ICG plc (LON:ICG)

CMD 2018

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Feb 1, 2018

Good morning, everyone. My name is Philip Keller. I'm Chief Finance and Operating Officer at ICG, and welcome to our 2018 Capital Markets Update, our first in a couple of years. Welcome and thank you for making it to London's latest trendy techno hub. I suspect we've substantially increased the number of people wearing suits in NW1 today. But we are very pleased of our host, Maitland, who are our PR advisor, for hosting us today. Just a little bit about how this morning is going to work. We have a number of speakers, and we're going to have specific breaks for Q and A after each couple of talks. So save your questions up. There'll be plenty of time to ask questions of the individual business unit heads who'll be addressing you. And then at the end, Benoit and myself will answer questions more generally about the company. We are joined today by a number of our Non Executive Board and specifically our Chairman and the Chairman of the Committees, who will be available throughout the morning to talk informally or indeed if any of the shareholders or indeed analysts want private meetings, they're also available for that as well. And they're broadly sitting in the front two rows here. 2 years ago, we a number of our colleagues talked to you about some of the more established businesses at ICG. We had the U. S, we talked about European Mezzanine Credit Fund Management. Today, we're going to focus a little bit more on some of the new strategies, some of the more emerging strategies that we've been developing over the last few years and hear the stories about how they came into ICG, how we grew those businesses and where they are and how they're looking going forward. Before we do that though, Benoit is going to talk about the business strategy, where we are right now and how we're going to be progressing going forward, a little bit more about the shareholder targets that we also that we announced earlier on today. Thanks, Phil. Good morning. Our business strategy. This is our business model. ICG's business model fundamentally is quite straightforward. We invest, we manage those investments and we grow assets under management. You will notice investing is at the top of the pyramid. We're an investment focused firm. We have a reputation for the strength of our investment culture, for a deep focus on origination and for the excellence and consistency of our track record over several economic cycles. This is our most valuable asset. The combination of strong investment and the quality of our Portillo Management drives performance and ultimately growth in resilient and long term AUM. And I emphasize on long term and resilient. We are not interested in growing AUM for the sake of growing AUM. We're focusing on long term AUM, which translates into locked in value. This is what generates shareholder return and allows for strong visibility in the growth of our profits and dividend distributions. At our last interim presentation, I mentioned that we're ahead of plan on delivering on our strategic priorities. And indeed, we have met actually exceeded our fundraising targets every year. Our client base has almost quintupled in 5 years. We've launched a number of new strategies, a number of new products, so much so they now represent a significant part of our AUM and a growing part of our AUM. Despite this focus on growth and the associated cost, we have been able to preserve a healthy level of operating margin for the fund management company. And we have also put considerable emphasis on the balance sheet to improve capital efficiency. Philip will be talking about this later. But notably, our co investment ratio has dropped from 37% to 7% today. And as you know, we've returned over £800,000,000 to shareholders. And we have revised our dividend policy to align it to the FMC profit growth. As a result, ICG does look very different from 8 or 10 years ago. We have diversified geographically. ICG is now truly global. We have also expanded our product base. Not only have we added new strategic asset classes, real estate, secondaries, but we've also expanded the breadth of our products within asset classes. If we look at corporate investments, for instance, in 2010, this was European MES and Asia MES. That's it. Today, it encompasses U. S. MES, Japan MES, European senior debt. We will be talking about it in greater detail later. U. S. Senior debt, Australian senior debt and so forth. We have a much broader product base, much more diversified. As a result, the GEE is more adjacent products become available. Simply you get better at growing. Growth becomes part of your DNA. There's a virtuous effect actually in this, which we can observe on this graph. You could see that in the recent past, our growth has accelerated. So this is where we are today. This is what we've achieved. What about our market environment? And what's our competitive position? Starting at a global level. Macroeconomic context, as you're aware, is quite favorable. Most economies are firing on all cylinders. The IMF, as you've seen, have recently uplifted their global growth forecast for 2018 2019. And we're at growth levels that we haven't seen for 7 years. And this flows down to company performance. We're seeing that in our portfolio. Company earnings are growing. It's particularly true incidentally in Europe. So the environment is and the outlook is quite favorable. For us, for ICG, we're actually not quite sure what to wish for. Obviously, a benign economic environment helps. Our portfolios are in very good shape. Default rates are negligible. It's easy. But at the same time, most of our strategies have a significant floating rate debt component and therefore would benefit from higher interest rates. And historically, we've done quite well in more volatile environments in dislocated markets. As a matter of fact, many of our investors invest in our funds, not only because of their recent performance, but because they've seen historically that we are able to take advantage of the opportunities that invariably arise out of downturns or more volatile markets. So from a macroeconomic standpoint, it looks like smooth sailing for the foreseeable future. But as ICG, we wouldn't mind some choppy waters along the way. At our market level, going from the macro to our market, we're fortunate. We're benefiting from long term structural trends towards alternatives. And beyond that, if you look at the split of asset classes within alternatives, the share of wallet, if you want, from investors. You could see that private equity still represents a significant part of it. Private equity used to be the entire alternatives market. As the market has grown and become more sophisticated, you've seen the emergence of new asset classes like infrastructure, real estate, private debt. But they're still relatively small compared to private equity. And when you think about it, there's no reason why private debt, for instance, should be any smaller than private equity. So it's not inconceivable to think that as the entire market grows, these newer strategies would tend to grow faster as they catch up, which would be it would benefit ICG clearly. And this seems to be no, yes, This seems to be confirmed by recent data from Prequin, which looks at long term allocation plans for institutional investors. And we can see 2 things. 1 is that their plans fortunately tend to match areas where ICG is focused and strong. But also importantly, you could see there is a marked emphasis on private debt, which would obviously be extremely beneficial by CG. This is where we are particularly strong. There is another market trend that we are benefiting from that works in our favor. It's the fact that as the market becomes more sophisticated, it's also becoming more complex. There's greater regulation, clients are more demanding. And as a result, the market is bifurcating. It's bifurcating between smaller single strategy managers, and that is the bulk of the market and a much smaller population, it's even smaller if you're looking at the European base, much smaller population to which ICG belongs of established diversified asset managers. And that group, the diversified asset managers is disproportionately benefiting from the growth of the market because a growing number of investors are looking to streamline their manager relationships and they're looking for managers who can offer a range of products across geographies. And there aren't that many managers in the scheme of things compared to the size of the market that can actually offer that. And the barrier to entry is high and getting higher. So there are actually not many new entrants into this group of diversified asset managers. So the market environment is favorable. How well positioned are we to take advantage? We have a number of competitive advantages. I've just mentioned a few. Number 1, and I mentioned that at the outset, because that's the most important, its track record. We have a 28, actually pretty soon to be 29 year track record with no failed fund. Actually, we've never had a fund that hasn't met its minimum performance targets. In our industry, such a consistency of strong performance is extremely unusual. And that's very highly valued by our investors. So this track record, this long term performance, that's our most valuable asset. That's our key competitive advantage. Linked to that and something that we are also known for is our investment approach. I've mentioned that we've become truly global. We have a global reach, But our investment approach is very local. It's very granular. It's local teams on the ground sourcing transactions. We're very origination heavy as well. This is what enables us to be highly selective in our asset selection to pick the best risk return profile for any given situation, any given opportunity. We're also benefiting from our history. Just the length of relationship that we have in our various markets could be with our various partners, very difficult to replicate this. And something that is often underestimated, it's data. We have a lot of data and we keep enriching this base as we grow our strategies. In particularly in the private corporate world, we often, if not always, have a lot more data than the well known professional information providers. That's a big competitive advantage. I've mentioned how the market is moving towards a greater need for multi asset managers, diversified asset managers. And the fact that ICG now has 16 different strategies, a proven ability to add new strategies and the balance sheet to be able to back that, and that's quite important, we'll come back to that later, is a key differentiator. It's clearly it's contributed to increasing our credibility and our attractiveness to investors. So overall, we're in a reasonably good place. The environment is favorable. We have a number of competitive advantages to take advantage of this market environment. But we do need to put things into perspective. If you look at this, this is essentially 20 years of history. And indeed, we have built a platform that is quite efficient now at building new strategies, bringing in new teams, onboarding new teams, launching new strategies, launching new products, but it's still difficult. It takes quite a bit of balance sheet capital and several years to establish a new strategy and even longer for a new strategy to become profitable. So the bar is high. The price is high as well. So when a strategy is established, it represents considerable locked in value. And that's what we are looking for. Locked in value is a defining characteristic of our business model. It's actually fundamental to the value of our business. And here's why. We've used as an example our oldest strategy, let's call it most established. European mezz. We've been doing this for almost 29 years. It's a closed end fund model. Very simple model. You raise a fund and the fund has a life of 10 to you can extend it. So for this strategy, 10 to 13 years. So you raise the fund and the day you've raised the fund, there are no redemption options. The day you raise the fund, you have contractual visibility over 10 to 13 years of fees. You invest that fund, then you raise the next one, possibly larger than the previous vintage. And then you get another 10 to 13 years of visibility on fees and you keep on going. You could see it's quite a powerful and quite predictable model, which is what you see here. Look at the AUM progression for our European mezz, it's almost linear. If you were just looking at this graph, you wouldn't know that it spans several economic cycles and that we've had a major financial crisis in the middle. The strategy is so long term that it doesn't register. Another important point about the visibility is, it's not only a matter of having contractual visibility for the next 10, 12, 13 years, it goes beyond that. Because actually in our industry, an established strategy with a track record is extremely sticky. So you actually have a very high level of confidence that you'll be able to raise the next vintage and the vintage after that. So once the strategy is established, it's almost an endless fee stream. The one variable is how scalable is that strategy. How much can you grow the fund from vintage to vintage when you go back fundraising? And how much can you grow it without compromising on the quality of the strategy and on the performance of the fund. So an established strategy is practically a perpetual fee stream. The variable will be the slope in the growth of the AUM and the growth of the fees. You can see why we're talking about locked in value. There are very few business models that have such visibility on income. And that's the strength of closed end funds. As we've seen, they have long term predictable fee streams. There's also visibility of fundraising, again, because it's all long term. These funds will typically invest over a 3 to 6 year period. So they'll be back in the market to fundraise again every 3 to 6 years, which means depending on your pace of deployment, you have reasonably good visibility on your fundraising timing several years ahead of time. So highly visible on fundraising. Importantly, you always have capital available to deploy. So I mentioned that these strategies have no redemption. This means not only that you're never a forced seller, which is useful, but more importantly it means that you have capital available when the market is the most attractive. And typically, that's when the market is very volatile. So in a downturn, you have capital to deploy. You could take advantage of the opportunities in that environment. And that's actually interestingly exactly what happened to us in the financial crisis. We took advantage of the fact that we have capital available to deploy to seek out particularly attractive opportunities. And what's interesting is because our investors saw that we were doing this, they actually gave us more money. So in 2,008, we actually raised a sidecar, a mini fund next to our main fund to invest more. So the most important financial crisis in decades for a fund meant actually higher AUM and higher fees. Naturally, as you go from vintage to vintage, even more so as you start adding more strategies, you have a natural increase in your operating leverage. So that's also a direct consequence of the closed end model. There's another feature of our model, which is that we have very significant embedded growth. Even if we were to completely stop trying to grow the business, we're not trying to add any more products, no new strategies. We're just living off the existing portfolio of strategies. Well even then, these strategies would generate significant growth for years. And the reason for that is, if you look at our portfolio along their lifecycle curve, the top right hand, these are our most established strategies. But even these are still growing. I was mentioning European Mez. It's still growing. It's not growing exponentially, but it's still growing. If you look at the younger strategy, the more recent strategies, strategies we introduced over the past 2, 3 years, these have a double growth potential. Because what happens for these strategies is, they get to the their cruising altitude, their cruising speed after the 3rd vintage. What happens is you raise a first fund, you start, you invest it, then you raise a second one. And while you're investing the second one, you're starting to divest of the third of the first. And then you raise a third. And typically, you're overlapping 3 funds. Typically, by the time you're investing the 3rd fund, you're still divesting the end of the first fund and you're in full divestment mode for the 2nd fund. So you're overlapping 3 funds. So up until you've reached your 3rd fund, you're naturally growing AUM and fees, even if you're not increasing the size of that strategy. So that's quite powerful because remember these are strategies that are 3 to 6 years. So with a new strategy, you have 9 years to 15 years of structural growth just by adding a vintage after the other. And in addition to that, of course, the more recent strategies have more growth potential. So actually what happens is they grow in addition to this vintage overlapping phenomenon, you have an increase in the size of these funds. So you combine the 2, that's quite significant growth. So as you could see, with the existing base of products without adding any other, there is very significant embedded growth. Obviously, that's not our strategy. We do want to keep growing the business and accelerate the growth, if only because the surest way to increase shareholder value is to add new strategies. As we've seen, the model is quite powerful in generating long term value. Finding new opportunities is not the most difficult thing. There are plenty of potential opportunities. The difficulty is the selection. So to that end, we put together a process that starts from the new product development, all the way to actually launching a new fund and establishing a strategy, and including structuring it, including on boarding a team if we have to, including the marketing plan and so forth. There are a number of aspects that are important along this journey. And as we say, it's a long journey, establishing a new strategy takes a few years. Some of the key aspects that I wanted to highlight along that journey. 1 is market demand, obviously. We're looking for what is the scalability, what's the potential for that new strategy? Do we have a 1st mover advantage, for instance? How well does it fit in the existing portfolio of strategies of ICG? Will we be immediately credible with this strategy? 2nd one, most important one, investment culture. We're an investment focused firm. So we absolutely need to make sure that the approach to risk, the approach to investment is similar to ours. And that generally the culture will fit. We have to consider more mundane matters such as can we actually afford the team that we want to bring on board. And more importantly, or just as importantly, capital allocation. Investors are more and more managers to prove concept before they launch a new strategy. So they're asking managers to invest in a number of deals before they launch a fund to prove concept and to demonstrate that there is indeed a market and that they're able to deliver. Not only that, but also asking managers to support these strategies at least in the initial vintages to accompany the growth of the business. So the balance sheet becomes critical, but it's also a scarce resource. So part of our job is to make sure that we're allocating it adequately and to the strategies that have the greatest potential, because it's a significant commitment and it's a long term commitment when you're starting a new strategy. Taking all of this into account, our market environment, what we've achieved, our embedded growth, we have looked at our strategic objectives and particularly our measurable targets, starting with fundraising. And we've decided to make a significant step up. We've decided to increase our fundraising target by 50% to 6,000,000,000 per year. That's an ambitious target. But we are highly confident that it's an achievable target for a number of reasons. One, as I've mentioned, we have significant visibility. I can show this slide. I will not steal your thunder on the on the pipeline, but we have significant visibility on fundraising for a few years. We also have demonstrated that we have a marketing team and a marketing platform that's highly efficient, that can deliver these sorts of targets. One thing I need to one thing I need to emphasize, our fundraising cycle is not annual. As we've seen, our funds go back to market every 3 to 6 years. So depending on how many funds happen to be fundraising in a given year and how many of these funds are some of our largest flagship strategies, some years will far exceed the average, some years will be below the average. What matters is the rolling average and the direction of travel. So this is what we're focusing on. Incidentally, slower fundraising years, essentially their fallow years, are quite useful. Because they're enabling us to focus on new strategies that typically are much more difficult to get into the market and to fundraise. They take much longer. They take a lot more effort. And in the year we're launching them, typically they don't move the needle for the overall fundraising number. But in terms of potential value creation, they're quite significant. So this cycle, these breathing years are quite useful for our model. So fundraising target increased to €6,000,000,000 We've also looked at the operating margin. And that's more of a balancing exercise, because there's no doubt that our existing strategies and the embedded growth will push the operating margin upwards. But at the same time, we want to keep growing the business, adding value and adding new strategies. And it's expensive. It takes a long time. And that's weighing down on the operating margin. So there's a balancing exercise. Nevertheless, when we look at our assumptions, even assuming that we accelerate the pace of new product development, we still believe that the momentum from existing strategies will push the operating margin up. So that's the reason why we've increased the minimum target from 40% to 43%. Fundamentally, sacrificing some operating margin in order to establish a new strategy is always going to be worthwhile because of this, because of the locked in value that it creates and ultimately shareholder value. Bringing it all together, we have refreshed our strategic priorities. I won't take you through the whole list. I've covered the points separately through the presentation. What I will emphasize is that our strategy is successful. It's delivering value. So we have no intention to change the strategy, but to accelerate it with a stated ambition to be recognized as the leading European Specialist Asset Manager. Now that we've somewhat raised the bar for fundraising, Andres will tell us how we achieve it. Thank you, Ben. Am I on? 1, 2. Can you hear me in the back? Yeah. Yeah, raising the bar. Thank you, Benoit. So quick introduction, because I love new faces in the room. Andreas Mondowicz, I joined ICG 5.5 years ago from UBS. He was Global Asset Management. I had a similar role there. Global had business development for their real estate platform, which is a €100,000,000,000 platform. And you probably wonder why would I join ICG. I joined for the vision and we're delivering the vision. So when I joined in 2012, it's important because again there's quite a lot of new faces. We didn't have a marketing team. So we used placement agents to hire DUNS to place our funds because we only had a European mezzanine fund and Asian mezzanine fund. So there was no point having a marketing. But there was division to diversify the firm and that meant the firm had to invest. So I remember my discussions with Exco and I said, well, you have 140 staff, you want to hire me, I need 28 people. What? 20% growth headcount. But I said, okay, makes sense. I did told them about the business plan. And today, the team is 42 people, so marginally bigger. We're 14 senior capital raisers. There's a centralized client services team in London, New York. And then we also have media and comms and all that. So now the question is why is it good to have this team, because it's a big team, it's expensive for you, for the shareholders. The first one is actually it saves you money. So we said half year results were €5,700,000,000 The placement agents on average charge you 1.5% to 2%. You run the maths, very expensive. We are much cheaper, good news. The second one and Benoit mentioned that too is new teams. When you talk to new teams, there's 2 questions to ask. The first one, can you give me balance sheets so I can prove concept before we go fundraising? Benoit mentioned that. The second one is, can you fundraise for me? So we don't have a team, then you have to say, oh, we have this great placement agent, hopefully, they can do it, but maybe not. So part of onboarding your team is always a bit of a beauty contest of my team to demonstrate we can add value can raise capital for them. So what I was planning to do in the next couple of minutes is talk about the overall fundraising market, then are these J curves paying off? Are we getting more efficient? The growth of the investor base, that's important. And finally, are we gaining market share, Because Benoit said that the diversified managers are winning and are trying to demonstrate to you that is correct. So the first one, the global market. So there's 3 takeaways here. The first one is, well, how long does it take to raise a closed ended fund? So the market average, as you can see up there, is 15 months. The second thing you notice is that since the financial crisis hasn't really changed very much. It went from 2017 to 2015. Although you hear about all these CVC hitting hard cap and Advent and da, da, da, da, but it still hasn't really changed very much. And that's because what Benoit said is the market is bifurcating. There is a group of people who are winning and raising funds faster and getting more efficient. And there's many, many others who struggle because that's the average. That's 15 months is the average. Just by the way, for your notes, the real time is a bit longer because you need about 4 to 6 months to set up the fund, the PPM, register with the regulators. So typically it's 18 to 24 months. That's just for the real average. So this is when you officially launch the fundraising process so as Preqin can track that. The second thing is more on the right side, which is basically where is the money going. So these little gray bars are showing where the capital eventually will be deployed. Europe typically gets about 25% to 30% of where the money is then deployed. And we're obviously very well positioned given our heritage to capture a big chunk of that one. The interesting part is the one on the left, North America, because North America typically, because of the home market buys of American investors, gets half of the flows. Now the question is how are we positioned to capture them and I give you a few examples. The first one is to capture the U. S. And the global flows. The first one is strategic secondary. So Andrew Hawkins will talk to you in a couple of minutes. His fund immediately when the team joined us was set up as a global fund. Andrew speaks with an English accent, but he's based in New York. It's kind of weird. Wouldn't you want to be best here? So that's great because that way we can capture these flows, the investor appetite into that strategy is also based in U. S. Dollar or denominated. 2nd 1, North America Private Debt 2, so we're in the market with our 2nd vintage of that team. Again, Benoit mentioned earlier, that's naturally North America fund, so naturally generates interest. But the third one is a very interesting one. Max Mitchell will come on stage in a couple of minutes, SEP, Senior Dark Lending. And I'll talk a bit more about this in a second. But what's interesting is we integrated sorry, Max, you repeat that. We integrated 30% bucket for non EU. So we can deploy North America and Australia. And if we can prove concept, and Max will speak about that, you could imagine this to become a global fund, which makes it super scalable. So there's three examples of how we're capturing also the left side of the gray bars increasingly. And we think about that a lot in terms of scaling up the strategies. And of course, there is the right side, which is more rest of world, we call that, so Asia, Africa, Latin and all that. And then the 3rd bit on this slide is competition. So if you add up these dark blue bars, these are just private equity funds. In 2017, there's 1,000 of them were fundraising. Then you add private debt funds, private real estate funds, you can easily get to 2,000 funds in the market, hundreds of marketers running around knocking doors, can I get a meeting? And I'll come back to importance of getting a meeting. Because if no meeting, no ticket. People still don't do virtual tickets, still hasn't happened, okay? So you need a meeting to write a ticket. And again, the market is barbelling, right. And I'll show this to you. You'll see how you can really get more and more efficient in your marketing and your marketing approach to make more room for strategy. So when we started the journey in 2012, we could basically raise 1 closed ended fund a year. We just weren't more efficient. Today, we can raise 3 or 4 and potentially more going forward in any given year. So we're really increasing the throughput of the strategy. And again, I'll show this to you. So let's use SDP or our senior debt partners. So SDP stands for senior debt partners, which is our senior debt lending strategy just to illustrate that point. So SDP-one was a fund we closed in 2013 at €1,700,000,000 which it hit the hard cap, we actually increased the hard cap. So it was a success. But it took us a while, 24 months to fundraise this fund. And it was at the time the biggest in the market. Why did it take us so long? Because when we started the journey, that was a new asset class. And you go to a private equity investor says, hey, I have a really cool strategy, 8 or 10 year lockup, 7% to 8% net. What? There's the door, because I'm looking for 20%. Oh, wrong guys. Into the fixed income people, hey, we have this really good strategy, 7% to 8% net. Oh, yes, I'm interested. Well, it has an 8% 8 year lockup. Oh, no, I can't do that. I do liquid. So we had to basically find the early adopters, the early innovators to basically come into the strategy. And today, of course, this has become a mainstream asset class as Benoit has shown you. But we were the 1st guys in the market doing this. And it's a bit of winner gets it all and Max will talk about it. So then the 2nd fund is a 2015 closing. So we increased it by 75%. But we shortened the fundraising time by 2 thirds, went from 24 to 8 months. That's massive in terms of efficiency gain. And then just recently, last year, we closed deferred fund at €5,700,000,000 another increase by 90%. And we once again shortened the fundraising time to 5 months. Okay, not of caution. That's as good as it gets. 5 months is you can't get any shorter. I know Benoit is shaking his head, of course, he can. We're trying to prove it soon. But there's a reason because investors and close investors, they're signing up for 8 or 10 years. They have to do diligence. They have to go to their Board of Trustees. They have to get approvals. They have to decide whether this is as good as it gets. I mean, I would assume it starts cracking and the investors get a little bit unhappy with you because normally you have a first close and then a final close. We did this one very, very fast. But nevertheless, it shows you the efficiency you can generate when you have a good process. Now fast forward, take and it's not on the slide, take North America private at 2, we're in a market with that. That fund also took us 24 months to fundraise. So it's the first time funding because the team came from Blackstone, but everybody thought it's a first time fund. We're in a market with this fund. And I guarantee you, it will be faster than 24 months. That's good, right? Setting a low hurdle. Let's say, so it's not going to be 5 months, but it will be somewhere there, which again it will be way more efficient in terms of the fundraise than what we've done with the first fund, because we established the strategy, strategy is doing really well from a performance point of view, we know is interested. Andrews Fund, strategic equity is also coming back to the market at some point in time. Again, first one also took us 2 years to fundraise. And what we closed at €1,100,000,000 which was a remarkable success. If you hit €1,000,000,000 with 1st fund that's amazing. So everybody said, wow. Nevertheless, it took us 2 years. Again, I guarantee you the next fund and it might be a little bit bigger, it will be much faster. So we're getting much more efficient at doing this. So how are we doing this? And this is again use STP just to stay on that fund, so it's easier. So what we're tracking very carefully is how many initial meetings do we need, so it's the second, the dark blue bar to create one ticket. This is a very important ratio. And by the way, I said this at the last Capital Markets Day, go and ask them of our competitors where they have these stats. It's really funny. Nobody can tell you this. It's simply you have a CRM system, you track it, You have to make people write corners of course. And then you track it, it's easy, but nobody knows these things. Anyway, so the ratio is from initial meetings you see this in SDP 2 which was the 8 months fundraise. So we targeted 156 investors roughly half of them were interested in the meeting and then basically 42 conducted due diligence and 30 were 4 investors. So initial meeting at the top of the funnel to ticket it was a 1 to 2.3, which is by the way very efficient. And I'll come back to this. With STP free, we were better because we knew between the fundraising, we obviously in touch with people, we knew who was interested. So we had only targeted people who were interested, whose point was wasting our time. And so all the people we targeted came and saw us. However, still only about 60% then conducted DD. Why? Did CIO just change, the asset allocation change, whatever. There's always changes. So you never get them all. So again, it's roughly a 1.1 to 1.9, so 1 to 2 ratio, which is by the way very efficient fundraising. Just to give your contrast, SDP won when we raised that one. So we had 210 investors we targeted. We had 200 initial meetings. And then there's usually a second or third. So Max had 400 or 500 meetings, kind of mind blowing. And then we had 72 investors conducting DD, only 19 invested. So we had a 1 to 10 ratio, which by the way is exactly the a 10 initial meetings, not phone calls, meetings, you have to assume in a 10 initial meetings, not phone calls, meetings with the PM typically to generate one ticket. But once you get through that cycle, you bring it down to 1 to 2, 1 to 3, you massively increase efficiency. And this is what Benoit has been talking about, you're overlaying these strategies and you're getting more efficient. And that leads me to our client franchise. Again Benoit mentioned this, we've grown it roughly 5 times or 4.75 times over the last 5 years. And again, 2012 was when we started putting this team together. So that's why we use this as an anchor, because we had 69 investors, we were really, really concentrated. And today, we have 328 investors. Couple of things here. First of all, at the bottom, we try to diversify the investor base, but we also were very cognizant who has volatile source of capital, for example, fund of funds. They were 19% in 2012. Today, they're 6%. Because typically they don't have money when you kind of need it and they have it when you don't really need it. So the point is you need to find long term source of capital as pension funds, insurances. So these are sovereign wealth funds. So these are people who have more long term capital and also not all of them, but most of them also in the crisis, Benoit said that would come and give you money if you see the opportunity. Funded funds, they usually don't have money. So we not that we systematically reduced it, we just didn't focus as much on it. The other thing is, where is the opportunity? It's kind of somewhat obvious. It's going back up by geography is the United States, North America. So 20% of our investors, that's Numeric, are from the United States. However, North America or United States in particular 50% of the institutional capital globally. So we're underrepresented. By the way, we're in good company. Check our partners group annual report, they're even worse. But the point is when there's supposed to be a marketing machine, but the point is we're growing in line with what we've done with the other investors. But it's a huge opportunity. There is about 5,000 investors you could address. We're basically focusing on 800, which are the bigger guys and so we did a lot of screening and scoring. And we currently have about 65 investors in U. S. So there is a big growth. But if we go to a market like Germany, we already have 40% of the addressable market locked in. We have in the Nordics 40% of the addressable market locked in. So you will never get them all. So yes, we're still growing in Germany and Nordics, but somewhere around 50 plus percent that's it. And you just not everybody will give you money. But the one opportunity we have is the U. S. So that's definitely one to watch out for and we hired more marketers. We're penetrating the market better. We have also dedicated guy now doing Canada. So we're doing much more and we're making progress. So this week alone, this is coincidence, but it's true, we added 7 new investors in the U. S. That's 10% more. So it's great. But the point is U. S. Is tough. First of all, geography. So I was in there 2 weeks ago. I had to go to Harrisburg, Harrisburg in Pennsylvania. You fly to New York, get on a train, takes you 2.5 hours, you meet a big investor, takes 90 minutes, so we had to pitch the investment committee and then you get a sandwich and take another 3.5 hours train back to New York. That's one meeting one day. That's U. S. View, very inefficient fundraising market because the way geography works. And the big Americans, the Blackstones, the Apollos, the Oak trees, the KKRs have done a really good job penetrating that market. It's their home base. So breaking into it is hard because nobody has been waiting for us. But we're making progress. As I just said, This week alone was a big jump again. So we're getting there and we're getting better. And then the next thing is, so what do we do with this client base? Cross selling. Are we extracting more value from the client? Because so now over the last couple of years, we established a client base and we keep growing that. But are we getting better at doing more with this client base? So we basically have 30% of our investors have invested in more than one of our strategies. Now you're wondering what's the right number. It's difficult. It's private markets. So Apollo, if you check their website, they have published a number, they have 50%. I couldn't find other numbers. So Apollo, they've been doing marketing longer than us. I mean, it's big scale. They're bigger than us. So 50% is probably not a bad number as an idea because not everybody wants all your funds. But going from 30% to 50%, that's massive. That's a real increase in efficiency. So again, this will help us to make the thing more efficient. And I give you one example. We have a big U. S. Client who invested in our European S Fund, Fund 5 and then Fund 6. So it takes a while. So they've been a big client of ours for a couple of years now. But now they really got comfortable with us. And they have just make a big allocation to our North America private debt strategy. But it takes you a while. They have to be comfortable with you and all that. So they're not you don't onboard them and boom you start crossing. We try, but it doesn't they want to foresee that fund doing well and then they start giving you more money into other strategies. But I'll give you my favorite example, Israel. So Israel is a very small market. There's only about 10 to 12 investors you can target. So it's very efficient. You go there 2 days, done, met them all. So in 2014, that's when we started there. And in that year, we onboarded 3 clients, which was good in the 1st year with €50,000,000 This financial year, 1st of all, of the top 10, pretty much all of them are clients of ours. Well, there's only top 10, there's only 12. But nevertheless, we got them all. But more important, we're going to print about €500,000,000 And 70% of our Easterly clients have invested in at least 2, most of them in 3 or 4 of our strategies. That's when you have a smaller market and you focus on it, that's great and it shows also a bit of some of the upside. But again, this is a very particular market and they're very tough to negotiate with, but we have been very successful there and we're growing there. Now why is this important? Benoit said this as well. The industry similar to the traditional asset management is consolidating. People want to have fewer relationships with larger managers. So again, I was in U. S. And made a big pension fund there And they told me they have 160 GPs, 160 ICGs. The team is 5 people, 160 GPs, 300 funds. So we just plan to go to all their annual meetings. We have one guy, the only thing that person will do just fly around, go to any meetings. I mean, you show you, that's not good. So they want to reduce. And we hear this a lot that people want to have less relationships, but they want to grow with the managers once they trust them. And that's again a huge potential for ICG to diversify across these clients. And that leads me to the ranking. Again, getting market share data in private markets is very difficult. We presented something like this couple of years ago. So this is taken from private debt investor. So we use Prequin in private debt investor. Since our mainstay is private debt, we use it this time and because they just published the results quite recently. And this is global. So this is basically taking 5 years of fundraising and then they keep rolling that. But it's 5 years of fundraising in aggregate and we are currently number 12. So first of all, there's this error pointing up SDP. Why did we put that there? Because the cutoff is May 2017 for the statistics. We raised this fund after May 2017, so that wasn't included. So when you do the next statistic, plus we're doing other stuff, it's very likely, I can promise this, but it's very, very likely that we're going to be in the top 10, first of all. So it's quite clear we're gaining market share. 2nd, what you see there, if you look at the top 15, check how many Europeans there are. There's M and G, there's AXA and there's ICG. So M and G and AXA have an advantage over us because they get when they raise a fund, there's a lot of premiums coming their way. So it makes fundraising easier if you have the 1st billion already locked in. We're the only in the top 15, we're the only independent European and counting going up. Because again, the Americans have been very, very good in the private markets. But if you look at the names, the company we have, Lone Star, Apollo, Oaktree, Blackstone, HBS is hybrid, Cerberus. So these are all very blue chip names and we're now in that group of names, which is a massive achievement. In jump. Summarizing, so we're growing the client franchise and we keep growing it. We want to grow it further to diversify the client franchise, which also helps in a down market if you have a more diversification. 2nd, cross selling, clearly, we're aiming to do more cross selling into the existing client base. And then 3rd, of course, all that leads to improved efficiency in the fundraising. As I said earlier, in 2012, we could do one closed ended fund. Now we can do 3 or 4 plus we are raising liquid funds in parallel. So we do way more funds in parallel than we did before because we're getting more efficient. And again, it's also important because people want to have fewer relationships. So I think it's fair to say in summary, we have all the ingredients in place to get more efficient, to grow faster and to raise the bar. Thank you. With that, I hand over to Max. Thank you, Andreas. Efficiency, you talked about for about 10 minutes on one slide. You have left me with, in theory, 30 seconds to deliver my part. So I'm already getting the hurry up signals from the back of the room. Thank you very much. So as Andreas said, I'm Max Mitchell. I'm the Head of Direct Lending. I've been with ICG for what seems quite a long time. I joined in 2,001. I set up the SDP strategy in 2012. Prior to that, I spent 11 years in our mezzanine business. So I've always been on the direct investment side, and that really is something that has will flow through hopefully the rest of my presentation and is a bedrock as to the hopefully the success of SDP. In my presentation, I'm going to talk to you about SDP Partners in-depth. SDP Partners is our direct lending strategy. To avoid doubt, it's referred to variously as SDP, senior debt lending, direct lending, but all of that nomenclature all means our direct lending strategy. The credit crisis was actually a game changer for direct lending in Europe. Prior to the credit crisis, the direct lending market didn't really exist. So it's not unreasonable for us to say that SDP is the son of the credit crisis, possibly one of the only good positives to come out of What we observed is that by 2011, increasing regulation and balance sheet broadly balance sheet stress on the banks meant that they had curtailed their support and appetite for mid market corporates. They really had retrenched back into their home markets and they'd reduced their activity, their lending activity. This created a market dislocation, a supply side dislocation and created the opportunity for asset managers such as ICG to step into the gap where the banks had previously been dominant and for us to create the direct lending market in Europe. ICG's heritage as a direct investment house for our 29 years of mezzanine investment actually set us up and as Benoit said, gave us the credibility to be a first mover in this market, and that was critical. Equally important was we were able to leverage from our balance sheet, our investment teams and our infrastructure to get our direct lending product up very efficiently, very quickly, using our balance sheet to seed the strategy. We were already doing deals in early 2012. And what that meant was we were a first mover and that has turned out to be a critical success factor. Andreas, this chart on the left shows you that the AUM growth, deployment growth. Andreas has talked you through that, so I'm not going to dwell on it. I think the key point or the point I'll bring out is as we stand here today, we have around €7,900,000,000 of AUM in the strategy. That makes us the market leader in Europe and is a powerful position for us to build from. The European direct lending market is a private market and data is pretty limited. Deloitte do some analysis and their data is directionally correct, so we refer to it and use it. The market has grown. The undisputable factor is the market has grown very seeing much higher rates of growth in that, nearer to 40%. It is clear, however, notwithstanding we don't have perfect data, it is clear that direct lending is now a permanent and structural feature of the European market. It's not going away. Having said that, I do believe that there is still significant growth potential for us and for the broader direct lending market going forward. If we look at total penetration of non bank lending in Europe, it's still very small. It's probably around 10% of market potential. If you contrast that to the U. S. Market, which made the change to a non bank finance market much earlier, driven by their banking regulation changes 20 years ago. In that market, you see non bank lending is closer to 80%. So that is a tangible and realistic benchmark for the European market to continue developing. So where we are today, 10%, U. S. Market potential 80%. I think that kind of growth potential is realistic. I've spent quite a lot of time with investors over the last 5 years. Andrea has talked about the 200 and something meetings initial meetings that I did on SDP-one. You learn a lot of things. And my 2 key takeaways from that and over the last 5 years is that the market has changed materially from a fundraising perspective. Andreas touched upon the first observation, but we've seen a real change in investor attitude to this asset class. 5 years ago, we spent most of a meeting educating pension trustees about what a loan was, what is lending in Europe. It really was that basic. Today, most of these institutional investors have large allocations to alternatives and specifically to direct lending. So when we go to see them, it's not an education meeting. It's about them selecting which manager they want to work with for the next 5 to 10 years. So a much greater level of knowledge and sophistication. And you see that actually in this left hand chart where this charts the overall fundraising by vintage or by year, and you see that we've seen some material step ups in capital raised. The second and perhaps most important feature for ICG is that since 2015, I have I'm observing a flight to quality. What does that mean? Investors are no longer supporting or rushing to support small and new entrants in this space. In the initial years, we had quite a lot of new entrants. People didn't understand what success meant, what would deliver success, and therefore, a number of managers got funds up and running. Today, that's very different. There is a flight to quality. And if you look at the chart on the right hand side, fundraising is really concentrated amongst a small number of managers. If you actually look at the data, which once again is not perfect, but it's directionally correct, the top 3 managers represent more than 25% of the capital raised since 2012. ICG is one of those. We are probably the market leader. And so this real concentration of capital is a trend that I see evolving and continuing. There is no reason why that won't continue. And ICG will obviously benefit from that as a market leader. In terms of deployment of capital, we see the same trend as in fundraising. The market structure is well set, and there's a small number of managers that dominate the space. If you're not an already established manager, it is getting increasingly difficult for you to become relevant. I talked about it on the last slide. It's getting harder to raise money. Equally importantly, it's getting harder to deploy capital. Borrowers or potential borrowers, for the same reason as the investors, they tend to gravitate to the larger managers, scale, track record, reputation. These are things that borrowers want when they're looking for financiers. They don't want new entrants, flaky entrants, small people who can't support them through round 2, round 3, round 4 of their funding requirements. They're looking for long term partners. ICG well placed to take advantage of this trend. Over the next 10 years I talk about it in the top right hand quadrant, over the next 10 years, I think the market will consolidate. In theory, there are something like 80 direct lending mark direct lending funds in Europe. The majority of these are very small and irrelevant. The market will consolidate down to between 5 10 managers. The reason is that scale is really important. And unless you have the scale to invest into the infrastructure, invest into the teams, invest into the local offices, it's very difficult to do this properly. That's not to say that niche players won't remain, but they do have to stay focused on a particular geography or a particular industry to be relevant. But consolidation isn't is going to be a natural feature of this market. And actually, we've already started to see it happening. Not only are the number of new entrants falling off completely, some of the less successful earlier entrants are now pulling out of the market. Most notably, we've hired a guy from Avenue Capital. Avenue had a €1,000,000,000 plus direct lending fund. It delivered a reasonable track record, but they're not raising a second fund. It was too much like hard work for them. They were trenching back to their core hedge fund business. That's a trend I think we'll see over time. So typically on these deals, they are direct lending deals. What that means is we are the originator, the arranger and the sole lender on most of our deals. What that means is that to manage risk, to originate these opportunities and to manage risk, we actually want to be as local as possible to these deals. And therefore, it's not surprising that 90% of the deals that we've done since 2012 are in what we would characterize as our home markets, U. K, France, the Netherlands, Germany. These are markets where we have existing infrastructure, existing investment teams, and we have a deep knowledge of investing and recovery in those markets. Think that trend will continue. Clearly, you're starting to see some new names there. Canada, we've just done our first deal in the U. S. So you will see a diversification increasing diversification, but the core of this strategy is still the Northwest European markets where we have our home territory status. One of the questions that we often get asked by investors, particularly in the last fundraise was, is the other return sustainable? Is the pricing sustainable given QE, given new entrants, given the noise around the market? And the reality is, and we're able to point to that, it is sustainable. We've been able to deliver consistent stable returns for our investors across SDP 1, SDP 2. And actually, when I look at the deals we're already doing in SDP 3 that is continuing. The reason for that is that these are complex locally originated bilateral deals, they're illiquid and unrated, Therefore, it's very difficult to intermediate them and commoditize them. The premium exists for that complexity, for that illiquidity, and I don't see that going away. The reason why this is important is because, and Benoit alluded to it earlier, you raise your next fund based on your track record. Track record is by far the most important thing for a successful fundraise. One of the reasons why SDP III was a 5 month fundraiser at 90% growth in AUM is because we had a track record. The positive thing is when we look forward to SDP 4, 5 and 6, we've got the track record. We're building it. There's nothing to suggest that we won't be really well placed to raise successive funds going forward. On this slide, I try to bring back to shareholders. I've obviously been talking about investors. I've been talking about deploying capital. What I'm going to talk about on this slide is bringing this all back to what it means to you guys in the room. And in particular, I want to bring out really the locked in value theme that Benoit was talking about earlier. Clearly, we're just about to reach cruising heights, Benoit's term from earlier. We've just raised our 3rd fund. So we're getting to that point where we've got the compounding effect. Fund 1 has still got a portfolio and is still generating fees. Fund 2, Fund 3 are now ramping up and generating fees. But actually, the more important interesting point for value creation and embedded value, the locks in value is this point here, which Andreas didn't steal from me, so I'm very grateful because he's pretty much stolen every other thing I was going to tell you. In a world where asset management fees are only going one way, we increased the fee rate on SDP3 by 25%. We did that by getting rid of all discounts and all size discounts, clearly very, very positive. The other thing combined with a 90% increase in AUM, what this means is because this is a fees on invested capital strategy, all of this growth, which is embedded in that fundraise is yet to come through the P and L. As we ramp up the fund, that additional fee rate, that additional AUM will impact the business over the next couple of years. Looking forward, Andreas mentioned it. We've added this non EU bucket and I talked about a U. S. Deal, a Canadian deal. One of the things that is really powerful about SDP III is we're able to seed effectively our global potential global fund through SDP III. The balance sheet is not having to demonstrate these proof of contact deals. We've been able to outsource that to our investors. When I look at the opportunities that we're originating out of Australia, out of the U. S, these are as attractive as the ones that we're originating out of Europe. And therefore, it really is feasible and likely that our next fund will be a global fund, which clearly gives us the opportunity for a step up again in fund size. Therefore, in summary, four points really. ICG's direct lending platform is a market leader. We've got a really strong track record of raising capital and deploying capital. We're delivering returns in line with investor expectations, and that's a really powerful tool and message for raising successor funds. There are significant tailwinds for the industry generally and as a market leader we will benefit from those not least the opportunity to expand out of Europe into other markets and to create a global platform. For shareholders, the strategy is very capital efficient and scalable. Of our €7,900,000,000 of AUM, less than 1% is from the balance sheet. The balance sheet isn't having to put capital into this lower yielding strategy to make it successful. They did initially. They ceded us. Philip will talk about it later. They ceded those initial few deals, but we've been able to reduce the capital exposure over time. And finally, having just raised S and P three, having negotiated a higher fee rate and a large step up in AUM, there is significant locked in value in this strategy. If we don't do anything else, we will see growth just from the mechanical rollout of that fund, which brings us to a Q and A session for Andreas and myself. There's a coffee straight after this if you can survive till then. Vanessa has a microphone. If you have any questions, put your hand up and we can bring you the microphone. Thank you. Arum Elmani, Macquarie. On your SDP fund, which is direct lending, it's a post crisis thematic in some ways. How do you ensure risk over the cycle given what banks faced in terms of mid market? So you've got so whilst we are taking market share from the banks, there is a material difference in our business model to the bank business model. And fundamentally, we're managing credit default risk, which is the key risk in the strategy through using ICG's classic processes and systems, which is essentially bottom up analysis. The real answer is that we see 300 plus deals a year and we do 2018, 2019 in a good year. So we are being very, very selective about the credits we're investing into. We're looking to buy into companies, invest into companies that we really understand. We've got an alignment of interest with the management and the shareholders and that have performed demonstrated performance through a financial crisis. That's the benefit of having the most recent historic track record to look at. They have demonstrated performance that is reasonably stable and robust through a financial crisis. So we are avoiding cyclical companies. We're avoiding companies that don't generate cash because ultimately we want to lend to businesses that can repay us. If you think if you're saying that the previous financial crisis was a pretty good test on the asset class, you look at what leverage loans have done, The most of the defaults and where banks actually lost money, where situations were essentially the restructuring was mismanaged. And it was mismanaged because banks ended up in large syndicates and very difficult to steer. In our transactions, we're the only lender that puts you in a very powerful position to help the company, but also sometimes to take more drastic action if you have to. So if you were to apply our model onto what happened during the financial crisis, use it as a test bed, actually you could say it's very resilient. And would you take comments and stuff like that or do you take Yes, we like the stuff like that. Yes. I will be very succinct. We will not do covenant light. Covenants are essential. These are illiquid mid market companies. They're performing. They generate profits. They generate cash, but they are mid market companies. They have enterprise values up to €1,000,000,000 but they can disappear if things go against them. We need covenants to ensure that we have the right to take action early ahead of any kind of impairment action. The other question I had was in terms of where you're rolling out U. K, France and Germany. Yes. And is the reason that you're lower in terms of allocation in Germany because banks do mid markets there? Or is that more an infrastructure versus future rollout strategy? It's So because it's still a nascent asset class, it's growing nicely, but it's a nascent asset class. It has grown from West to East. So the U. K. Was the earliest adopter. France has followed. The Benelux naturally follows the U. K. Germany is still some way behind. The Scandinavian countries are still some way behind in terms of adoption, but it's an awareness point. And as they become more aware of the optionality, then we will see more deals from there. It's true in all private asset classes, Germany is not as mature. So we're starting to see more deal flow in Germany on the private equity space, but it's taken a very long time. Private debt will follow. So it's not specific to private debt. It's the German market that is but it's evolving. It's getting it's moving in that direction. It's always underpunished. It's weight. It's GDP equivalent weight in all private asset classes. Thank you. It's David McCannery from Numis. Just one of the first things that you led with at the day, clearly there's been a number of new strategies come on board. I mean, you did touch on it in the opening slides. And given the importance that the track record of the whole group has on everything, how do you ensure that you're not going to get a slip up in one of these kind of newer strategies coming on board? I appreciate you talked around kind of the ICG process and the recruitment. But obviously, as you do expand the diversity of the group, the potential for something to slip up does increase. And maybe you can talk about some of the concrete measures the group has taken. Define slip up. A real slip up is if they make a poor investment. That's a real slip up. If the slip up is we have a strategy that doesn't take off, it hasn't happened to us yet, I'm sure it will. But that's okay. That's par for the course. We have enough opportunities and we need to have enough balls in the air. So that's fine. The real slip up and where we put all of our attention is we won the strategy to build a strong track record from day 1. So we raised the bar very, very high initially on the first few investment that any new team is doing to make sure that they're insubmersible. You'll have if you want during coffee break, you can have the discussion with Andrew about his business unit, but he will tell you how painful the investment committees were. I think the first one lasted a couple of days, because we can't get it wrong. Because if you get the first investor or the first few investment wrongs for a strategy, that strategy will never take off. So for sure, we're raising the bar very high. Depending on the nature of the asset class, if it's an asset class that's very, very close to what we've done for years, such as senior debt, that's easy. We're quite comfortable. It's an asset class that's further from what we've done historically. It's not unusual for us to bring consultants, 3rd parties on the investment community to make absolutely sure that we are at the lower end of the risk spectrum in these certainly in these initial deals before the deals before the strategy takes off. Does that does that does that does that does that that's very useful. And then just one second question on SDP. So the 8% to 10% kind of net returns that you're anticipating or expecting for the Fund, maybe you can give us a bit more color on so how is that made up so between interest fees? And is there any kind of noncash income, if you like, so any PIK type lending in that? And secondly, I guess related to that, so what's kind of the impairment expectation within that net figure? That would be really useful. So those are gross returns. So the 8% to 10% is a gross return expectation, but the question is still valid and I'll answer the rest of it. What makes up this is a fixed income strategy and therefore all of the returns come from fixed income features. So interest income, upfront fees, LIBOR or URYBOR, these are all floating rates and early prepayment penalties generate some pickup of yield if these loans don't stay out for a certain duration. In terms of So it's all cash. It's all cash, yes. So in terms of which investors love actually. So when they're thinking one of the reasons why investors buy into this strategy is both the attractive risk adjusted returns on and the higher absolute returns, but also the cash yield. A lot of them are using it to manage short term cash liability management. In terms of impairments, we assume when we model so when we sell the fund, we obviously model our net returns for our clients and we assume an impairment rate of around a default rate of around 2% and a recovery. One of the features of this asset class is the strong downside protections and strong recoveries in the downside through asset security, through share security, through the covenant package. And so we model a 70% recovery rate. Those 2, that default rate and that recovery rate are based on ICG's actual performance in the senior syndicated loan asset space through our CLO program, our credit fund management program, so the European equivalent liquid version. It's the best benchmark that we have. It's the best benchmark that anyone has for this asset class. It's lower, so it's the only benchmark we haven't seen here because there was no private senior debt market in Europe before. But this assumption is lower than what we've achieved in mezzanine over 28 years. As in mezzanine, our recovery fit on average actually has been over 100%. We've recouped more than what we've lost in the deals that have defaulted. So it's we're using 70%, because that's what the investors we're talking to from fixed income understand now coming from. Actually, we think that because the way we're approaching those deals and in some instances, we will not shy away from taking over a business and managing it through a downturn that your recovery rate will be quite high. It does mean you need the teams to be able to do that. And it takes quite a lot of effort to work through these restructuring, but it's quite key to make sure that you protect the performance of the fund even in a down cycle. Just to finally put a little bit of color on that. We've over 6 years, we've done 70 plus investments deployed €5 +1,000,000,000 of capital. We've had one default. And the consequence of that default was we had a consensual restructuring. We had strong legal rights, and those legal rights meant the shareholder had nowhere to go. And ultimately, there was a consensual restructuring where we took over ownership of business. We didn't have to write off any of our debt. So we preserved all of our capital. And having taken over the business, and this was in August 2016, we've restructured the management team. We it's a manufacturing business. We've shut 2 of the 6 plants to rationalize the cost base. We've invested into new CapEx to help drive growth. We've helped them win new customers. And the ultimate consequence of that is we expect to be selling that business in the next 12 months and getting all of our money back and potentially an equity upside from being the owner of the business. Any question for Andreas? He's feeling long It's Gertrude Campbell, JPMorgan. In the last sort of 7 years, obviously, you've been very busy launching new strategies. So I think you've launched 12 in the last 7 years. So as we sort of look forward for the next sort of 5 years, 7 years, is it going to be more of a sort of consolidation now? You've got the 16 strategies. And therefore, should we expect a slowdown in the kind of pace of new strategies coming on board? I don't think so. I don't think so. You're right that we need to do both. You're right that because we have now a number of younger strategies, there's tremendous value in optimizing them because some of them are subscale and we've explained how you get the benefit from just rolling from 1 vintage to another. Having said that, the opportunity set to grow into further strategies is quite large as we've seen. And to some extent, it's getting easier. 1, because we've done it. I mean, it's almost plug and play. We know how to bring in a team. We know how to set up the presentation, the more strategies you have, the more opportunities in very adjacent products come up and they are easier to launch. And so it's quite tempting. So I see no reason if anything, I think it's possible that we can see an acceleration in the rate of new strategies for a period of time. But we do need to do both, because you want to maximize the existing strategy. That's also what's going to push profit up. The newer strategies tend to be weighing on your profits for a while. So you need both. And just one follow-up on for Max actually. In terms of the I think you mentioned that 10% is still non bank funded in Europe and obviously 80%, ninety percent in the U. S. I'm sort of surprised that number has sort of stayed around that level for some years now. What's the sort of what will drive that higher, do you think, in Europe? And is there sort of a difference in different markets within Europe? Yes. So the earliest adopters of direct lending were the private equity companies. So it's been predominantly to date, it's been predominantly an event driven product and predominantly supporting LBOs, so buyouts, private equity buyouts. The trend that we've seen over the second half of SDP2 and into SDP3 is actually the use of the product by non private equity. It's still event driven, but actually we've opened up a universe, not we only we, but we as an industry have opened up a universe of opportunity in the non private equity owned companies. These are entrepreneur owned, they're family owned where they're looking for a financing partner to help them deliver some form of change or growth and they don't want to bring in a private equity or minority shareholder. So that's really the opportunity that I see driving the next 5 years of macro growth. Hi. Justin Bates. Liberum, question for Andreas. Could you just talk through the experience of SDP 1, 23? So when you actually saw an increase in the fee rates, is that a trend we should expect to see across ranges? Was there a lot of pushback? Of course, there was a lot of pushback. So what we did is, we generated a lot of interest in pre marketing. So maybe I should go a step back. So the way we're doing it and this is where we when we set up the team, we had a lot of stuff to market, but we're always running behind ourselves, catching our tails. We now surpassed ourselves and now we're doing and Andrew is a big example, just came back from Japan or Korea and he's not even fundraising, he's doing pre marketing. We just talk with the market and we start really earmarking with the strategy by the time he will come to market, we it's like the SDP. But when we increase the fees, we made sure that we had an oversubscribed fund. I mean, you're not going to do that if the fund is oversubscribed. There's no chance because then you need to have basically people have to believe you the fund is oversubscribed. By the way that's also something if you're not oversubscribed don't say this. Because you only will say this once and at least my job I can move on. So the point is you have to be credible, you have to know it's true. And it was we had almost €10,000,000,000 of interest, almost €10,000,000,000 of interest, right? And the only reason why we didn't take €10,000,000,000 was, first of all, because there's a capacity how much you can take and how much Mex can invest, but also speed because we want to invest do it fast because we were after some we want to come out with other funds. And we said people look, this is what it is. And we also did a lot of competitive benchmarking. We knew that we weren't the most expensive game in town, especially for the infrastructure we provide and kind of the quality you get, right? Yes, there are some people dumping because they need to raise funds. But we knew in our peer group, we're not the most expensive. And so we just best factually explained this to people and then said, well, if you want to be in the fund, then that's kind of what it is. So we gave basically no first dose discounts, no size discounts and for separate accounts we charge 5 bps more, but it's more complex. So it was quite fun because normally they get the discounts. So but so your question is can we do this with all the strategies? No. Will we try? Of course. But will we get there? I think you can't increase the headline fee on the fund unless something's changed in the strategy and it's becoming more high yielding. There's something different about the strategy, which happens. It's rare. And we would not want to because it's not that's not the way we want to be perceived by investors. We would not want to be perceived as taking advantage of a temporary market condition to suddenly jack up our fees. What you can do is you can easily get rid of the discounts and investors understand completely because you haven't changed the headline fee on a fund, but you're getting rid of discounts because there's so much appetite that it's not justified and investors understand that perfectly well. But there are more elements to that. There's just a fee. The fee is important and everybody's focusing on the fee. But actually there are features in a fund that are much more important than the fee in the terms of a fund that you can change when the market is extremely favorable and when you have a very strong track record that are extremely valuable. So expanding your ability to recycle for instance is extremely valuable because actually you're recreating new fees within the same fund. Having the ability to extend the life of the fund for our European mezz, we're now given when we're actually officially starting, up to 13 years. That's extremely powerful. We have control over 13 years of a fund's life. So there are other aspects beyond the fees that are quite important. And if you're a recognized manager, investors will accept more readily. I think, if we want to have a little bit of a break before 11, I think if you don't mind, we'll take questions with a coffee cup or tea. Thank you. Morning again, everyone. Thank you for making it back swiftly from coffee break. I want to change TAC a little bit now and talk a little bit about the value of the balance sheet and how it enhances the value of ICG as an asset manager. And we've touched on this all the way through, and we'll hear some more stories a little later. But I just want to focus it on it specifically for the next 15 minutes or so. As we build our business, we benefit hugely from the synergistic value of having our own balance sheet, of having that permanent capital time and time again. We see it allowing us to incubate new strategies, accelerating the growth of relatively new strategies and supporting the continual growth of existing franchises. And we talked about this actually I think we talked about this with many of you in the room over a number of years. But I think now that we're seeing profits come through from some of the emerging strategies that we've invested in the last 7 years, it's a good time to start looking at the specifics. A massive shift over the last 7 years. Fundamentally, we've gone from 7 years ago when we were investing in assets to a point in time where we stopped doing that and started investing in funds. And that's quite a profound change, both in the culture of the business, but also the way we look at our own investment book. So what we've seen over the last 7 years is quite a significant downsizing of the balance sheet, as we've considered in each and every case what's the right amount to allocate into specific funds. We now on the asset side have hundreds of have invested in hundreds of underlying businesses across 41 different vehicles, which we manage for our clients. And also seeing this feature come into the balance sheet, which is the little gray piece on the top. So at any point in time between 10% 20% of our balance sheet is what we would call we're holding assets for syndication, where we're holding assets awaiting for them to be syndicated into funds to our clients. If you like, what we see as our current assets and what that allows us to do is to develop new strategies, hold assets on the balance sheet while we prove concept. And you've heard how that was used very useful for a number of strategies, and we'll continue to see that as we progress through the morning. So over this period of time, 7 years, we've achieved or we are continuing to achieve our goal of improving the financial leverage of our asset base. And now, as you'll see, the balance sheet is dwarfed by our 3rd party AUM. Our strategy is to continue to optimize the use of the balance sheet. And what's happened over this period of time is we've developed a better understanding of what is the what we perceive as the optimal amount to invest into individual strategies when we make those allocation decisions, which is at the very start of the optimization come through as we've And we've seen some of this optimization come through as we've invested in successor funds over the last 7 years. So European mezzanine in Fund 5, we put 20% of the capital in. In Fund 6, we put just over 16% of the capital in. Max talked about senior debt partners. SDP-one, we initially committed €100,000,000 to that strategy. We actually be able to we're able to reduce that during the close while we're bringing in investors down to €50,000,000 For the second fund, we invested €25,000,000 a much larger fund. It was much more efficient. The North American Private Debt or MES strategy, we invested £200,000,000 into Fund 1. We expect to put £150,000,000 into Fund 2. None of this, of course, is a science. It's very much an art. But what we're trying to do, as we learn more about how our clients respond to our own co investment is try and become more efficient and optimize the balance sheet over many iterations. I think what's really exciting is we have now 26% of the balance sheet is invested in what we would see as new strategies. And I suspect within a few years that will increase to around 40%. And all of that then creates these long these very, very long stories of funds as they progress through tens of years. I want to come back a little bit in a moment to the importance and the synergistic value of the balance sheet. But first, I want to consider the nature of the balance sheet returns. What returns can we expect from the balance sheet? There's really a function of 2 factors. Historically, what have we allocated from the balance sheet into our funds? So what's the component of the balance sheet? And secondly, currently, how are those funds performing? So what we've invested in and how those investments are performing. This slide shows when investments were made, that currently constitutes impacted the return in the last financial year were actually made, some of them were made 7 plus years ago. And allocations to those funds were made perhaps even before that. So the constitution of the balance sheet is quite well known to us because we made decisions as to its current constitution many, many years ago. The performance of the funds, of course, is current. As all of our investments are in funds or holding assets awaiting to be syndicated into funds, the return on our balance sheet is really just a weighted average return on our funds. It's a weighted average of fund returns depending on the weighting that we have. So currently, this is how we report the balance sheet income, but it's not reflective of our business model. The way we report it right now is we split it by the type of income that is being generated by our investments. This isn't aligned to our clients. It's not aligned to our funds. And in fact, it focuses too much on the performance of individual assets. It goes back to the time pre-seven years ago when we invested in assets rather than funds. Even though all of those assets that we invest in are acquired, monitored and realized at fund level. They're not we don't manage them at asset level, we manage them within a fund and those funds manage at asset level. The balance sheet though, is between the balance sheet and the asset is the fund that it's investing in. This is quite difficult to forecast as well because it's now made up of so many hundreds of underlying businesses. So from the new financial year, starting April 1, we'll be disclosing income in line with the funds in which the income as a portfolio of investment in our funds, what we will call net investment return. So as you can see, what we'll do is we'll provide a return based on either individual funds or groups of funds. This way, we can guide towards the likely allocation between these groups of funds. And we can also talk a bit about the expected returns on each of those funds or each of those groups of funds, which will allow us to have a discussion around performance of our funds rather than about performance of assets, which is much more aligned with how we're growing the business and how our clients see the business and indeed how we manage the business, because it's at fund level we manage assets. At business level we manage funds. We can consider the volatility of different fund returns rather than looking at specific assets, capital gains or impairments. But I will stress, and the reason why I put the old style down at the bottom, that the 3 12 total return that you can see here is the same both ways. The result itself is the same. It's just the way that we want to discuss it with you and the analysts and shareholders. So as a result, we will be dropping impairments as a KPI because it's not consistent with our current business model. But all of the data that's currently provided will be in the data pack. So it will be available. And for this year end, we will show the results both ways so we can have we can talk about the how they reconcile to each other. And I think this works because as the balance sheet invests in funds, the way that we report our results of our balance sheet is really, as I said, a reduced version of how we look at our funds. The valuations that we use are actually the valuations that the fund managers come up with as they look at their funds. So historically, our valuations and impairments capital gains are already done at fund level. So there's no change to that valuation methodology. What this shows is that over a number of years, the book actually changes fairly slowly. And taken as a portfolio as a whole, the returns are fairly consistent. We've got a range here from 13.4% to 14.7%. So this change in the way that we'll look at the balance sheet returns or the investment company returns, it doesn't will not impact the nature of the volatility of those returns. We'll just be able to discuss them at fund level. Of course, if there is a major market adjustment, that will come through in the mark to market, and we will see some change. Or if there's an uplift in the market, we'll see that come through in the valuations. In the event of a downturn, of course, there will be, inevitably a short term change in valuation downwards. But from an operational point of view, as Bernard alluded to earlier, downturns are very helpful for us. Volatility is actually helpful for the actual business side, putting aside the reporting, because we like the opportunity to invest in mispriced assets. While I have your attention very briefly, let me tell you a little bit about the implementation of IFRS 9. I've somewhat of a formality, so I'll keep it incredibly brief. This is effective in the new financial year. We don't expect any impact on our results. And myself, Iain, and indeed the Chairman of our Audit Committee, Russ Neligan, who's sitting here, are all delighted to talk to you as much as you'd like about IFRS 9 at the end of the session. But the main message is it's coming into effect 1st April and there's no change in the way we don't see it changing our results. So let me get back move from matters of reporting back to how the balance sheet fits in with our strategy and enhances the value of ICT's fund management franchise. At every phase of a fund's life, a fund strategist life, the balance sheet has been can be an incredible facilitator, 1st of all, in helping us develop new strategies by incubation, then through accelerating the growth of a strategy through showing institutional support, which is becoming more and more important. And then as our strategy matures, continue to show institutional support, but also helping out where as the investments in those funds may get a little bit too large. And I want to just look at examples of each of these phases of how the balance sheet can drive forward the growth, be in a neighbor of growth of the fund manager. I think it's fair to say that the past growth that we've enjoyed and particularly in accumulating so many new strategies over the last 7 years and the future growth that we're anticipating is absolutely underpinned and facilitated by the balance sheet. In fact, to such an extent now, when we see multi strategy asset managers in the wide world beyond us, who started out as partnerships and have grown and added strategies, they are we are seeing them more and more often looking to develop permanent capital of their own, because they see the importance. And you see this across this happens in the U. S. And in Europe. But when I talked about the bifurcation of the market, in multi asset, multi strategy asset managers, it's becoming more and more important to have capital. Investors want to see house capital running alongside them. And also, it's an incredibly efficient way of developing new strategies. So in the early stages, as we introduce new strategies, the balance sheet allows us to hold assets, independently of our funds. It allows new teams to prove concept, to build a pipeline. And for innovative strategies, this is incredibly important because for brand new strategies in the market to go and tell an investor that you've got a new idea, but they're investing in a blind pool because of no assets at that early stage is a very, very difficult ask. To be able to show them that we've gone and done 2 or 3 deals of our own and we've got a pipeline makes it far more real, far more palpable. In due course, the assets are syndicated and that helps identify early client support. And this has been crucial in attracting new teams to ICG, who can then focus on getting some of their early investments on board with the sort of rigor that we've talked about so far, rather than going straight into fundraising, which is quite a steep ask. So the two examples I've given here, strategic equity, which Andrew will talk about in more detail in a moment, we put an initial balance sheet commitment on the first deal that Andrew and his team brought to us of $254,000,000 It's quite a sizable commitment. It was in there was a number of underlying assets, but it was a single vehicle that we were looking to acquire. That cornerstones at $860,000,000 deal because it attracted in other investors. That brought in the team, and it brought in ultimately an investor base that we could share that asset to. For the Australian loan funds, it was a slower burn. We used A130 1,000,000 Aussie dollars of balance sheet money to invest in senior loans in Australia. Over a number of years, they recycled that money several times, so they could show a significant portfolio of investments and their access to the corporate debt market in Australia, which is now allowing them to raise funds in much third party funds in much higher quantity. Once the strategy is up and running, the balance sheet can support be essential in building the franchise and continuing to build critical mass. Over the last 5 years, a couple of examples. In the U. S, our U. S. Mezzanine fund, what we call private our private debt fund in the U. S, has actually been investing in assets since 2008. But in 2014, when we brought in new members of that team, the balance sheet committed $200,000,000 to the strategy, which along with a massive marketing effort, which has already been somewhat described to you, resulted in the 1st fund. We're now raising our 2nd fund. House support was incredibly important. In liquid credit funds, we've had expertise in managing leveraged loans and high yield for a number of years because we manage CLOs. It's a similar sort of asset base. And we've also managed separate accounts for clients. Recently, we've put in GBP 319,000,000 of investment into a number of funds, open ended funds, but using the same underlying investment skills. And that balance sheet investment is allowing the team to build a track record within a number of dedicated funds as we're now beginning to see AUM accelerate into those strategies as well. And finally, the balance sheet is very active in supporting long standing strategies. European mezzanine is our oldest strategy. It's what we started off doing. Last year, we did our largest deal ever in that strategy, a French care home group called Domus. It was a major coup for ICG, but the amount of investment was too large for the Fund because the Fund, the European Fund had concentration limits. You can only put a set percentage into a single asset. The balance sheet was there to allow us to put assets onto the balance sheet while we looked to syndicate the amount over the concentration limit. So the balance sheet held €60,000,000 for 6 months, while we found co investors, which incidentally clients love to co invest directly into deals and also means the rest of the investor clients are happy because these larger deals get done and we have access to them. So very helpful for European Mez team. In U. K. Real Estate, that team tends to almost invest as they fundraise. In order to take advantage of the best deal opportunities in a very fast moving market, the balance sheet often will provide them with bridge financing for 2 to 4 weeks just so they can get access to deals if their fundraising is running a little bit behind their investment pace, incredibly useful. And finally, our support of the CLO franchise since 1999 providing regulatory capital has resulted in a very strong market presence in as a CLO manager both in Europe and in the U. S. So many factors have contributed to our growth as an asset manager. Our marketing, marketing prowess that we built up, talented investment teams, uncompromising investment culture, but also our balance sheet. A pound of balance sheet capital is not just worth a pound to us because there's a potential to drive and accelerate the growth of ICG as an asset manager, hence the synergistic value. We've talked about the embedded value within each fund franchise due to the predictable fees over many generations of our fund. Our balance sheet strength and flexibility is very unusual for an asset manager of our size and has been a key factor in adding new strategies and sustaining existing ones and continuing to build and accelerate shareholder value. I'd now like to get us back to talking about some of the business units. And one area that's grown have been one of the biggest growth areas over the last 7 years has been what we've termed as an asset class secondaries. We also use Equity Solutions, which covers 2 strategies. It's headed by Andrew Hawkins, who's going to join me, and tell you a little bit about how he came into ICG and just the strategy surrounding the area of the business units he looks after. Thank you very much, Phil. And yes, my accent is indeed a British accent. Andreas is quite right. In the words of Sting's song, I'm an Englishman in New York or in the curious vernacular of my adopted country, a legal alien. Over the course of the next 30 minutes or so, I will share with you what this rather grand sounding title, Head of Private Equity Solutions means. And in particular, I want to tell you what it is that we do, why it's a successful and growing part of ICG and give you some idea of direction of where we're headed and what we see as the outlook. So before I do that, let's just ask some basic questions. How and why did ICG get into this piece of the business world? And how did we find our way to ICG? As you'll see in a second, there are actually 2 distinct activities within my Private Equity Solutions division, And each has its own history. My colleague, Emma Osborne, will shortly speak for herself and tell us how her business came to ICG and why it was such a natural home for her. My story, although actually my story, funnily enough, goes back even further because I used to work with 1 of the founders of ICG a long time ago. I was a little younger than him, but it was funny to be able to come back to something that I had such familiarity with. But my more recent story is one of really one of 3 guys. We had a great idea. We had almost unlimited ambition, entrepreneurial zeal, a passion and a hunger to build something different that we knew that the private equity market urgently needed. We just didn't have any capital, which was an interesting problem. I'd have a long history in private equity, including being one of 4 partners who formed a mid market pan European buyout and growth firm in the '90s. And then for 5 years, I worked at another private equity firm with my now 2 partners in this business. And we had a shared mutual conviction about the robustness of what we plan to do sufficient to allow us to leave the relative comfort and safety of that private equity firm and set up on our own. And actually, we've now worked together for 12 years, and we're still going strong. But it was a doubly ambitious plan as we were really setting out to start something completely novel and entirely unprecedented. And so we faced what I would call a herculean task. And I think in a way, the excitement of building something that was radically new probably made us impervious or blind to the actual challenges. Everybody who knows the industry will tell you that starting any private equity business is incredibly tough just doing that because there's the overwhelming regulatory and compliance burden, which gets worse and worse all the time. There's fundraising while at the same time trying to execute deals. There's building teams and the infrastructure support. There's the extremely painful personal financing of the overhead burn rate. But when it comes to a new strategy, something the market hasn't seen before, incredibly tough becomes virtually impossible. And we were very fortunate after a couple of years, so to speak, in the desert through a series of connections to be reacquainted with ICG and, in particular, to discover that they were looking to build something which was both a natural extension of their existing business and which sounded a lot like where we were wanting to go. And at precisely the same time, not only did we have that realization, but we also had our hands around a deal, which was, in our view, the best in this emerging opportunity set that I'll describe in a second. So you could say it was something of a perfect storm. And so what did we see in ICG as an independent group? Well, let's just open with this. The fact that such a storied and successful firm shared our vision and believed in us was a huge confidence boost. So psychologically, it was great. But more substantively, what we saw was a couple of things, which we talk about here. First of all, a fundraising machine to enable us credibly to raise 3rd party capital because without the likes of Andreas and his team, it's extremely hard to break in. Secondly, balance sheet. We've heard from Phil about how the balance sheet is so transformational to businesses like ours that are emerging, and we'll talk a bit about that in a second. The balance sheet ceded our first deals, ceded the fund. It makes a huge difference when you're going out asking for money that when you're rattling your tin cup that it's already got some money in it. It also enabled us to build the team, to finance the overhead so we could scale the business. Though I actually would like to say that we were profitable from the outset, and this is quite an interesting thing and Phil, I think, liked it. But we took half of the balance sheet commitment and syndicated it to 9 LPs on full fee and carry. And actually, it only took 6 weeks, Andreas, that first one. But it was a little easier because it wasn't a blind pool fund. Everyone knew what they were investing in. So it was pretty straightforward. The other thing that is crucially important is infrastructure support. The benefits of being on a robust and scaled institutional platform, think about legal or regulatory, fund reporting, accounting, tax, PR, HR, It's hard to overstate the value of these things in the context of trying to build a strong business, particularly as a start up. And then don't let's forget the brand. A powerful reputation and longevity underpins and empowers emerging business models. So all this has meant that in the 3 years since we joined ICG, we've invested over $1,000,000,000 in pursuit of our strategy. We've raised $1,500,000,000 of capital, including $1,100,000,000 in the fund that we closed in June of last year. And it's so interesting what Benoit was saying about the 3 the way that 3 funds overlap. And so we're now thinking the 3rd fund and how that will generate even further profitability. But as I mentioned, right now, what we call Private Equity Solutions or secondaries is actually 2 distinct businesses, 1 which I would call indirect, the other direct. Private Equity Fund Investments or PEFI as we know it internally because it's easier to say is and Emma will describe in detail shortly, is in the indirect camp. So you'll hear it's a very active in the process of selection and allocation of capital, but indirect in that the underlying companies that ultimately are the investment targets of Emma's Fund are managed entirely by the managers to whom with whom PEFI invests. On the other hand, Strategic Equity, the business I started, is directly involved with underlying companies and in all aspects of their strategic development, governance, funding, realization, etcetera. So what is it exactly? And to put the other side of the question that I posed a moment ago, what was it that ICG saw in us? So we had designed and developed a product to fix a fundamental problem in the private equity model that, for reasons I haven't got time to go into now, had led to 100 of 1,000,000,000 of dollars of what I would call trapped NAV in older vintage funds. Great pools of attractive seasoned assets where investors were keen to gain liquidity and who were therefore not so price sensitive. A huge marketplace in other words and with little in the way of existing viable liquidity solutions. Our approach, from a very high level, was to partner with the existing managers of those funds and acquire their entire portfolios with them in a single transaction and give those managers a new lease of life and new economic incentives while at the same time providing a much desired liquidity option for the investors. Such transactions became known as fund restructurings, sometimes fund recapitalizations, sometimes GP led transactions. You will get from the nomenclature the broad idea of what was going on. And we were undoubtedly and remain, as part of ICG, pioneers in this space and frankly, in a large part of that market, market leaders. And moreover, our experience and skill set made us very distinct from our natural competitors for such deals. And so we've been able to successfully and consistently close transactions at very attractive pricing. Let me unpack that a little more. So in many ways, strategic equity has all the characteristics of a typical ICG strategy, a highly specialized investment approach in a distinctive and compelling asset class. Secondly, proximity to the underlying assets where there's a DNA inside ICG that makes us feel comfortable. Thirdly, taking advantage of market inefficiencies. And fourthly, loving complexity where we can distinguish ourselves through deep analysis and rigorous and disciplined execution. And moreover, the fact that none of our competitors approach these opportunities in this manner, which is direct investors underwriting each company in the portfolio, means that we've been able to consistently buy cheaply, which is rule number 1 in private equity. To illustrate, our average enterprise value to EBITDA ratio across 38 companies in 6 portfolio transactions is just 6.1 times. Let's just let that sink in for a second. The market context right now is that average multiples across the buyout world are presently well into double digits. And our deep asset focus, all our team are direct, they have buyout experience and training, means we can safely underwrite concentrated positions, gain immediate credibility with the managers we partner with and exercise thorough and effective governance post acquisition, sitting on the boards of companies, guiding strategy, challenging and encouraging management and so forth. I'll come on to describe the market landscape in a second. But as I mentioned already, we've closed 6 deals despite having only had a final close on our flagship fund last June. One very important consequence of that activity, as you can see here, is that we've already committed 60% of that fund that's less than a year since the final close. And we have 3 further deals right now in exclusivity. As you can imagine, this mean this sort of fairly intense activity means that we're likely to be back with Fund 3 a lot sooner than we were contemplating. I said I'd comment on the development of the market. This first chart I'll show you paints the story of the rapid growth of transactions in our market sector. So in 2012, where actually, I and my team were involved in literally the first one of these transactions, obviously, pre ICG, there was $2,000,000,000 of transactions. In 2014, when we joined and we launched the strategic equity strategy on the ICG platform, on the back of the largest deal that year and one of the large and by far the most attractive that we'd seen to date, it was €8,000,000,000 And then last year, it doubled again to €16,000,000,000 And in that 16,000,000,000 dollars transaction size, we deployed $500,000,000 But perhaps the most important takeaway from this chart is that the market has matured and I would say has gone beyond a tipping point. I now think it has a permanent place in the firmament of private equity. And it's a pretty big market opportunity. As you can see here, the total addressable market of these old funds is almost $400,000,000,000 and around half of this is in the especially attractive to us smaller, by which I mean sub-one billion dollars NAV transaction size where we have those significant competitive advantages I spoke of a moment ago. And incidentally, while many of the names in these blue segments, which is our area of interest, won't be known to you at all. I'm sure if you look and you see names there, I don't know whether they'll be recognized by you. In this gray section, there's a whole different group of people that you probably will have heard of like Wolvo Pincus, like BC Partners, like Nordic Capital. And these guys are doing restructurings of their older funds as well. And so we don't happen to like those deals so much because we don't like the pricing because we're cheap, I suppose. We like to pay 6x, not 16x. Those transactions have been very useful in another way, which is they've authenticated our marketplace and given it maturity. And frankly, as a result of that, not only does it kind of empower every GP with an old fund to look at one of these transactions, It raises the question, is it responsible not to look at one of these things? So the whole of that €400,000,000,000 market universe is open to us. Let me just dwell for a second on performance of the asset class. And I'd make the following observation, which the chart attempts to depict. We achieve buyout like returns but at substantially lower risk because each of our transactions is a diversified portfolio, maybe 5 or more underlying companies. And so actually, if you think about it, our fund becomes a portfolio of portfolios. And so the risk of failure is very low. Another way of thinking about this is in terms of the so called efficient frontier, a concept which most of you would be familiar with. Given the risk return characteristics, we sit as far above the Efficient Frontier curve as anything I've been involved with in over 30 years of being in the finance business. What does all this mean for us going forward? So I'd say we got a lot of wind to our back here. There's huge investor appetite for these kind of assets. And as pioneers who happen to have created great performance benchmarks, we have significant advantages in fundraising. We also have Andreas, of course, as well as investing prudently under the ICG flag. The underlying market, as we've seen, is very large, and I am highly confident we will get more than our fair share of it. And this will enable us to raise larger and larger successive fund generations, which in turn enable us to underwrite larger transactions. And the business model, because it relies heavily on striking partnerships with incumbent managers, albeit with material governance and oversight rights and capabilities, it's inherently scalable, which means that more of the fee income generated falls to the bottom line. And finally, it's important to note that fees are on committed rather than invested capital and they're guaranteed for the 1st 4 or 5 years of each fund. As Benoit was saying, this is a long run sticky fee product. And there's one other little point, which is just as for Max's business, we anticipate the fee rates going up on our funds. And because of the success of the strategy, I think we are in a privileged position where we can not just reduce the discounts, but actually increase the baseline. And that's what we'll hope to do in our next fund. I'm going to go back and sit down and give Emma the floor for a few minutes. So it's 2 years ago to the day that ICG acquired Graphite's fund investment business, some of you may remember. We manage a listed private equity fund called ICG Enterprise Trust and that has total assets of £670,000,000 Before I tell you about the business, a little bit of my background and how we came to ICG. I've worked in private equity now for 23 years, 13 of which as the portfolio manager of this trust. I'm also a co founder of a private equity diversity initiative called Level 20, which ICG is a sponsor of. Before joining Graphite and working on this trust, I had various roles in private equity investing across the capital structure, including as a mezzanine investor in the late 1990s, and I worked on a number of deals then with ICG. And then throughout my time at graphite, we backed the European mezzanine funds. So we all knew each other really well. And when we were looking for a partner to take the business forward, ICD seemed like a natural fit, thought it would be a perfect platform for executing our strategy. So what is our strategy? And how is ICD adding value? The foundation of the strategy, as Andrew mentioned, is investments in private equity funds. All our funds are focused on buyouts in developed markets, and that's the part of the market we think best enables us to meet our objective of generating consistently good returns with low downside risk, an approach that is consistent with ICG's overarching investment philosophy, as you heard from Benoit. We currently have investments in funds managed by 38 private equity managers, And these include a number of names that you probably will be familiar with from the media, such as CVC and Synvent, but also many less well known groups that provide access to more niche parts the market, such as Gridiron, which is a U. S. Middle market manager. I'd be surprised if anyone in this room has come across before. Fund investments not only provide the portfolio with a base of strong diversified returns. But importantly, they also generate deal flow for the direct co investments and secondaries, which are a key part of our overall strategy. Co investments and secondaries are attractive for 2 main reasons. 1st, the portfolio. So it enables us to increase exposure to specific companies that we have a high conviction will outperform through the cycle. So examples include Domus V, which was mentioned earlier, a care home operator that we partnered with ICG Europe and Rumpot, a Dutch holiday park operator that we partnered with PAI. Both companies have the same strong defensive characteristics that we look for in our larger holdings. So our approach is different from a pure funder funds model where the 3rd party managers make all of the underlying investment decisions, whereas in our model, over 40% of the portfolio is in companies selected directly by us. And we have a strategic objective to increase that to over half. The combination of the directly managed and third party managed investments is unique in our market as our peers are either pure direct investment or fund of funds vehicles. And we think that our approach offers our investors the best of both worlds, striking a balance between diversification and concentration and between risk and reward. So moving on to how ICG is adding value. At the time of our move, we identified a wide range of potential benefits of moving from a small U. K. Private partnership to a global asset manager, and we've grouped them into these 3 key headings. Access to deal flow is the most important one for our investors, and this includes, obviously, in house investments, which currently covers 3 of ICG's strategies. And it also includes some third party deal flow sourced through the broader ICG network. And Gridiron, the fund I mentioned earlier, is a good example of that. The second area is insights. ICG has been lending to and investing in private equity backed companies for over 28 years and as a result has relationships with many private equity managers across the globe. And these have been developed from doing deals with them, sitting on boards of companies with them, sometimes unfortunately working out difficult situations together. And that gives us a different perspective from a typical fund investor. My team is finding that being able to get feedback on managers with thinking about backing from colleagues who have first hand experience of working with them and local market insights is a hugely powerful resource in executing our strategy. So the 3rd area of impact is support. As you know, ICG's business model is based on putting specialist support functions around investment teams to enable them to focus on managing portfolios. And we've enlisted a number of specialists to help us manage the trust such as legal, tax and Investor Relations. ICG has also supported us by investing in the team. So we've added 2 to the 5 that came over from graphite. And then finally, ICG provides oversight at Investment Committee with both Benoit and Andrew bringing to bear their long experience to our decision making. So we've been pleased to see the benefits coming through in all three areas in the still relatively short space of time since our move, and we think there's much more to come. So a quick comment on performance. Since our move, the Trust has continued to build on graphite's strong performance record. The chart shows the net asset value per share over the short, medium and long term, And we've compared it to both the FTSE All Share Index, which is the benchmark for our mostly retail investor base and also the listed private equity group. And you can see we've outperformed both the benchmark and the peer group over all time periods. It's also worth noting that the outperformance has accelerated since we moved to ICG with the share price returning almost 60% in 2 years. So finally, before I hand back to Andrew, I've talked about the benefits of the move to the Trust and to the team. I suspect you might be more interested in the benefits to you as shareholders in ICG. So fundamentally, the acquisition added a profitable and growing business to the group, and that's in contrast to a typical team hire slate, notwithstanding what Andrew said earlier, which will tend to require investment in start up expenses and seed capital. With the business, ICG got an experienced team with a track record of working together and outperforming peers and with a good cultural fit given the long relationship that we had with the firm. So the combination of these two features makes the business a solid platform for future growth, particularly in partnership with Andrew's business. And he's going to talk about growth initiatives in a minute. But it's worth noting that the evergreen nature of the listed trust creates a long term fee stream and means that the base business has good growth prospects. Our assets are up almost a third since the deal. The other two factors on this slide are a little less tangible for shareholders, but I think there are a number of synergies that we bring to the group. Relationships is the most obvious one. In the process of selecting our managers, we've developed relationships with hundreds of different private equity groups and intermediaries. And we also have a broad network of other fund investors. These connections can strengthen existing ICG relationships or indeed bring new ones to the group. And we have already introduced a number of contacts to some of our colleagues that have the potential to either generate deal flow for other strategies or interesting leads for fundraising. Market Insights is the other synergy. As an investor in funds, we have a broad perspective on the private equity landscape, and it's from a slightly different angle than ICG's other investment teams. Also, Benoit made a comment at a recent Investor Day that the best way to understand your clients is to become 1, which is what ICG has done in bringing in my team. So all in all, we feel that we're adding value to shareholders in a variety of different ways. I'll come back to Andrew. Thank you, Emma. And it's actually right. Emma's team has given 4 introductions to potential transactions for strategic equity of real meaning in substance. So thank you for that. And those performance characteristics that you've seen are deeply impressive and consistent. Emma consistently outperforms all her peers. So as I hinted in the introductory commentary I was making, the Private Equity Solutions business is presently focused on these 2 activities, the strategic equity and PEFI. But it's just a beginning. And we see a significant opportunity to build meaningfully from this already pretty compelling, I hope you agree, base, not just through larger, more profitable funds, but by diversifying into other adjacent areas, particularly where we can harness and deploy existing ICG skills and experience as well as taking advantage of the insights and information that flows naturally within the firm. Two examples of that potentiality are listed here. 1 is geographic expansion perhaps into Asia. Why not run these the strategic equity idea in for Asian businesses? A further push into funder funds from which other very profitable investment activities and which Emma alluded to secondaries and co investments can be spawned from and which play very well to the existing strengths and capabilities inside Strategic Equity, PEFI and the wider ICG Group. So in conclusion, let me draw out the main themes. So firstly, Private Equity Solutions has become, in a little over 3 years, a significant profit contributor within the ICG family. We have 2 businesses with sticky, long term, predictable and profitable and growing fee streams. In the case of strategic equity, we have significant opportunity to grow AUM, taking advantage of our market leadership position and distinctive competitive edge. And beyond that, we have a wide array of attractive ways to diversify the private equity activities to expand the suite of businesses into natural adjacencies that lead to further profitable growth. And on that note, I'd like to open the floor to Q and A. You better come up in case people ask you questions. In terms of the difference between the strategic equity part and within PEFI, the secondary's equity component, are they quite similar? What's the difference between those two parts? Between Between the strategic equity that you have? And then within PEFI, you have the secondaries part. Right. Are they quite similar? And is there overlap there? Yes. So there are some similarities. But what Emma's doing in her secondaries business is buying LP interests, so limited partnership interest in funds, whereas we're buying underlying companies. So that's the if you want to make one point of distinction, it's that. There is a natural overlap. And in fact, when I was talking about who our natural competitors are, they are people like Emma's secondary business on a much larger scale, so groups like Lexington and Goldman Sachs and Carla Capital and so forth. And they're the guys who are doing that gray shaded area of fund restructurings. And they look a bit more like secondary's transactions as you'd understand them. And there's an important point of DNA or approach or whatever you want, which I kind of touched on, which is that Emma's DNA or the secondary's world's DNA is about manager selection. It's about deciding whether you can trust the manager of the asset to do what is written on the tin. In our business, we're asset selection guys. Sure, we're partnering with in place managers, but we're really digging down into the companies and writing our own investment cases in support of those assets. Do we want to own the underlying assets? And so there's quite a difference in mentality, which gives us this competitive advantage in those deals. But there is a lot of overlap and a lot of shared resource, particularly as co investments come up where we a lot of experience in making direct investments, which we can share and help Emma and her team. And just one follow-up. In terms of when you the 6 deals you've done, obviously, the underlying investors may want liquidity to understand why they may want to sell that. But have these assets underperformed? And what are you doing when you're going in when you partner with, let's say, Edgestone, VSS? What's the skill set you bring in that extracts value? It's a long answer, but I'll try and give a short version. So typically, these private equity managers have underperformed, which is why they're in this situation. There's a fund that's just not going to achieve carry or whatever. What we do is we revitalize the manager. We sit on top of them. We sit on perhaps on their investment committees. We certainly sit on the boards of the underlying companies. We may give them new capital. We certainly give them new direction. So we recharge those underlying businesses. But it's not true for the entire audience of that €400,000,000,000 But within that market segment, many of the underlying companies are perfectly good companies. These are not bad companies because the private equity manager couldn't sell them. They're actually companies they didn't want to sell. In fact, in many cases, they're the crown jewels. But they haven't had the focus of somebody who's really motivated to recharge the business. So we get very involved. We're quite painful if people don't do what we agree at the beginning. And we have enough experience to be able to alter the way that the private equity firms think about their businesses. Not there's anything wrong with them, but sometimes they've lost confidence, sometimes they've lost people and help revitalize them. I think it might be worth understanding. Part of the reason this model works really well is in these situations, there's a complete misalignment of interest. Because these funds are overall, they're underperformers, the interest of the manager is to hang on to the assets for as long as possible because what they're getting out of these funds is the fees. They're unlikely to ever get carried interest. The investors in the fund want their money back. That's where the tension is. What Andrew and his team are doing is they're unlocking that situation. They're creating an environment where you're realigning the interest and what you find is suddenly exit options occur and there are exits that typically come in much quicker than anticipated. The J curve for this strategy is actually extremely favorable. Yes. We've made now 8 company exits, complete exits, and we've had real liquidity events on 15, and the average multiples we're getting are in the high ones and low twos multiple. So these are good businesses that we buy cheaply. No one else? Poor Emma is kind of looking for a question. Sorry, I have 2 questions. 1 on Slide 67, which was where your addressable market is. A lot of these are no successor funds and underperforming vintages. So I can understand where your money multiple comes from in terms of buying these assets. I mean, how do you then go I mean, how do you then go about I mean, there should be a reason for why those are, right, because of the assets that sit in them. How do you then achieve the turnaround for the companies? Do you do something in terms of restructuring? Or I mean, how hands on is your approach? Okay. So the first thing that I would say is that the reason that these and we're really talking about this upper segment here. The reason that these funds are where they are is not because the assets in them are bad. It's because the portfolio that was originally underwritten was an underperforming portfolio. What that means is typically there have been 1 or 2 or 3 businesses that were sizable that blew up and the GP lost all their capital. So what we're not doing because those private equity managers have proven that they might make mistakes in going into investments in the 1st place. They might be overenthusiastic, might overpay with too much debt, a curiously repeated marketplace environment right now. So we're not giving them new capital to do new deals. We're simply saying, let's help extract value from those portfolio companies, the remaining. The other way to think about it, by the way, which is quite helpful, is these companies, the remaining in these funds, are the ones that survived the financial crisis. So they're actually pretty robust because the poor ones failed. So what we do is pretty hands on. We like to we treat our manager partners with respect, and they continue with the day to day. They are the immediate face to the company. But we're on the boards of every single company that matters. So we go to the board meetings. We have the debate. We agree a plan with the private equity manager about what needs to happen. If the plan if we're not happy with the way the plan is going, we take action. We're right now in the middle of taking action on 3 companies across our portfolio where we don't think the private equity manager has done quite the right thing. And so we're being a little pushy. We're not unwelcome, by the way, because many times they need some help or counsel to develop what they've already got. And so it's normally not a fight to get things to change. And of course, because we've reset their incentives, they are highly aligned with us to create value. And so I mean this €384,000,000,000 is a historic number in terms of funds to date. But when you're looking at what P multiples are in terms of what they're buying today, how do you think that vintage will look like in terms of if you pan 5 years ahead, how does that number change to the 84? So just to be clear, that €384,000,000,000 is the NAV of all those funds that are more than 9 years old. So how will that go in the future? So a series of things will happen. I mean, the natural process is that these old funds shed their assets. So, they'll go down because of that. They'll go down because deals like ours get done or other equivalent deals get done. But they'll go up because the vintages that then weren't 9 years old a year ago become 9 years old now. And so and we've also had since the financial crisis, volumes of fundraising have picked up and the same mistakes are being made over again. So we're pretty confident that we're going to have an exact this number should at least stay where it is or go up. And the last one I had was I think you sort of showed in Emma's thematics you sort of showed returns versus FTSE companies. Is that pre or post fees? Post. It's post fees. Yes. That's the net return to our shareholders. Right. About 60% is retail, so we use the FTSE All Share as a benchmark. Thank you. I think we're thank you very much guys. Well done. Quite a lot of information to take in. I'm sure this morning hopefully you found it fully you found it useful. We welcome feedback. If you think that we can improve on the content of the or the format, please get in touch with us and we'll improve for our next Capital Markets Day. A few of course concluding remarks. There you go. As you've heard, we benefit from excellent fundamentals. The market environment is very favorable for generally and particularly for our asset classes. And we're in an extremely good position to take advantage. Locked in value, it's a defining characteristic of our business model and it's a fundamental element to understand the value of the business. We're confident about AUM growth as evidenced by our new target. You've heard 3 really interesting stories of growth this morning and quite different. Senior Debt Partners, completely organic story, something we build completely from the inside, because it was a strategy that was very close to a strategy that we already had. U. S. Senior debt will be the same, entirely organic. Strategic Equity, we brought in a team, we brought in the expertise and we unlocked the potential through the platform, the marketing capability and balance sheet capital. And PEFI, PEFI was an acquisition. Essentially, we purchased a fee stream, which we very quickly enhanced increase through synergies between the two entities. What Emma hasn't, I think you might have mentioned is her business is incredibly skilled, because what she does at her level on just sort of £700,000,000 she could be doing for double that size easily. It's exactly the same. It's exactly the same amount of work. This is these three examples are a good illustration not only of the focus we put on growth and we will continue to put on growth going forward, but also on the flexibility of our approach to take advantage of the best opportunities, to find the best way to add new products to our product base. And finally, capital efficiency. You've heard Philip talk about how critical the balance sheet is. It is the fuel for the acceleration of our growth and as a consequence the growth of shareholder value. On that note, I'd like to thank you very much for attending this morning. We will be around if there are more questions, so do not hesitate. Thank you. Will take them for a few minutes now and then head through for more informal questioning and grilling.

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