Good morning, everyone, and thank you for making the time to listen to this results presentation for the six months ended September 30, 2021. The slides for the presentation, along with the accompanying results announcement, are available on our website. You can submit your questions throughout the session via the Q&A function on the webcast. We knew full year 2022 would start strongly, and it has exceeded our expectations. Our growth has been broad-based with notable fundraising success for Europe VIII, our oldest flagship strategy, as well as for two first-time funds. Against a generally favorable environment for alternative, which disproportionately benefits the strong established managers such as ICG, we have delivered well ahead of plan as ICG momentum accelerates. We have never raised as much capital. We have never deployed as much capital. Our current vintages are shaping up to be some of our best vintages.
We have never realized as many investments, thereby anchoring this outperformance and consolidating our track record, and we have never attracted as many new clients. We have further anchored our position of leadership in ESG for the industry with ambitious tangible commitments. All of which supports my view that with long-term visibility on fees and therefore profits and multiple growth drivers, we are well positioned to experience accelerated profit growth into the future. We have been enjoying meaningful growth for many years now, and this trajectory is continuing. Firstly, fundraising. At $13.8 billion, we have raised more in this half than in any full year in ICG's history. Our third-party AUM is now $65 billion, an increase of 16% in the six-month period and 28% year-on-year. Secondly, growing our platform.
We have made seed investments from our balance sheet totaling GBP 160 million, laying the foundations for yet more diversified growth. Thirdly, the level of activity across our platform remains extraordinarily high. We have deployed more in this half than in any full year in our history and have had a record half year of realizations with an incredibly strong exit pipeline coming into the second half. This strong momentum across fundraising, deployment, and realizations is supportive of our future fundraising cycles. Our financial performance reflects this of course. Third-party fee income is up 29% year-over-year, and our fund management company profit before tax is up 35%. This performance is closely tied to our efforts and progress around sustainability and people.
I'm extremely proud of our commitment to be a net zero asset manager across our operations and relevant investments by 2040. This is a substantial commitment and is supported by approved and validated science-based targets covering 100% of our relevant investments. Of note, relevant investments are defined by the SBTI as those where you hold at least 25% of the share capital and have a board seat. This is essentially capturing all investments where we can reasonably influence management. I have been publicly saying for several years that strong action on responsible investment will be critical to achieving success in private markets, and we have been at the forefront of helping to develop the science-based targets guidance for our sector. We are now amongst a small handful of alternative asset managers who currently have approved science-based targets. Secondly, people.
We are a people business in what remains a relationship-driven industry. Nurturing and attracting talent is a key area of focus, certainly something I and all our senior managers spend a fair amount of our time on. In the last six months, we have continued to invest in our talent across all parts of the business and at all levels. We have made progress against our D&I and broader people objectives, including launching two new employee networks, reinforcing our well-being programs, and we welcomed several interns this summer in partnership with the 10,000 Black Interns program and SEO London. Finally, we continue to innovate within our responsible investing activities, whether through enhancing our ESG engagement strategies or structuring ESG-linked financing facilities for some of our strategies. These are essential topics and are close to my heart.
Therefore, in conjunction with our Q3 trading update, we will be hosting a shareholder seminar specifically on sustainability and people on the 27th of January 2022, and I invite you all to join. This period well illustrates the intricate relationship between fundraising performance, the continued growth of our platform, and our focus on sustainability and people. There are really two ways to grow organically for our business. Grow up, that is increase the size of existing strategies, and grow out by developing new strategies. In the last six months, we have done both. Europe VIII, our flagship fund, our oldest strategy launched in April. As of today, we have raised close to EUR 6 billion or just under $7 billion. Vintage VIII is therefore already 50% larger than its predecessor vintage, and it is still fundraising.
We also now have over $2 billion of third-party AUM across Infrastructure Equity I and Sale and Leaseback 1. These are both first-time funds, both featuring fees uncommitted. Sale and Leaseback 1 had to increase its hard cap to meet demand, Infrastructure Equity I is also on its way to hit EUR 1 billion of commitments. First-time funds are always difficult, but they are also incredibly valuable in that they represent diversification and meaningful future fee income streams. The integration of sustainability and ESG matters into these funds is fundamental, not only to how they implement their investment objectives, but also to how we market them to our clients. All three of these strategies have distinctive sustainability characteristics.
In our European corporate strategy, which is over 30 years old, we have materially enhanced our ESG engagement framework, and this fund will of course, be covered by our science-based target commitment. Both Sale and Leaseback I and Infrastructure Equity I actually are sustainability themed funds. One of the attractive features of our platform, I believe, is this powerful combination of growth drivers. There is huge opportunity to scale existing strategies and substantial embedded growth from our newer and seeded strategies. We expected full year 2022 to be a peak year in our four-year fundraising cycle and to be front loaded. It has exceeded our expectation, raising more in this half than in any full year in ICG's history and across a broad range of strategies. One noteworthy data point is that over the last 12 months we have raised $22 billion of capital.
Looking at these past six months, the $13.8 billion of fundraising was driven by ICG Europe Fund VIII, which raised $7.6 billion. That's including a fee paying continuation vehicle. We also won a large mandate over $1 billion for Senior Debt Partners. This is the first time ICG has been able to absorb that size of commitment from a single client in a single strategy. This is important. As we grow, we become more relevant to large client, and this will not be a one off. In fact, we signed last week a mandate for just over $1.8 billion again for SDP. We have had an extraordinarily active period across the whole business, in particular on the deployment front, where we have deployed more in this half than in any full year in ICG's history.
Part of this is a natural function of us having increased the size of our funds over recent years. Strong successful deployment is key to both accelerate our fundraising cycle and increase fund sizes. Realizations have also been an area of key focus as we seek to take advantage of favorable market conditions. Realizations are important to crystallize the strong performance we have enjoyed across our portfolios and to return capital to investors, what is called DPI or distributed to paid in our industry. We're particularly successful here. Europe VI, a 2015 vintage has reached a DPI of 116%. This compares to an average of below 50% for private equity and private funds, private debt funds of that vintage.
Even better, Strategic Equity II, a 2016 vintage has already reached a DPI of 125%. This puts us squarely in top decile territory and is important because successfully returning capital to clients helps underpin fund valuations and support fundraising of future vintages. Private equity activity has continued to accelerate after the lows of COVID, reaching historical highs globally. This has a direct positive impact on our structured and private equity strategies and is a leading indicator for our private debt and credit strategies. In our investment committees, I have seen significant levels of attractive opportunities across all four of our asset classes. You do, however, need to be very selective. We are seeing some bold valuations and structures, some aggressive adjustments to EBITDA, particularly in the U.S. One cannot ignore the uncertainty around interest rates, inflationary pressures, and supply chain difficulties.
This is where our disciplined approach to underwriting investments, our ability to provide flexible capital, our focus on downside protection, and importantly, our local presence and long-standing networks with founders, entrepreneurs, management teams, and family owners make all the difference. Turning to our AUM. We now manage $65 billion of client capital, broadly diversified across four asset classes. That is up 16% in the first 6 months of this financial year and up 28% in the last 12 months. To put that in perspective, it is double the amount we managed at year-end 2018. You can see from this graph the track record we have built of consistent growth over the last decade. Our client base is global, growing, and diversified.
During the period, we grew our client base by 14%, and at 30th of September 2021, it stood at 542. This is impressive growth and illustrates the strength of the brand. Despite the COVID environment and restrictions on travel and in-person meetings, we attracted new clients into both our established and emerging strategies. For now, our focus continues to be on growing our client base. As we scale more strategies over time, we expect the benefit from an increased share of wallet as clients invest in multiple ICG strategies. As you can see on this slide, our clients are diversified geographically and by type of investor, and we also have limited concentration, both by number of clients and by number of funds and mandates we manage.
We manage approximately 130 separate funds and mandates and do not have significant single fund or single mandate concentration. As I said at the outset, this financial year has been very front-loaded from a fundraising perspective. Looking ahead to the remainder of the year, we will continue to raise for Europe VIII, Strategic Equity IV, and Infrastructure Equity I , among other strategies, although the bulk of fundraising for all these strategies has been completed. Depending on market conditions, we may also look to start to launch one or two of our seeded strategies towards the end of the financial year, but these will only impact the fundraising numbers in the next financial year. Beyond full year 2022, our fundraising trajectory will continue to be driven by the breadth of our product offering and the pace at which we deploy our current funds.
It is too early to give guidance today on when some of the strategies you see in the chart on the right-hand side may come back to market with their next vintages. Clearly, next year will not repeat by some margin the peak of fundraising performance of this year. As we noted earlier, the level of activity across a number of strategies is particularly strong, which bodes well for our medium-term fundraising pipeline. On these positive medium-term prospects, I will turn it over to Vijay to discuss our financial results.
Thank you,Benoît , and thank you all for your time today. I'm delighted to be presenting such a strong financial performance for ICG, continuing our track record of profitable growth. As a reminder, all the financial performance that I will present today is based on alternative performance measures, which exclude the consolidation of some of our fund structures as required under IFRS. has discussed the growth in our AUM, and this growth has led to a 29% increase in our third-party fee income compared to the first half of last year. We saw an increase in our third-party fee income across all of our asset classes, with the most notable increases being in structured and private equity, driven by the fundraising for ICG Europe Fund VIII and ICG Strategic Equity IV and Real Assets, which is driven by fundraising for Sale and Leaseback 1 and ICG Infrastructure Equity I.
These two funds held their first closes in the last financial year, and so this year, Real Assets includes GBP 8.2 million of catch-up fees, which we do not expect to recur next year. Within our third-party fee income, performance fees have always been an important but relatively small contributor. This year was no exception. Performance fees increased by 19% compared to the same period last year, and on the last 12 months basis, they were 14.8% of total third-party fee income, in line with our medium-term guidance. We have significant visibility on management fee revenue from this half year's fundraising, as well as from fundraising done in prior periods for strategies that charge fees on invested capital and not yet paying fees.
We estimate the additions to AUM during this half year have the potential to generate GBP 118 million of annualized management fees, of which approximately GBP 12 million will come through once the AUM is deployed. The AUM raised this period has a weighted average contractual life of approximately 12 years. Fundraising this period underpins a long-term revenue stream for us. Additionally, we have approximately $7.7 billion of AUM that was raised in prior periods that is not yet paying fees. We estimate this could generate approximately GBP 50 million of management fees per annum once it's invested. Combined, we estimate these two elements add up to approximately GBP 168 million of annualized long-term revenue, of which approximately GBP 63 million is not reflected in this period's P&L.
Turning to profitability, the increase in our third-party fee income drove a 35% year-on-year increase in our fund management company profits, which stood at GBP 121 million for the period. This continues our very strong trajectory of growing our fund management company profits, which had increased at an annualized rate of 29% between March 2017 and March 2021. The growth in our other income during the period was primarily due to increased dividend receipts from our CLO equity, which have continued to perform strongly in a favorable market environment. Moving to our operating margin.
This grew by over 100 basis points to 52.2% compared to the same period last year, in part due to the catch-up fees I mentioned earlier. The growth in the absolute level of expenses was largely due to our continued investment in people who are crucial to ensure that we have the platform to continue to successfully grow. It typically takes 2 or 3 vintages to start generating powerful operating leverage as you get bigger funds and concurrent fees from multiple vintages. There is further upside potential in our operating margin. This will take a number of years to come through as more strategies mature. In the nearer term, we expect our margin to remain broadly around these levels as we continue to invest in our platform, and particularly as we launch new strategies that we are currently seeding.
The fund management company is very well-positioned strategically and financially to continue growing. Turning to our balance sheet, this is an accelerator of the growth of the fund management company. The balance sheet investment portfolio is very diversified, investing alongside our clients and importantly, seeding new strategies which will generate future growth and value. As mentioned, during the period, we invested GBP 116 million from our balance sheet to seed new strategies, laying the foundations for further new drivers of growth. The exceptional net investment return during the period was driven by our structured and private equity asset class, and in particular, by successful realizations or increases in valuations where we have visibility of an exit in our European corporate, Asia-Pacific, and strategic equity strategies.
We expect the net investment returns going forward to be in line with our medium-term guidance of low double-digit investment returns. As you can see on the right-hand side of this slide, our balance sheet has a track record of accreting value on a standalone basis. It is in a strong financial position and is an important strategic advantage, accelerating the development of new strategies and hence helping to broaden the fund management company's future growth profile. Touching briefly on outlook, we maintain the financial guidance we gave at our full-year results. Our performance against these metrics needs to be measured over a medium-term horizon and not in a six-month period. As we have discussed already, fundraising has started very strongly and has been very much front-loaded during this half year. We expect the second half fundraising to be more normalized.
In the medium term, we remain confident that the guidance we gave remains valid. With that, I will pass back to Benoît . Thank you.
In many ways, it's green lights everywhere. Portfolios are performing well across the board. We are investing at a record pace and realizing assets at historically high levels, all the while expanding our product offering and broadening our client base. With our track record, experience, approach to risk, and range of products, I'm confident we can successfully navigate and indeed thrive in volatile market conditions should these occur. I want to finish by looking even further ahead, not the next 12 months, but 5 years and beyond. I said earlier that simply put, there are two ways to grow our business organically, grow up and grow out. In a sense, it's like developing a waterfront. Once you have something there, growing up is incredibly efficient. It doesn't take much incremental capital, it's very profitable, and there's huge wide space to expand into.
Growing out is much tougher. It's hard yards and takes time and capital to lay the foundations of future success. Once you've got something in place and it works, that's your first time fund, you create an entirely new space in which to grow up. You are materially increasing your diversification and scale of your AUM opportunity. Our balance sheet enables us to do those hard yards, and we have the people and expertise to do it successfully, and we have a very good track record of doing so. There is significant opportunity to scale existing strategies and substantial embedded growth from our newer unseeded strategies. We saw that in this period with Europe VIII, Senior Debt Partners, and Infrastructure Equity I, and there's more to come. We have multiple drivers of very high-quality compounding growth.
As we raise successful vintages of current strategies and expand our product offering, our highly predictable and long-term third-party fee income on a growing base of AUM is poised to increase meaningfully over the next several years. Thank you very much for your time today. This concludes this half-year results presentation, and Vijay and I will now take your questions. As I mentioned at the beginning, please submit any questions through the online portal. Thank you. Chris?
Thank you very much. The first question on market environment, and particularly deployment, it's been very strong across the board in H1. How sustainable do you think this is, and how do you think about the pipeline for the coming 12 months?
Sure. I'll take this. You may remember that we started seeing a material increase in activity from the summer of 2020, so this is not new. It's been going on ever since then. If we look at pipeline, there's no sign of the market cooling down. The level of activity is incredibly high, and that's globally across asset classes. This is not purely an ICG phenomenon. We're observing that across the board. There are challenges, of course, but what's interesting is if you have the origination capability, what this means is you can afford to be more selective. You're seeing more deal flow.
Picking up on that origination capability, how much overlap is there in your origination capability between your existing strategies and the emerging strategies that you are seeding, like Sale and Leaseback I and Infrastructure Equity I ?
I'm not sure what's behind the overlap question. If the question is, do we create synergies as we launch new strategies? The answer is yes. Sometimes directly. I mean, Sale and Leaseback I is a very good example of that because Sale and Leaseback I is essentially a joint venture between our real estate team and our senior debt team. But even when that's not the case, and we're launching a completely new vertical, so think life sciences, for instance. Even then, clearly there's benefit because the expertise, the knowledge of this new team in healthcare is incredibly useful in other parts of the firm. I don't know if that fully addresses the question, but you know, this is how we portray that.
Thank you. Moving on to your client base. You've clearly grown a number of clients or attracted a number of clients over this period. Can you talk more about where they came from, whether it's emerging or established strategies and what has catalyzed the large number of new clients you've had this period?
Two aspects of that question. Where, you know, where do they come from? It's across the board. Having said that, in this period, I think it's probably more on the new strategies, if only because, for well-established funds, so take fund eight, for instance, typically in the early phase of the fundraising, most of your investors are re-ups, so they're existing investors who are reinvesting into the next vintage. It's been the case for Europe VIII. It's been a very successful strategy. We've had some investors trebling the amount of commitment from one vintage to another. It typically is later in the fundraising period for a given fund that you start attracting new clients.
New strategies, on the other hand, by definition, do not have an existing investor base, and so that's a good opportunity to attract new clients. Overall, when it's all said and done, what we find is it's across the board. You're attracting in both. Why? Again, I think that's a you know there's a combination of element. Obviously, your strategies have to be in demand, so the nature of the strategy itself. For instance, Real Assets strategies are very much in demand, so think infrastructure, think real estate. Of course, strategies that have a long and very successful track record are also very much in demand. That clearly is a driver. I also think I would like to think that we...
You know, our brand recognition is improving, particularly in the U.S., where we've clearly made headway, significant headway over the past, call it two years, winning over some of the key pension funds there.
Staying with clients for a minute, could you talk about whether you have any plans to increase your exposure to retail or high net worth clients? If so, how you think the best way is to grow in those markets.
It's very topical because it's a fast-growing space. I mean, we already have indirectly high net worth clients through feeder vehicles of some large banks. I think this is likely to continue because there is very significant appetite there. This is where brand matters a lot. I think, you know, I was mentioning the fact that I think our brand recognition is improving, particularly in the U.S., market, which is the largest market for fundraising. I think that will fuel that in the future. This is not something that happens overnight, and this is something that you build vintage after vintage progressively. Is this a new space for us to go into in terms of fundraising?
Yes, for sure. You don't turn it. It doesn't turn on a dime. Incidentally, we still have a lot of white space in, you know, the institutional investor base. You know, if you compare our size to some of our larger U.S., peers, we still have a long way to go. For us, it's just an additional potential source of capital.
Question on rising inflation and interest rates, and how you think that could impact both your portfolio and also the attractiveness of your products overall to your clients?
On the portfolio, we are seeing some, you know, cost increases in our portfolios. We're seeing, you know, price increases being passed on. For now, if anything is having a positive impact on our portfolio companies, precisely because they're able to pass on rising costs, and so their nominal EBITDA is increasing. You know, there's a question as to what that does ultimately to the economy and whether that, you know, doesn't have a broader impact on the economy. If I just look at what we're experiencing today and what that does to our portfolio companies, if anything, it's having a positive impact on their numbers. The broader question of, you know, rise in interest rate, what could it do to the attractiveness of the alternative asset class?
You know, this is a question that we've discussed before. You would need a very significant increase in interest rates to alter the you know, the demand for alternatives. You know, Remember, I mean, you know, not so long ago, interest rates in the U.S., were you know, much higher than they are today, and that you know, did not in any way you know, slow down the the growth of the alternative asset space. You know, I think we're a long way from a rise in interest rates having an impact on the way our clients are allocating to alternatives. What we're experiencing today and what we have since you know, it's hard to say since the pandemic because it's not entirely over, I'm afraid.
At least since the height of the pandemic, if anything, is an increased appetite for alternatives.
Vijay, a question on the average fee rates. You comment that they have been broadly stable over the period. Could you talk a little bit more about how you are seeing the fee rates within individual strategies or asset classes?
Sure. We're under no pressure in terms of fee margins currently. The strategies that we have raised funds for this half period are usually the much higher fee rates. You're looking at rack rates of up to 150 basis points. Obviously, they're discounted depending on the size of the clients. We're able to maintain the fee rates marginally. They're a little bit up year on year. On the whole, we're expecting to see these levels of fee rates to continue for some time as we raise strategies which effectively charge fees and higher fees and uncommitted capital.
Thank you. On Europe VIII, specific question. It's obviously already 50% larger than the predecessor. How large can it be? You commented that you've seen strong demand. Can you give any guidance either on size or timing of Europe VIII?
Well, how large can it be? I think it could be as large as we want it to be. The question is how large do we want it to be? We've always been relatively cautious in the way we step up the size of our funds from vintage to vintage. You may remember that from fund 6 to fund 7, we increased the size by 60%. To me, that's a reasonable growth, you know. You can maybe push it a little bit more. I'm always a bit wary when you start to double or more than double the size of a fund, particularly when it gets to larger sizes, it's easier when it's much smaller. You know, because there's a question, you know, can you still deploy it as effectively?
Are you still deploying in exactly the same types of investments? That's something to be mindful of. We're playing a very long game here. In terms of timing, well, as you've seen, we've, you know, the fundraise has been extremely successful very quickly. Again, that's because of the appetite of existing investors who've asked for more essentially in the current vintage. We've left on purpose some capacity to bring on new investors. I think this is going to be from this point onward the focus of our marketing team. You know, I'd be surprised if we weren't pretty much done by the end of this financial year.
We may leave it open a little bit longer, you know, to attract some clients that need a bit more time and that are not existing ICG clients because there's merit in that for us. But for all intents and purposes, I think it'll be done by the end of this financial year.
On SDP, you've mentioned a couple of billion-dollar plus mandates. What's the capacity in that strategy to absorb this size of mandates? And do you see there being more of them in the pipeline?
Potentially. This is a strategy that is, at least as far as we're concerned, because we are perceived as a leader in Europe in direct lending, where clearly the limiting factor is deployment, and our view on how quickly and how well we can deploy the funds. You know, thus far, what we've experienced is the market has kept on growing. We've been seeing more deals, and we've seen larger and larger deals. In a market that is consolidating, where you're seeing that, you know, the larger players essentially are doing the bulk of the business. We're clearly benefiting from that. I think there's appetite from investors for these large mandates in direct lending.
Remember, this is, you know, you were asking or someone was asking a question about interest rates earlier. You know, remember, these are debt products that are floating rate. If you know, if you're concerned about inflation and interest rate, this is not a bad strategy to invest into. There's clearly a significant appetite. Yes, I think there's room for more. It's not infinite, of course, but there's room for more. I think we will be raising more for SDP in the coming year, given how well that strategy has deployed in full year 2022.
Vijay, picking up on that comment and also the comments about the $1.8 billion dollar SDP mandate in H2, how confident are you in your fundraising guidance for the full year or for the coming four years? Sorry. And does the guidance or comment around normalization of fundraising for H2 include that $1.8 billion dollars for SDP?
As had mentioned, this year was always going to be a peak year in our fundraising cycle. The fact that actually the fundraising for this half year was so strong exceeded our own expectations. We expect the second half to be more normalized, and we certainly don't expect the same level of fundraising to come through into next year. We always knew this year was gonna be a peak year in that four-year fundraising cycle. I would expect for the rest of the year to assume a more linear-based fundraising profile based on the four-year cycle. Given next year, we will have SDP, as mentioned, and certainly some of the newer strategies, I would expect a lower fundraising for next year.
A question around fundraising and clients. Given some of the comments from Gensler, do you think it could be harder for you to give different clients different terms as we currently do? How disruptive do you see comments on disclosure and consistency around fee charges as being?
That, that's actually pretty straightforward. In any fundraising, there's a rack rate, so there's a table, and that table is known, it's known to all the investors. Depending on your size. It depends on the strategy. I mean, some strategies, you know, for instance, Europe VIII, there is no first close discount because that strategy is successful enough that we don't have to give any first close discount. We do give some discount on size, but there's no first close discount. In some of our strategies, particularly if it's a first time fund, you need to give a first close discount to attract people, you know, so that, you know, you get the first brave ones to come in.
The rack rate is well known to everyone, so there's no, you know, if your question is, you know, can you be deemed to be favoring one client with another, you can't do that. They fall into a very neat matrix, and depending on the strategy, but depending on size, first close and/or later close, you know, there's a corresponding fee rate.
Thank you. A question on M&A. Do you see any strategies where M&A could be considered, or where organic growth may be more challenging?
Well, organic growth is always challenging. It's a lot of work, but we've been doing quite well at growing organically, as you can see. I mean, we've been able to launch several new strategies per year, which is quite an achievement. We've been a very nice machine to grow organically, and obviously that's the most profitable way to grow, but it's difficult. Would M&A make sense in some situations? Possibly. We have to be mindful of valuations. Clearly, we're not keen to do anything that would be dilutive, and that, you know, today's valuations in the private market and often that it would be the case. We also need to be mindful, you know, as I said during the presentation, it's, this is a people business.
We have to be mindful of culture fit. It's always possible. We're always having discussions, as you can imagine, when, you know, there are a lot of people knocking on our door. There are areas, maybe some geographic areas, where we decide that, you know, it's a faster way to market. We're doing this as, you know, you will all have seen, we're doing this very, very cautiously, very prudently.
Thank you very much. Thank you all very much for attending today. There are no more questions, and this concludes the presentation.
Okay. Thank you all.
Thank you.
Okay.