I mentioned earlier, that if you've got a company that's gone a long way to fulfilling its potential and is more mature and is delivering growth in these times, then it generally attracts a premium price. However, the differential between companies that are less perfectly formed and those that are at the end of our process in the middle market has increased. The acquisitions we've done to date have been, for Fund VII, for example, have probably been on average at an entry price 20%-25% lower than we would have seen 18-24 months ago. Of course, these aren't businesses, and this comes through in our underlying valuations. These aren't businesses that are also growing in late teens percentage.
you know, it does catch up quite quickly. I think that's one of the reasons why you haven't seen, you know, really material valuation, declines in the space. because, you know, you wait a year, and if you're growing at 15%, 16%, you absorb a huge amount of the multiple, decline just through the DA growth. that's why Adam was saying, you know, we're, we're actually pretty excited about the opportunity at the moment. There's better pricing. some of the tourist investors have gone out of the market, and people wanna deal in a time of uncertainty, very often people want to have one-on-one discussions, and that absolutely plays to Bridgepoint's strength. I hope that answers your question, Arnaud.
New products in development. I think the first thing to say is that we certainly in the short term have got really good organic growth within the equity funds that we have, and so that'll be the focus within equity over the next sort of the shorter term. I think there's lots of new credit, new products we can move into in credit, and I think we will sort of update you as we actually deliver them. I think we can sort of talk about them in advance of that. And then that's the final thing to say is I think the...
As we start, delivering on our M&A, our M&A agenda, that will also help in the, in our ability to expand the existing, the existing verticals, as we will have a greater sort of, a greater spread of expertise that we can help leverage.
Yeah. Three areas there, Arnaud. Okay. Go back to Levi for the next question.
Great. Thank you.
Thank you. Our next question is coming from Nicholas Herman of Citi. Please go ahead.
Yes. Good morning. Thank you for the presentation and for taking my questions. Can you hear me okay?
Yeah.
Very good. Okay. Yeah. Three from me please. One on fundraising, a follow-up on deal activity, and one on, I guess, balance sheet and opportunities to acquire. On fundraising, it sounds like you're no longer expecting BE VII to be completed in the first half of 2023. Just to confirm if that's correct. More broadly, can you just talk about then the fundraising, how you see the fundraising outlook evolving into the second half of this year and maybe into 2024? I'd be interested in your thoughts on your views around that, please. On deal activity, taking point that, you know, leverage is not a major part of, in the area, in the spaces that you're playing in.
Have you seen signs of bid-ask spreads for assets now narrowing? Let me be constructive on the ability to do deals. Finally, on balance sheet opportunities, this is a two-part question. First of all, you talked about an uptick in the quantum of opportunities, and that you are specifically focused on infrastructure and real estate. I guess that uptick in opportunities, is that broad-based? Or is there any specific tilt within that comment? In terms of, you've talked in the past about how you want to use surplus capital to fund organic growth, organic and inorganic growth.
When you think about how you're using your cash and potentially adding leverage, how do you quantify or think about the capacity of the balance sheet to level up? Specifically, how many times of EBITDA would you be willing to move? Thank you.
Okay. Thanks, Nicholas. I mean, just to confirm our fundraising target remains to close the fund by the summer. You know, we're alert to what's happening out there. You know, the events of the last week certainly, you know, just show you how volatile the world is. We feel pretty comfortable that we're on track. You just have to take it to month by month. That remains our target. When I look at the market as a whole, I think what you're seeing is just investors facing into a couple of issues. One is that because of...
If you think about fund valuations, this comes back to the whole issue of, you know, how the heck are private equity values higher than the quoted markets? I think there are two or three good reasons for that differentiation and why it isn't quite as volatile. It does come to where the issue that investors face. The first reason is that typically private equity companies, portfolio companies are valued on the basis of selling 100% of the company. They're not valued on the last 5,000 shares that have been traded in the company. Of course, we know, 'cause we look at Public-to-privates like other funds, that you have to pay a 25%, 30%, 40% premium to take a company private.
You know, when you think about the difference in valuation, then there's one answer to it. Second thing is that, just go back to Adam's comment on the MSCI growth statistics. Typically, equity markets cover a whole range of different sectors. Most private equity funds are focused on absolute return. The sector exposures are in different places. Clearly, you know, if you have very high growth sectors that have become overheated, valuations come off. In a fund like ours, we have a slightly more, slightly broader base of niches we're in, but still in high growth. You've got that factor coming in as well there. Actually, then you've got the underlying growth of the EBITDA, which goes a long way to compensating for valuation declines.
Of course, coming back to your question, the consequence of that is that while you have seen a rotation in public markets, a lot of private market valuations haven't come off. They've come off quite a lot in the venture sector, and a little bit in the large buyout world. On the whole, they haven't come off that much. That, that is the so-called denominator effect. I think that effect probably will run through the rest of this year and into 2024. The interesting thing is that a year ago, most LPs were really focused just on tech investing. It was the hot area.
You know, when you go through a cycle, it leads to rethink where they want to make capital. I mentioned earlier that, you know, realized returns suddenly become the benchmark rather than net IRRs on unrealized valuation. I think the, you know, for every fund in the market, and it's notable actually, that the funds coming to market at the moment are not setting targets on the whole because it is an uncertain environment. I feel, you know, we've seen a lot of interest in our... the funds we've got in the market. The middle market positioning. The middle market has become the place of interest at the moment right across the middle market.
But, you know, you, we spend our time working with our LPs to make sure we can help them get to the right conclusion. That's what's going on in fundraising. In deal, the other question you asked was deal activity and leverage, and whether the bid-ask spread had changed. I mean, I think we are seeing a little bit of that. It depends on the nature and of the nature of the business, really. You know, as I said earlier, if you've got a high-performing company that's growing fast, there's a lot of interest in it.
If you've got a business that has got a lot of potential, but it hasn't yet realized at all, then, you know, the price spread has broadened. So I think, you know, that's why on the whole, most of the transactions are done on, you know, high-performing businesses, and you don't see multiples coming off that much. Charles, do you wanna comment?
Yeah. Well, maybe one of the things that has changed over the course of the last year or so is that more of the processes are done privately.
Yeah.
We're seeing a lot less of the investment banks. I was gonna say, if it's a Citi guy asking a question.
Sort of investment bank-led auction processes. It's perhaps harder to tell whether the bid-ask spread is closing or not because it's much more likely at the moment that if you're thinking of selling a decent business, you'll want to go and have a couple of private conversations with people rather than an investment banking process in a book. That's evidenced in the sort of deals that we're doing across both of our equity and asset products, where the latest deal as an example, signed by in our BDC business. The team managed to have a four-month exclusivity period to really dive into the business and understand the dynamics and track its trading for a period of time to make a buy decision.
That is definitely a sort of a shift in the market. Do you want me to talk about balance sheet and, Yeah, and quantum of opportunities?
I mean, I think we... What I meant by that is, as we've settled into life as a public company and the enhanced profile for Bridgepoint and the story and the messaging and our quoted equity position. We have found an increasing number of sort of founder-owned, single vertical alternative asset businesses that have expressed interest in joining a more diversified platform. You know, the sort of the story at the time of the IPO about this being a really interesting vehicle is manifesting itself in interest across the space. I mean, it's a small industry. It's a narrow number, so there's not a sort of a flood of opportunities.
There's an increasing number of conversations we're having with an increasing number of firms who the concept of becoming part of, as I've described it, sort of Bridgepoint family in the safe harbor of our sort of diversified firm is appealing to them. I think the critical bit is what I said also in the presentation, that for us it's really important that we find in an M&A environment a like-minded culture and a like-minded approach to doing business. But also that these are very successful firms that are experts in their space. The added value of being part of Bridgepoint is additive rather than substitutional, and that's critical for us.
I'd also say that the having listed paper as a currency in a transaction is very helpful because ultimately, while it ensures stronger strategic alignment with the, with both parties, there is obviously a pathway to liquidity over time. Just to be clear, you know, the core strategy is we're well positioned in private equity. We've got dedicated teams that to run those funds, similarly in credit. If we execute on M&A, it would be to bring a separate vertical in that would be stand-alone and therefore not distracting to the success of those two strategies, but leveraging off the resources and actually enhancing the overall resources and knowledge.
Going back to that kind of strategy of total immersion in the space and having, you know, good organic growth, but keeping completely focused on our area of expertise. Leverage, you know, we would not have enthusiasm for high leverage on our balance sheet. Don't worry about that. I think the point I'd make about M&A is that, you know, valuations have come down in the companies that we're looking at. When Adam talks about use of paper, it would be relative to where the industry is, which is an important point.
Nicholas, well, thank you for those questions. We'll go back to Levi for the next question.
As a reminder, if participants would like to ask a question, please indicate by dialing star one on your telephone keypad. There are no further questions on the conference line. I will hand back to the management in the room.
Okay. Well, listen, thank you very much to everybody. You've got two that have come in. Adam's got two that have come in on online.
Thank you.
Adam.
The first one is from David McCann at Numis. You referenced acquisitions needing to be accretive. What metrics are you considering which would determine this accretion?
Good question. Raoul. I'd pick up three. I think Accretion is an important component of this. As you know, the sort of fee-related earnings are key drivers of long-term value in our businesses. The ability to add something into the platform that is immediately accretive at an FRE level is really important to us. I think we also would aim to it to be accretive at a bottom line level. Although to a degree that's slightly more variable because part of that level of accretion is a function of the proportion of existing carry and co-investment investments of that platform has already made that come across as part of the perimeter of the transaction. It's slightly more variable. FRE accretion is absolutely critical.
I think we would expect accretion to be from day one, but also over the long term.
The second question is from Greg Simpson at Exane BNP Paribas. In the funds overview slide, the group share of carried interest in BE VII is shown as TBC. Can you just confirm we should still expect 22.5% share consistent with messaging and listing, or could this change?
well, we haven't yet finalized the carry allocations, which is why it's down as a TBC. At this point I would, yeah.
Yeah.
Within that range.
Within the same range.
Yeah.
No, no change there.
Any other questions, Adam?
I think there's one more to come.
From?
Levi.
Levi. Levi, do you have another question?
Yes. We have our next question is coming from Tom Mills of Jefferies. Tom, please go ahead.
Morning, guys. Thanks very much for taking a late question. Apologies if I missed it earlier, but I was just wondering if... Are you seeing sort of more opportunities or wanting to push through sort of more add-on deals in your existing portfolio companies to sort of drive value accretion than perhaps you would have done in recent years? Just be interested to hear about that. Thank you.
It's a good question, Tom. I mean, if you were to get into the detail on Fund VI, which is our the fund we completed in the summer, our flagship fund, we really in the last 18 months, doubled down on bolt-on acquisitions, where we've seen, you know, significant value. Typically on bolt-on acquisitions, particularly larger ones, we've been able to acquire them at probably 20% below platform investments. Also then get really meaningful synergies through which drives equity value. It's been a big part of our thesis.
I guess the tilt that we've done is we've always done 50 or 60 bolt-ons for each fund that we have, but in Fund VI, we've done three or four big acquisitions that are kind of the same size as the platform, the original platform, and they have the capacity to be transformational. In our track record, what we're seeing and we've focused on over time is we're seeing in Fund V and Fund VI, flagship Fund V and VI, and indeed in the BDC III and IV, the potential to get multiple breakout returns. Rather than having the return of the fund driven by one or two big winners, getting four, five, six big winners in a fund.
By that, when I talk about breakouts, if you have a target return of two and a half times money and you're getting north of three, then you're into breakout territory in our space. Yeah, really interesting, opportunities around at the moment.
Thanks very much.
Okay. Levi, any other questions before we close?
There are no further questions on the conference line. I'll hand back to the management in the room.
much, Levi, for managing that process. Thank you to everybody for following us today. I'm sure people may have follow-up questions. Please don't hesitate to reach out to Adam, either Adam Pollock, who runs our Investor Relations, or Adam Jones. We'll look forward to giving you a further update later in the year. Thanks very much for being with us this morning.
Thank you.
Thanks all.