Good morning, everyone, and welcome to the presentation of EQT's Q1 announcement 2024. Let me start by saying thank you to everyone who attended our Capital Markets Day in Stockholm a few weeks ago, and for those who were not able to join us, the presentation materials and the recording of the event are available on the Shareholder Relations section of our website. For today's call, as always, if you've registered ahead of the call, you should have received an email with your personal pin code to participate in the Q&A. To make sure that everybody has time to ask questions, we suggest that you focus on the most important topics, and as always, we're available for follow-ups after the webcast. So thank you all for joining today, and with that, I'll hand over to Christian. Next slide, please.
Thanks, Olof, and good morning, everyone. I'm excited now that EQT has entered its fourth decade, and we did this with a big demarcation of closing our largest fundraising ever, which was EQT X at EUR 22 billion. This, of course, is a sign of the partnership we have with our clients and their trust in our ability to deliver strong and resilient returns for the long term. Now, a month ago, we hosted our first Capital Markets Day in Stockholm. There, we clarified our ambitions to become the global leader in private equity, top three in infrastructure, while maintaining the number one position within value add infra, and over time, approach the top three in private real estate, a segment which is quite fragmented today across the top 10 players.
Reaching these ambitions comes down to performance for our clients, and this is why we are focused on active ownership. And as we say, we're positively paranoid around all aspects of transforming and improving companies for the future, and thus driving fundamental value creation across the cycle. We're also progressing on our sustainability goals and are now supported almost 40 companies in setting science-based targets. This is actually the largest move towards net zero in our industry and will, of course, also help future-proof our companies and make them more valuable. The key EQT funds are all developing on or above plan. Key fund valuations were slightly up in the quarter. We also had some material valuation uplifts in other funds focused on earlier stage investments, such as EQT Ventures and EQT Life Sciences.
Our investment activity continued at quite a good pace in the first quarter. With our thematic and local with locals approach, our deal flow, as we talked about before, remains very, very strong. We have one of the largest deal sourcing machines in the world of private markets. And of course, this kind of deal flow is exactly what we want so that we can remain selective on which deals we go after. On the exit side, we expect activity to pick up materially over the coming year and years. Of course, near term, this will be dependent on the market, and right now, credit markets are fairly robust, while the equity markets are still in the early stages of recovery. There are geopolitical challenges and other issues, including sticky inflation in the U.S., so this may take some time.
Now, from our point of view, becoming less dependent on the market is why we are working to build new capabilities, such as Private IPOs, as we call it. And this we're doing in order not to be driven to exit companies and assets that we believe can be grown and developed in the long run. So we're exploring longer term structures that we can own together with other asset managers and financial investors and continue to develop the company. We're also continuing to strengthen all of our capabilities, strengthening all of our capabilities around other exits, including public IPOs. And actually, I'm quite proud of the team and everyone involved in our recent IPO, Galderma, which Bloomberg actually called a case study of IPOs, which is great.
Moving to the fundraising market, it continues to be demanding, with fundraising timelines still being prolonged. Compared to a year ago, we've seen a slight improvement, partly as the denominator effect has abated. However, with low exit proceeds across the market, some clients have had less liquidity to enable new commitments. Thus, we'll probably only see a real improvement in fundraising markets once exit volumes really start to be active across private markets. We're making good progress with Infra VI, and fundraising is expected to continue at least throughout the year, and we do expect it to reach the EUR 20 billion target.
On new initiatives, the Healthcare Growth strategy just made its first investment, and preparations for an infrastructure transition strategy continued, and this strategy, as you may remember, is to go after the enormous space of scaling up companies that are supporting the energy transition. Fundraising for EQT Nexus, our semi-liquid fund catering to private wealth clients in Europe, continued, and we're preparing additional products with a similar structure, including just-launched EQRT, our U.S. real estate investment trust. And all these products represent solutions that are designed for specific clients or client segments, and these are the kinds of capabilities that we're now building across the firm. Next slide, please. At the Capital Markets Day, we spoke about our strategic priorities and our avenues for growth.
We expect EQT to continue to take market share over time, driven by strong returns for clients, created in a responsible manner, and a continued trend of clients concentrating commitments to fewer and larger managers. Specifically, we expect to grow based on four pillars. First, we're gonna scale our flagship funds further. Second, we expect to scale recently launched strategies while introducing also new initiatives, and over the next five years, we expect to triple the AUM across our current first-time funds. Third, we'll continue to deepen our client relationships and add distribution channels, including the ecosystems around private wealth, and over time, we expect private wealth to comprise 15%-20% of fundraisings, up from 10%-15% in recent ones. Fourth, we'll selectively pursue M&A.
As you know, our industry is continuing to consolidate, and we expect EQT to continue to be a driver of this trend. This could be white space in a geography or in a sector, or to create new capabilities to better serve our clients. Yet we remain highly selective, and we're only gonna go after opportunities that really strengthen the platform, and as always, most importantly, having a very strong fit with our culture and strong performance. Next slide, please. So we continue to see a super investment pipeline across actually all strategies. Digitalization of societies, decarbonization of transportation fleets, the growing need for healthcare, and an aging population, et cetera, et cetera, are all areas that require significant investments, where EQT will continue to put its capital and its expertise to work.
And during the strong market environment in 2020 and 2021, we actually exited a large part of our portfolio and pursued several exits ahead of plan at that point in time. As a result, we have top quartile DPI, which is the industry way of saying cash returns in our funds that are in realization mode, in exit mode. And today, only about 10% of the portfolio by capital is five years or older, which is pretty unique. The industry, as you can see, is at a totally different level, and as such, the vast majority of our portfolio is still in value creation mode, and we also don't have a lot of old stuff to manage and deal with, so we have capacity to drive value creation and to do new deals.
Having said that, we're of course propelling exit alternatives across the portfolio, and we have a number of companies ready for exits this year. Some of those will be in earlier vintages, and some will be in more recent funds, which are not yet in carry mode. Since the global financial crisis, we've been laser-focused on owning high-quality assets, supported by long-term secular growth trends. As a result, most of our companies are assets which are less cyclical, which are typically market leaders with underlying growth that also have attractive exit optionality with multiple buyers. And looking across the portfolio, we have quite robust, solid financing structures. As EQT enters now our fourth decade, we're in a stronger position than ever. We've created a global platform to leverage insights across geographies and industries, from early stage to mature companies.
We have deep and long-standing relationships with our clients that we're continuing to build on, the tools to drive fundamental value creation, which we're constantly improving, and that includes, of course, our Motherbrain artificial intelligence platform as well. The world is changing at an ever-increasing speed. Climate challenges, artificial intelligence, structural changes to demographics, combined with now changing geopolitical landscapes, global conflicts, et cetera, all these bring challenges for society, and for us as a firm to navigate. But such challenges also bring out opportunities, and I'm confident that we have the platform and the teams to continue to be forward-thinking, always challenging ourselves to improve, to manage risk, and to seize opportunities. With that, I hand over to Gustav.
Thank you, Chris, and, next slide, please. Good morning, everyone. This quarter, as Chris said, was marked by two fund closes. So EQT X reached and even surpassed its hard cap with almost EUR 22 billion of fee-generating AUM, which was almost a 40% increase from EQT IX. The EQT Future Fund closed at EUR 3 billion in total fund commitments and total fee-generating commitments to the strategy, which also includes fee-generating co-investments totaling EUR 3.6 billion. Fundraising continued for Infrastructure VI, with fee-generating commitments of more than EUR 15 billion at the end of the quarter. We expect that the fund will reach its hard cap or target fund size of EUR 20 billion, and the fundraising is expected to continue at least throughout 2024.
The fundraising environment in real estate continues to be challenging, especially for newer strategies. However, as part of our increased efforts in Asia, we have now begun to raise our Asia-Pacific logistics fund. Today, our real estate business has approximately $12 billion of dry powder. Hence, there will be some time before we raise the next round of flagship logistics funds. As previously stated, given the current investment pace, we expect that our flagship funds to be on approximately 3.5-year investment cycle. This will imply that we would activate BPEA IX towards mid-2025, and then EQT XI and Infrastructure VII to follow with around six-month gaps each. Preparations are continuing for the transition infrastructure strategy, and the healthcare growth strategy made its first investment during the quarter. Moving on to the evergreen side.
EQRT, our evergreen product aiming to make direct investments in commercial real estate, made its first acquisition, and we would expect to start fundraising for this shortly. We also continue to onboard new distributors for EQT Nexus. Fund NAV is now above EUR 600 million, and we expect the monthly inflows to increase during the second half of the year, as we're scaling the efforts in many countries across both Europe, Asia, and Australia. In parallel, we're also preparing for additional private wealth products focused on our core strengths in private equity and infrastructure, and expect to launch a couple of new products, both in North America and in Europe slash Asia, over the coming 12-18 months.
I've said before, we find this long-term opportunity super interesting, but also that it will take time to scale our evergreen strategies and for these to have a meaningful impact on our financials. And with that, I'll hand over to Olof. And next slide, please.
Thank you, Gustav. Investment activity continued during the first quarter at a good pace, with about EUR 4 billion of announced investments, primarily within digital infrastructure, education, and vertical software. As a result, EQT X is now 35%-40% invested, up from the 30%-35% level at year-end, whereas the Infra VI and BPEA VIII funds are at similar investment levels as they were at year-end. Over the past 12 months, more than a quarter of our investments were in healthcare and close to 20% in digital infrastructure. And if we look at it by region, more than 40% of the capital was invested across North America, about a third in Europe, and the remaining part across Asia.
In real estate, the slight pickup in investment activity that we saw in Q4 last year has continued into 2024, and in fact, our investment levels in Q1 have already surpassed the very low volumes that we saw in 2023. Turning to exit activity, it remained muted in the first quarter, with total gross fund exits amounting to about EUR 1 billion. Looking at the market, we'd say high quality assets, they're trading at strong valuations, and in recent exit processes, we've seen engagement from various buyers, including families, strategic buyers, and sponsors. A highlight in the quarter was EQT VIII's successfully priced IPO of Galderma, expected to be one of the largest IPOs in Europe this year.
EQT VIII retained nearly all the shares it held before the IPO, with Galderma using the transaction to raise capital, and hence, the IPO does not add to our exit volumes during the quarter. We're cautiously optimistic on the reopening of the IPO market, but as we've seen only in the last week, there'll be times of volatility, and there'll be windows to navigate, with 2024 being, for example, an important election year. If we look at the broader market, we think the bid-ask spread seems to be more prevalent, either in more cyclical types of companies or those with a narrower universe. With that, I'll now hand over to Kim. Next slide, please.
Thank you, and good morning, everyone. Let's start with a quick look at the AUM development. Fee paying AUM increased to EUR 132 billion during the first quarter, and gross inflows amounted to EUR 5 billion. They were primarily driven by closed out commitments in EQT X and in Infra VI. Total AUM also increased during the period to EUR 242 billion. Next slide, please. During the first quarter, key fund valuations increased by approximately 3%, as underlying performance remained healthy and valuation references were supportive. The portfolio remains robust, albeit, as previously mentioned, there are certain pockets of underperformance. We do not see any systematic performance issues or financing issues. Importantly, all 10 key funds are performing on or above plan. Now, what does that mean?
It means that they are on track to deliver on or exceed the return targets communicated to our clients when raising the funds. We have a rigorous exercise for determining whether a fund is on, below, or above plan. Each quarter, we assess the future projections for each portfolio company, as well as our exit assumptions in terms of timing and valuation. Being on or above plan means we have high confidence in meeting or exceeding the return targets. On a separate note, keep in mind that for funds which are still investing, new investments are added at 1x, and you can thus have increases in the like for like valuations, while the overall money multiple for the fund is impacted by new investments at 1 times.
This quarter, strategy is focused on earlier stage investments, such as EQT Ventures and EQT G rowth, which have previously faced some headwinds, saw meaningful value uplift. Next slide, please. A few words on carry generation. If all our current key funds perform on plan, carry to be realized for EQT AB is around EUR 8.5 billion. When considering the timing of carry recognition, remember that our most recent funds are significantly larger than the predecessors, and in some of the older funds, EQT AB has a smaller share of carry than the 35% applied after the IPO. And as Chris mentioned, we have a young portfolio compared to the industry as a whole. Let me also remind you of the rule of thumb on carry recognition from an accounting point of view.
For a fund to enter carry mode, we should normally have reached a gross MOIC of around 1.7x-1.8x, and usually executed a few exits. So this, in most cases, is four to six years after the first investment. Next slide, please. We saw small increase in headcount during the quarter with some 20 additional colleagues. Hiring is expected to continue in targeted areas, such as within capital raising and private wealth, and the growth will typically be in higher cost functions and jurisdictions. Headcount within central remained broadly flat during Q1. And with that, I'll hand over to Chris for some final remarks. Next slide, please.
Thank you, Kim. So to summarize, we held two strong final closes of EQT X and EQT Future in the quarter this year when we're celebrating our 30th birthday. Having said that, the fundraising environment is still expected to remain slowish until realizations start to pick up materially across the private markets. We continue to execute on thematic investments. You've seen that a number of announcements have come after the quarter, and we have a very strong pipeline of opportunities across all asset classes. We have various exit processes ongoing. However, with a relatively young portfolio, it will take some time before all of that generates carry, as Kim has explained. And we are dependent on the market to remain healthy for the exit volumes to be really strong.
You know our philosophy, if we don't exit, then of course we decide to keep the companies and develop them so they become more valuable over time. We made progress on recent initiatives, including the launch of Healthcare Growth and EQRT, that have announced their first investments, and we're continuing preparations for the new infrastructure transition strategy. In terms of scaling the firm, our central headcount remains flat, and we're really digitizing and sharpening our whole platform every single day, which is great. And we are continuing with strategic hiring in private wealth and in capital raising generally, and in certain growth areas. So with that, I thank you, and we open up for Q&A.
Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now take the first question. It's coming from the line of Magnus Andersson from ABGSC. Please go ahead.
Hello? Hello, can you hear me?
Hello.
Yep.
Yeah, we can. Hi, Magnus.
Yeah. Hi, good morning. Just first of all, on fundraising, if you could tell us why it seems to be a bit tougher than expected to raise Infra VI, since it was up marginally from the eighteenth of January. Also, if on more longer term, if you look beyond the recent and ongoing fundraising of flagship funds, you have been very optimistic about the Infra segment. When do you think that infrastructure, the next flagship fund there, actually could surpass your traditional PE funds in terms of size? Could it be already when you raise the next generation, say, EQT XI and Infra VII? And finally, there, if you see a cap, really, for how large those flagship funds could become. Thank you.
Gustav?
Yeah. I would say, so on the first question, we ended the year at around close to EUR 14 billion. And during the quarter, we raised approximately EUR 1.5 billion. And of course, as you know, starting off at 14, the target fund size is 20. We have six to go. So I think we're tracking towards reaching that target fund size by the end of the year or thereabout. And that's the communication that we have. I think what we had in the Q4 report was that we closed out quite a lot of capital in the beginning of the quarter. And that's, of course, how this works, that you'll have closes rolling.
Some of them will be early in the quarter, some of them will be late, and we'll, we'll try to communicate what, what... Let's say, as, as much as we can during the quarter, and that's what we did on, on January 2018, so to speak.
Yeah. Okay, thank you.
And on your question on the long term, we don't know yet, but, but as you know, there's a lot of growth in infrastructure because there's such a need to transform society. You have the energy transition, you have the digitalization of society, and you also have the aging population, and aging infrastructure all over. Two elements, one is, that we're, you know, buying infrastructure companies and developing those, but they're also investing in real assets, so they're actually using a lot of capital to develop their companies. So the capital needs in infrastructure are great, and the risk/reward is super. You know, you're downside protected with an essential service to society, but you have an upside if you're a great owner. So, I'll just answer it like that.
Yeah. Okay, and I mean, regarding the flagship funds, you're already raising among the world's largest funds.
Yes.
Do you see any... I mean, how large can they become?
Well, nobody really knows, actually. If you look at the largest infra fund in the world, it's EUR 40 billion. It's got a different mandate, you know, lower return mandate than ours. It's rather... You know, we're gonna size the fund so that we can continue to deliver very strong returns. So it may be that the fund has a certain maximum size, but then we can also start to build out newer strategies, like infra transition or a sector strategy or a geographic strategy. It's not just about size, it's also about scope-
Mm-hmm
... and how you develop it.
Okay, thank you. Secondly, if I may, just shortly on exits, you made some exits across various funds here in Q1. I was just wondering if you could tell us for how long you've been working on those exits, if it was the normal kind of six to nine-month exit process periods, or did it take longer?
It really varies. Well, I think what I said last time is that we start very early to prepare exits, because the windows over the last years have opened and shut. You know, a lot of volatility. So Galderma, we've been ready to IPO for 18 months or maybe even slightly more. So it depends a little bit on the situation, but I think systematic, systematically, we are preparing our companies early, our management teams, you know, the capital structures, we're right-sizing those, as we did in Galderma, as an example, to make sure that we have that exit optionality that we now are looking to execute on.
Oh, okay. Thank you very much.
Mm-hmm.
Thank you. One moment, please. We will now take the next question, coming from the line of Hubert Lam from Bank of America. Please go ahead.
Hi, good morning. Thank you for taking my questions. I've got three of them. Firstly, just on slide five, again, I wanted to clarify, so given that 11% of your assets are only held for longer than five years, should we assume a few exits in the next couple of years, just as the book needs to mature, even if the market for exits opens up? Is that, is that the right way to thinking about it? Second question is on BPEA IX. I think Gustav said that he expects that to be activated middle of 2025. How should we think about the size of that? I think the previous vintage was about $10 billion. So just wondering, in terms of, well, what kind of size would you be targeting for that fund?
And lastly, also on Nexus, I think there was... You talked about more gaining access to new distribution channels. Can you just talk a little about that and the process about, you know, getting further distribution channels? Where are they coming from, et cetera? That'd be helpful. Thank you.
Kim, do you want to-
Yeah, should I take the first one on-
Yeah
... on exits? Well, I think you need to combine what Chris said about being prepared. So we do have a significant pipeline of companies that are in exit mode, that are ready for exit, and if the markets are conducive to that, we will exit those. But the bulk of our companies are invested in within the last few years, and there is no rush to exit them in a market environment that wouldn't be conducive to that. So, I hope that gives a bit of color, but it's not, you know, it's not black or white.
Yeah, and maybe I take BPEA IX and Nexus. So for BPEA IX, I would say that we feel that on a relative basis, we are coming from a position of strength in Asia, with let's say, a good performance, good DPI. The integration has gone very well. There is a lot of capabilities added to the BPEA team and how we operate, so to speak. So I think in general, we feel that we are in a great position in Asia, and that we see that that's a market that we will continue to grow on in terms of size and what we do there.
And that, of course, means also that we have ambitions that BPEA IX at least will be a bit larger than BPEA VIII. But we haven't set a target fund size yet, and it will take a little bit of time before we do so. And when we do, of course, we're gonna communicate that. In terms of fundraising, you should expect that to start earlier. And I think previously we communicated that we are preparing, and that we think that we will start that fundraising during this year. So even though it's activated mid-2025, the fundraising in itself will start earlier. And then when in terms of Nexus, I would say a couple of things.
As I said, we're right now scaling up across Europe, Asia, Australia. And the way that we do that is a mix of, let's say, distributors that can handle either several or many countries, as well as certain distributors that can handle a single country. So I would say that we have in the area of, let's say, 10-15 distributors, either confirmed or very, very advanced discussions with, that we expect to onboard during these years. Some of them in the smaller size, that will maybe handle one single country, and some of them larger scale, that will handle several countries.
Thank you. Very helpful.
Thank you. We will now take the next question from the line of Arnaud Giblat from BNP Paribas. Arnaud, please go ahead.
Yeah, good morning. I've got several questions. If I can start with Galderma, the IPO. I noticed there's no change in valuation as a consequence. So is that... Is it the case that there was no uplift on your previous valuation with pre-IPO? That's my first question. Secondly, I'm wondering if the protracted fundraising of the infra fund sort of puts constraints on your ability to invest. If you can maybe give us a bit more color there in terms of, is there a point where you have to stop fundraising if you're over-invested? Because whoever's coming in has the benefit of foresight.
Just wondering, if you can talk a bit more about the constraints in a protracted fundraising environment. You also talked about a six-month gap between, at least between fundraisings. So since you're talking about mid-2025 for BPEA IX, are you in effect telling us that we could see the another flagship being raised in 2026 and activated in 2026? And finally, just a specific question, but you did talk about adding a U.S. distributor. Is that a large wirehouse, I'm wondering? Thank you.
Thank you. Glad you asked the first question. The Galderma IPO, we didn't sell any shares, or therefore it didn't generate directly any carry. But the value uplift was very substantial, actually, versus where we had it in the books. So, you know, when we look at our average uplift of exits versus what we have in the NAV in our reports, it's typically around 30%. And in this case, it's actually somewhat higher than that. So, I think what we meant was, until we sell shares in Galderma at this new valuation, we'll be crystallizing those returns. So that's answering that question.
When there's a question on the constraints, no, there's no constraints on the ability to invest because we are, you know, we're highly confident that we're gonna reach the EUR 20 billion, just like EQT X. It's taking just a longer time to raise. Clients need more time, and new channels need more time, and we'd like to give them that time. And as you know, it doesn't really matter when we close the fund in terms of fees or anything like that. So it's rather that, you know, it's rather that we, you know, like I said, we have a huge amount of deal flow.
So what we're doing is actually trying to say, "You know, we wanna invest over a normal cycle, let's say 3.5 years, over our flagship funds." And then so that means that we are being ultra-selective in making investments. So, there's no problem here, just opportunities in a sense.
Should I do activation and
Yeah
... and the-
Please do
... U.S. side?
Yeah.
So, I think maybe there was a little bit of confusion. I think we need to separate what is a fundraising timeline and what is activation of fund timeline, because those are two different things. So if we take BPEA IX as an example, what I said was that we aim to activate the fund in mid-2025. But it means that we will start fundraising for it earlier. So the activation is around fees and not around time of fundraising. What we then said was that we expect the activation right now for EQT XI to then be end of 2025, and EQT Infra VII to be in the first, let's say, mid-year 2026, so to speak.
And that, of course, ties into approximately three and a half years' investment cycles. I would say that in all those cases, you would probably expect the fundraising to start earlier than the activation, in the same way as we're communicating around BPEA IX. And then when it comes to the question about the U.S. strategies, of course, if and when we go into the U.S. on the private wealth side, in the same way that we're thinking about, let's say, distribution in Europe and Asia, we're doing that in a broad base, i.e., targeting both large-scale distributors as well as some of the smaller distributors.
I would say that the case would be the same in the U.S., i.e., that we would be targeting also the wirehouses. And then, of course, as all of you know, our origin is a European firm, which of course means that from a branding perspective, we have a little bit of a longer journey to do in the U.S. And that's also why it's important for us to communicate that for us, this is really a long-term opportunity, and that you shouldn't expect this to have a material effect in the short term.
Mm-hmm. And if we... I'm not sure we answered it fully on the gaps. You know, in the past, when we had a smaller capital-raising team, we were very careful to spread out the timing between flagship fundraisers. But we've now built out our team globally, and we have more dedicated resources for different strategies. So, that's really less of an issue now than it was in that previous generation.
That's very clear. Thank you very much.
Thank you. We will now take the next question, coming from the line of Jacob Hesslevik from SEB. Please go ahead.
Good morning, and thank you for taking my question. I heard your comment, Christian, on the exit market being muted, and that you don't really expect activity to pick up until the latter part of the year. But my question is, could you maybe shift your focus to some of your investment in listed stocks, as the public market's multiples has come up by a fair bit, and the timing to exit makes a bit more sense for these investments than maybe your private portfolio companies?
Yeah, we have a few public companies, and of course, in those, we're... We're of course always working on how do we best sell down in those. So that's a strategy we're working on, and it's something that takes years, but is well-planned and managed. And when it comes to the exits, I think, we have a lot of exit activity, and preparations ongoing. The question we're raising about the market is, is the market good enough, you know, to take all these exits, and or receive all these exits, you know, at the right valuations? And that's what we don't yet know. But we are more than ready.
We, you know, we have a number of processes ongoing, and it's not just the end of the year, so if we said that, that's actually incorrect. We have exit processes that are already started. We've had some in the first quarter, and we continue to execute on those the rest of the year and going into next year. But as you know, we are. You know, typically, we own very good, healthy companies, and if the market's not conducive, like this week, it would be a, you know, pretty tough week to be in the public markets with a new company. You know, during those kinds of periods, sometimes it's better for us than to keep the companies and develop them rather than going out.
So that's the decision-making that we are taking. But the drive towards exit is clearly there. The activities are there, the pipeline is there, and it's now, it's not tomorrow.
All right, thank you for that clarification.
Yeah.
But then just a quick follow-up: So we shouldn't expect your Public Value fund to divest its holdings in the near term then, I guess?
Well, the Public Value fund is, I think, has a NAV now of EUR 100 million or something, so, that maybe gives you the answer.
Yeah. Thank you.
Thank you. We will now take the next question. The next question comes from the line of Angeliki Bairaktari from J.P. Morgan. Please go ahead.
Good morning, and thank you for taking my questions. Just a few on my end as well, please. So first of all, can you let us know how much of the $4.7 billion of fundraising that you had in Q1 came from Exeter? And if we think a bit more sort of for this year, 2024, and also 2025, given that you're sitting on a lot of this dry powder, what should we forecast in terms of the net fee-paying AUM growth in the real estate business per annum, approximately? I think in the past we had an indication of around EUR 4 billion-EUR 5 billion, so I just wanted to understand whether that could be lower near term given that you are deploying what you've raised in the past.
Second question, you mentioned that you've launched Healthcare Growth. Can you give us an indication of the target size for that, for that fund? And thirdly, you do mention in the release that the Swedish Tax Authority is reviewing the social security contributions with regards to the carry, the taxation of carry. And I just wonder, does it affect only a few individuals, or is it sort of across all of your employee force in Sweden? And would you ever consider relocating? Thank you very much.
Okay, I can start off with the fundraising question. Hi, Angeliki. So of the EUR 4.7 billion fundraise in Q1, most of that would be from infra and from EQT X, and the part that came from Exeter was a very, very small part of that EUR 4.7 billion. As you rightly alluded to, Exeter has some EUR 12 billion of dry powder, and having held off investing for most of last year, whilst also having completed a few fundraisings over the past couple of years, they are now in a position where the fundraising need is relatively limited. And as you pointed out, a part of that EUR 12 billion dry powder will only become fee-paying as it's deployed.
So you will, first and foremost, in the near term, see a gradual increase in their AUM from these investments. There are certain, smaller funds that are in fundraising too, and notably, we've now started to raise a logistics fund in Asia, as you will have seen. But to your question on this, the four-ish or so billion, you should expect that to be a lower number in the near term, taking into account the dry powder and the recent fundraisings that we have done.
Should I comment on the tax? Was that what was left?
Yeah.
Oh, Social Security. Yes. So, the issue at hand concerns certain individuals at EQT in certain historical funds of EQT. And should those individuals be subject to income taxation, that may also lead to EQT being subject to social security cost for those specific funds, historical funds, those specific individuals. So from an EQT AB group point of view, this is not a significant amount. Then you also asked about headquarters. But I don't think we want to speculate on media speculation or comment on media speculation. I just say that the taxation of these individuals is not dependent on where the headquarters of EQT is.
It is about where these individuals are based.
Thank you. And if you could also give an indication on the size of healthcare growth?
Yeah. So, taking a step back, we haven't externally communicated a target fund size yet, so I'm not gonna give you a specific number. What we... The rule that we have is that, let's say if it is on the slide that we presented, it's at least EUR 1 billion of target fund size. So that gives you an indication. I would say that we think that, let's say healthcare growth is something that can be scaled over time. And of course, now, with the first investment done, we see good momentum in that business, so we're excited about the future.
Thank you very much.
Thank you. We will now take the next question from the line of Oliver, Oliver Carruthers from Goldman Sachs. Please go ahead.
Hi there. It's Oliver Carruthers from Goldman Sachs. Thanks for the presentation. I've got two questions, as you think about the preparation for your transition infra strategy. So the first, will LP see this as a first-time launch for a new strategy, or will you get a decent amount of credit for your track record, existing in your infrastructure fund? So that's the first, and then the second, as a follow-up to this: When you think about the opportunity set here, would it make sense, or would it help to think about a larger GP commitment in percentage terms relative to your more established flagships as this launches? Thank you.
Mm-hmm.
Yeah.
Very good questions. We're excited about infra transition. We haven't set the target size yet, but the opportunity set is very, very large. We have a lot of credibility because you're asking the right question. Yes, we've done a lot of similar investments in the past, at a smaller scale, sort of EV charging networks, for example, EV battery recycling companies, which is, you know, based on new technology, electricity storage companies, and a number of other ones. What we'd like to do now is to create a scaled strategy that can go after those opportunities in a bigger way. We haven't decided on the launch date yet either on that strategy, but it is something that we're putting a lot of resources behind.
And then the second question, that's a good one. You know, the GP commitment is something where, that's
... It's a discussion between really us, the team or the firm, the team running the fund, in this case, of course, the infrastructure team, and the clients. In general, you know, we're only launching strategies that we have a big commitment behind in terms of our spirit and our philosophy and our keenness, and we try to back that up with a solid GP commit. But it's far too early to tell where it's gonna be.
Got it. Very helpful. And then just one quick clarification point. I think, Kim, you mentioned that the scope of the social security contribution review was not significant. Are you able to quantify that at this stage? Thank you.
No, I'm afraid I'm not able to quantify that. Again, the review concerns the employees primarily, and they... That's where the review has gone the furthest. We are not subject to any decisions or anything like that from the tax authorities at this point in time. Furthermore, maybe I should just clarify to say that our clear understanding is that we have been following case law in this, or the individuals have been following case law in this matter, and that that has been the sort of... Everything has been done according to the books.
Okay. Got it. Very clear. Thank you.
Thank you. We will now take the next question from the line of Ermin Keric from Carnegie. Please go ahead.
Good morning. Thanks for taking the questions. So maybe want to start off on the kind of long-term MOIC guidance that you give. Is there any rule of thumb or anything we can look at from the outside, you know, that you're using? Like, if a fund hasn't reached 1.5 within a certain period of time, you will consider it under plan or vice versa, if it gets there before a certain period, it's kind of above plan. Anything like that we could look for? Then on the exit side, you've talked about the Private IPOs for a while. When do you think we could see the first time you're kind of trying out this concept? And then lastly, just on the M&A agenda that you've talked a little bit about, could you look at anything within distribution capabilities there?
Thank you.
If I start with the MOIC guidance, no, no, I would take you back to what I explained before. It's not really a function of what the current MOIC is in that particular portfolio. That may be subject to sort of up and down valuations in the quarter, and different strategies have different time to mature. So the MOIC guidance is very much based on a bottom-up approach each quarter on each asset, saying, "Do we still believe in the forecast for that asset, or have they changed?
And do we still believe that the exit can be had at a certain point in time with a certain valuation?" And then you sort of add all of that up, and you get to a MOIC number at the end of the fund life. And that part we are very, very, very confident about. Then, that we can deliver that MOIC to our clients within the range that we mention, on plan, above plan, et cetera.
Thank you.
I'm muted. Thanks. When it comes to Private IPOs, I hope that we'll be able to execute on the first concept this year. Probably will be in combination with other investors coming in, but we will see. That's something we're pushing hard with our capital markets team. And then M&A and distribution capabilities, that is, it's... Put it this way: our business development team, led by Gustav, is evaluating the ones that, you know, there are in the investment side of the business, whether it's a geography or a sector or whatever it may be, a new asset class, and also other capabilities that we may need. And some of our competitors have bought distribution in the U.S.
Most of that has been connected to private credit, so, hasn't been a great fit for us. But it, it could be a possibility, probably not in the near term, but maybe in the medium term when, you know, when the, the types of products that we are, creating for our clients, when they start to scale. So it could be, but nothing, nothing in the near term.
Understood. Thank you.
Thank you.
Thank you. We will now take the next question from the line of Isobel Hettrick from Autonomous Research. Please go ahead.
Good morning. I just have one question, please, on FTE hiring. If I remember correctly, at full year results, you guided to roughly net hiring of 50 FTEs over the year. I just wanted to check, A, does that guidance still stand, and B, if it does, with 21 hires so far this year, should we expect the rest of the hiring to also be front-loaded in the first half of the year? Thank you.
I can't recall that we guided towards 50, but maybe that's the way it came across. I would rather say that the sort of the pace that you've seen here in the first quarter is a reasonable guidance for the rest of the year. Sort of, that would be my impression. But this is now within kind of, I don't know, 1% of our total headcount. So these are very small numbers compared to the total headcount, and things may change on based on sort of small circumstances, whether somebody signs or doesn't sign in a particular time period. So yeah, maybe that's helpful for you.
No, great. Very helpful. Thank you.
Thank you. We will now take the next question from the line of Nicholas Herman from Citi. Please go ahead.
Yes, yes, good morning. Thank you for taking my questions. Some of my questions have actually already been asked, but I do have a couple just outstanding. One on valuation. So I appreciate there are lots of moving parts on fund valuations, but equally, you do use public comps versus valuations of private capital valuations. So could you please help us understand broadly, how much was the value uplift from higher public multiples in the flagship private equity funds, please? That's the first one. And then secondly, just a clarification on Nexus. You called out an expected increase in monthly inflows in the latter part of this year as you scale in countries.
Can I just confirm this is coming therefore, this step up is coming from newly onboarded distributors rather than any pickup of inflows from existing distributors? That'd be helpful. Thank you.
Well, listen, we are typically not breaking down our valuation into all of its component parts. It's like you say, there's a lot of moving parts in terms of public market multiples moving, the underlying performance of the assets, FX factors, the public market or the public companies in the portfolio, et cetera. You have potential exits and uplifts due to that. So there's so many factors that it becomes a little bit muddled and technical if we would go into all of that. But what we've said is that public market multiples have been supportive, and that the underlying performance has been very robust, but some pockets of underperformance.
Then we've talked today about Galderma and some other things here that have also positively impacted the valuations.
Maybe if I take Nexus, I would say, it's a mix, of course, in the sense that, when you think about just from a number of distributors, of course, having, let's say, 20 distributors instead of 10 is gonna be helpful to the monthly flow, so to speak. I would say, when a distributor comes on, you normally have, let's say, a little bit higher inflows in maybe the first and second month, so to speak, just given that it's a little bit of a campaign in the beginning before it becomes a steady state and it more is, let's say, part of their platform.
So, it has a little bit of a bump in the beginning, which of course means that what we're looking to do is to have, let's say, distributors coming in at some, let's say, pre-decided pace that... Which makes it easier for us to ensure that we deploy the portfolio in a way where we have a good sense of the inflow versus how much we're gonna deploy. So, it's a little bit of a, of a play to make sure that we that we do it in a, in a smart way, so that, of course, at the end of the day, that we're able to deliver a good returns for the existing investors, because that's, of course, what's gonna grow this fund in the long term.
Wonderful. Thank you very much.
Thank you. We will now take the next question from the line of Tom Mills from Jefferies. Please go ahead.
Good morning. I know you wouldn't want to comment specifically on a competitor, but I've seen Thoma Bravo are targeting $20 billion for their flagship Fund XVI, having raised $24 billion for their Fund XV. I know that there's no hard cap on the fund that they're raising, so perhaps they're just trying to manage expectations. But do you see a potential step down there as idiosyncratic, or something we might expect to see more widely among players who've been raising EUR 20 billion+ funds in the recent past? Thanks.
Yeah, I don't comment on specific competitors, but, but I think, at least on our Capital Markets Day, I think we showed a chart which, where you can see flagship fundraisings on one axis and investment performance on the other axis. And there's a direct correlation between the size of this current fund generation that's being raised and performance, which is great to see. Some years ago, that was, you know, when interest rates were zero and, and the tide was rising all boats, there wasn't such a big difference. Now, there is a big difference. So, so I think that's, that's gonna give you the answer that you're looking for.
Thank you.
Thank you. We will now take the last question from the line of Haley Tam from UBS. Please go ahead.
Morning. Thank you for taking the questions. Just one follow-up and one on personnel expenses, please. So in terms of the follow-up, I think what you said earlier was that you saw a significant uplift in valuation from the Galderma IPO versus what you were carrying at in your books. And so just so I can understand that properly, EQT VIII, the MOIC was unchanged at 2.2, I think, at the end of March versus end December. So to understand that properly, the uplift was not reflected in that multiple, or do you not... Or are there other things that came down? Or how should I think about that, really, is the question.
The second question, just in terms of personnel expenses, as we see you more hiring selectively in private wealth and maybe on the fundraising and capital raising side, should we expect to see more of the personnel expenses therefore to be on your own P&L? Because those sorts of individuals don't get carried interest. Just help me understand. Thank you.
Should I?
Yeah.
Should I... Should I comment? I mean, on the valuation, I'd say, first of all, there's a fund would typically have 15-20 investments in it, and the concentration would not exceed, say, 15% for one particular asset and typically be way below that. Now, Galderma is a significant asset, but so the impact of one particular asset, even though it would be up X percent, as in this case, will not significantly impact the whole MOIC of the whole fund. And, you know, that's with one decimal, that it may move between 2.0 or whatever.
You know, you see what I mean. It's, there's-- That's just the background to it. You asked about whether more of the cost should be on our own P&L. Well, I think I did mention the fact that the hiring we are targeting during this year is in both higher cost jurisdictions and in higher cost types of roles. So, on average, yes, that would be the case, that the higher part of the, that it would be higher cost for those individuals. Now, the installed base is, if you can call it that, it's 1,850 or something persons compared to this hiring, so it doesn't really move the needle that much.
But that would be the background.
Thank you. Can I just clarify, the fund will typically have 15-20 investments? I thought it was a lower number than that. Just to confirm, that'd be great.
That would be the number in the flagship funds, yes.
Thank you very much.
Thank you. There are no further questions at this time. I would like to hand back to... over to the speakers for closing remarks.
Well, thank you, everybody, for joining us this morning. We know quite a few of you are busy this week, and we appreciate all the great questions and the discussion. So thank you very much, and see you next time.
This concludes today's conference call. Thank you for participating. You may now disconnect.