Earnings Call: Q4 2019

Jan 23, 2020

Earnings release

Good morning, everyone, and welcome to the EQT Q4 Announcement. I just want to start with a quick reminder, and that's that we publish updates on our investments and our exit activity as well as our AUM development and the valuation of key funds on a quarterly basis. That means that today we're not presenting our fiscal year financials. They are going to be presented at our meeting on February 12. Today, I'll be presenting in the beginning, then I'll be handing over to Kim Henrikson, our CFO. Casper will then round off the call. We also have Alsah and Pavan from Shareholder Relations today attending. And we'll all be there for the Q and A. So we have a presentation that you should see on screen. Starting with what's Page 2, the highlights for the quarter. The total investments by the EQT funds amounted to $1,900,000,000 here in the 1st sorry, the last quarter of the year. New investments include SHL Medical in Switzerland and Recover Nordic in Norway. Both of those are in EQG8 in private capital. We also invested in MetLife Care in New Zealand through our EQT Infrastructure 4 fund, which is in the real asset segment. On the flip side, we've had quite a busy exit quarter, which is good with a total gross fund exits of €2,400,000,000 Looking at the full fiscal year, which we believe is more interesting actually, it's been a year of record activity. Our total investments by the EQT funds ended up at $11,900,000,000 up 38% versus last year. And we've also there had very strong good exit activity for the year with total exit of $8,000,000,000 and that's about 58% up year over year. Looking at the overall portfolios, we're pleased to see value creation in our key funds developing according to plan, both in private equity and in infrastructure and actually above plan in Infrastructure 3. On the fundraising side, we've been also quite active during 2019. As everybody saw, we announced Ventures 2 at the hard cap a few months ago. We are continuing with our fundraising of real estate that remains with its target of €750,000,000 to €1,000,000,000 And we then ended up at an AUM for the year at €39,900,000,000 dollars This is slightly down versus Q3 and it's natural because it's a result of the positive exit activity, which then, of course, reduces the net invested capital. As a firm, we're continuing to grow. We're now over 700 employees, and we're continuing to build the business for the future. As everyone saw, we recently also announced the Target fund size for E-nine. That's the successor fund to our flagship PE fund in EQT-eight. The target size is set to 14,750,000,000 dollars and we expect the terms to be materially the same as EKTA. And as a reminder, in our industry, there are quite strict marketing rules that restricts public statements relating to fundraising. Therefore, we can't provide additional detailed comments on our capital raising activities. But probably the one question that people will have and that is what is the hard cap of the fund. And we do not set the hard cap until we get nearer to the first close of the fund. So we won't be able to comment more on that today. Back to deals. Yesterday, we announced quite an interesting thematic investment in renewables in India. This is in our global infrastructure business and Infrastructure 4. And with that, Infrastructure 4 is now 60% to 65% invested. And this is a region where we've had cooperation with Temasek for quite some time. Also in this context, a comment on the next infra fund. Here, you should not expect us to be fundraising 2 flagship funds at the same time. So private equity and infra equity and infra will not be fundraising simultaneously. I'll remind everybody that the typical investment pace is about 20% to 25% of a fund per year. However, if this investment pace remains in infrastructure at the relatively high pace that it's at, we will investigate either solutions to bridge or extend the infrastructure for funds. Finally, we have initiated a strategic review of the EQT credit business segment, And we're going to come back to that in some more details with some more details later in the call. So, we can go to the next page and I wanted to just take a step back and remind everybody of the purpose of EQT. Our purpose is to future proof companies and make a positive impact. What we mean by future proofing is really in everything that we do on the investing side, really investing thematically for the long term and pursuing attractive long term secular trends and then driving positive change in companies through, for example, digitalization. Our company should be better suited for the future when we sell them than when we buy them. On making a positive impact, this is something that we have kind of 2 facets. 1 is that we are we do work very hard to transform and improve and develop the companies that we invest in and the assets that we invest in, but it also has a sustainability element. And we're integrating sustainability in everything that we do from deal selection to our value creation plans and actions. This means since we want to make a positive impact with everything we do, it means also that you should not expect us to have a separate impact fund, but rather that we work to have a positive contribution to society and everything we do. On the next page, also taking a step back, we're operating in a growing industry and we are a growth company. We're continuing to invest for future growth and we're well positioned for that. We see quite a lot of opportunities across various investment strategies and geographies. Casper will come back to that a little bit later. And in order to pursue these opportunities, we do need to continue to scale, digitize and automate our business. And we are making quite a lot of investments taking actions to make sure that we have a continued strong platform for the future. We work a lot with our people who are developing the EPT Academy and obviously our push for diversity and gender diversity is a big part of our agenda now and going forward. We'll also continue with a high level of hirings that we have now given the opportunity in the market, and we are expanding our geographic footprint. We are opening both the Perris office and our Sydney office here in Q1. Obviously, we want to make sure that we manage our growth wisely as we have done in the past. Then we go to Page 6. This is a bit more detail on our activities. And on 2019, again, a record year of investments of $11,900,000,000 a continued strong investment pace. And that is really the 2 axes of the EQT being local with locals and driving thematic investing through our sector teams. As our sourcing efforts are really working very well. And our ratio of deal wins is good when we decide that we want to go after something. We're focusing in private equity, primarily on healthcare, TMT, services and industrial tech. And in addition to Infrastructure, we have Energy and Environmental and Transport and Logistics. In both of the flagship funds, we have quite a few bilateral and proprietary deals even in this market, which means again that our the way that we source and find deals is working well. However, the market of course is super competitive, very high valuations for assets, lots of competition from all kinds of sources, strategic buyers, IPO and financial buyers. So we're focused on situations where we have clear angles and where we can really add value to the business. So we're looking at buy and builds. We're looking at really good companies and strong industries that where we can help them accelerate. And given where we are in the cycle, we're looking for non cyclical businesses. We apply our fully our value creation toolbox to everything that we do. We try to shy away from broad auctions. And on the financing side, we do spend a lot of work with Jim and our team to make sure that we have long term robust financing structures that can, if a storm comes, that can survive a more turbulent time. And in general, we do have plans for all of our companies if a turbulent time would occur. But before I move on, I'd like to mention a couple of deals that are, I think, are quite thematic and interesting. The most recent one, Netlife Care in New Zealand, our first major transaction in Asia Pacific for some time. This is a $1,000,000,000 operator of and developer actually of retirement villages, providing a continuum of care for seniors in New Zealand. It's a social infrastructure deal proactively sourced by our Asia team who are based in Singapore and now shortly in Sydney. This is really leveraging our thematic approach in our healthcare sector experience as well. On the exit side, we've had quite good activity, like I said, and we've used the relatively good market now to finalize some older funds, such as EKG Greater China II, ended up with quite strong returns. And also taking care of and exiting some portfolio companies across the group that haven't performed so well. And those are always more difficult to sell. So, we're quite happy with that achievement also. One example of a super thematic investment and also exit is AutoStore that we sold in the middle of last year. That's our Norwegian robotic warehouse system. We sold it to another player in the industry who will continue on the growth path of the company. During that ownership, Autostore was transformed into a global automation leader. We quadrupled sales and EBITDA compared to the time of acquisition, and all that growth was purely organic. Actually, margins also went up during that time. So, the sourcing of that deal was classic, these 2 Axies in a regional local team visiting the company up in the fjords of Norway, together with the thematic industrial tech team working together. And the 2 of the those 2 axes actually made us both win the deal and also help us develop the company. That's actually the 5th best deal in EQT's history in terms of MOC and the best deal that we've done, the best exit that we've done in the last 10 years. So the reason I mentioned that is that we believe that our approach to the market is working quite well. So that's what I wanted to cover on business and investment activities. So with those words, I hand over to Kim. Thank you, Chris. Thank you. Let me start with a reminder of our business model. I know I've been through this slide before, but it's an important one that EQT is a performance driven firm, which means that everything we do start with generating good and consistent returns to our investors. And we are convinced that these good fund returns in turn will drive our assets under management, which as a result will generate income both management fees and carried interest and investment income to EQT AB. And as before, our cost base is mainly people, employees and other costs driven by the number of employees. So how are we doing on performance? Well, first of all, 1 quarter is a very short period for our business model. But the thematic investment approach that Chris mentioned, our value creation toolbox, our focus on digitalization and sustainability is playing out well. So you can see here on the chart that value creation is good. We continue to develop on plan for all our private equity and infra flagship funds and even above plan in one of the infra funds in Infra III. AUM increased with 9% in 2019, driven primarily by the Infra IV fundraising, but also Ventures 2 and other funds. But we also continue to grow our net invested capital in some of our funds such as EQT7 that has continued to make new add on investments in the post commitment period. Some of the gross inflow was offset by exits, as Chris mentioned, which then reduces the net invested capital. So at the end of Q4, AUM stood at SEK 39,900,000,000. There were no major movements in AUM in the Q4 in that period. During that period, we did close out the Ventures 2 fund with approximately SEK 620,000,000 dollars in fee generating AUM, which was offset by exits and reducing the net invested capital base. On the back of the EQT9 announcement last week, we thought it might be relevant to remind everyone also about how the management fee model works. So a few points on Page 10. Firstly, when a fund is raised, management fees are charged as a fixed percentage rate on the committed capital. And as we've mentioned many times, a successor fund is normally starting to invest when 80% to 90% of the predecessor fund is invested. And when that successor fund starts to invest, the predecessor will start charging management fees on the net invested capital. So that is what is called a step down. There is not a step down in the management fee rate. And then over time, as the predecessor fund exits companies, the net invested capital then declines. After 8 to 12 years, the fund is typically terminated. Also a brief reminder of our carried interest recognition on Page 11. The rule of thumb that we have given out said is that you should expect a fund to start recognizing carry when you have gross Moik in the region of 1.7x to 1.8x. And you should usually have made a few exits. This would typically be but there is wide variance typically be 4 to 6 years after the first investment. And you can see here that in Q4, our gross moved up somewhat in the 2 relevant funds here, which means we are getting close to recognizing carry in EKT7. However, we reiterate what we said before that we do not expect carry in interest income from in 2019 from that fund. And then you can ask why not given the rule of thumb. Well, it's exactly because it is a rule of thumb. It's not an exact science. But we are expecting to be in carrier recognition mode soon on EQT7. Moving over to the employee base. We've had continued growth in employees in 2019, adding about 105 net new employees. As mentioned, FD plus is a good indicator of our overall cost base. And as Chris said, we will continue to scale and digitalize our business and to pursue growth opportunities. So therefore, for this year, 2020, we will continue with our high level of hiring given the current opportunities in the market. But at the same time, we will ensure to manage our growth properly, of course. But you should expect most likely more net FTEs in 2020 across geographies and investment strategies and broadly similar growth percentage as in 2019. With that, over to you, Kasper. Thank you, Kim. As Chris said, we are reviewing the strategic options for our credit business. And by means of background, credit has developed well since inception some 10 years ago. It has €3,900,000,000 in asset under management at year end, which is roughly 10% of our total AUM and around 6% of our revenues. The growth prospects are good. However, these growth avenues that we see in credit are in areas that are further away from EQT's core strategy as illustrated on this graph. So when EQT, we think that we can make a strong impact and fully utilize the EQT platform and our U. S. Piece. That's where we see the core of our strategy. And when we are in sort of less influential and more commoditized products, we see our edge is not that strong. And for this reason, we have initiated a review of the future strategic options for credit. We're still early in this process and no decision has been taken. However, we have appointed JPMorgan as a financial adviser. In the meanwhile, this would be business as usual during the process. And I also think that the decision to review strategic options for credit should be seen in the context of scaling our business. We believe that all our investment strategies, we should operate them at scale. And this means we will continue to drive the growth initiatives in ventures with growth in public value, in APAC and in real estate. And in the case of credits, growing this business would be in areas further away from EQT score. And I must also add with a bit less in common to the rest of ICT also on the operations side. And that's sort of the main drivers for doing this strategic review. In terms of timing, we aim to have concluded this review before summer. And also to be clear, all options are on the table, including also a sale. So that was it on the strategic review. Chris, back to you. Thank you, Casper. Final page here, a recap of our financial targets and our dividend policy. These remain unchanged and that are they are the first one having total revenue growth exceeding the private markets long term growth rates. We talked about that over a fund cycle, so for the long term. Profitability, our target over the long term is an adjusted EBITDA margin of 55% to 65%. And our dividend policy is to generate a steadily increasing annual dividend in absolute euro denominated terms. And we do expect the Board of Directors to propose a dividend of €200,000,000 in respect to fiscal 2019. And what we've announced before is that we expect those to be paid in 2 equal parts here in 2020. So with that presentation, I think we are ready to open up for the Q and A. Our first question comes from the line of Arnaud Dziepla of Exane BNP Paribas. Please go ahead. Your line is open. Yes, good morning. I've got two questions, please. Firstly, on the comments you made about not fundraising to flagship funds at the same time. So do you need to have hit your final close on Fund 9 to be able to launch Fund 5. And you also mentioned that you're looking at options to extend Infrastructure Fund 4. Does that is it possible to go to the LPs to say to ask for extra commitments in Fund Forward? Is that what you're talking about in effect? And my second question is on the strategic review on private credit. You've clearly mentioned that it's non I mean, it's not where your focus is, but the outlook is good. I'm just wondering, is the idea that you're trying to get extra bandwidth for management time to focus on the business that matter? Or are there any other constraining factors that is limiting you when thinking about the business? Thank you. Very good question. Thank you. I'll take the first one and Kasper will take the second one. On the timing, there are some there are lots of contingencies here. We are any decision will be dependent on our investment pace. What we do know now is that we're starting the fundraising of or have started fundraising in EBITDA 9. And what we also say is that we don't have the capacity and we don't think it's appropriate to try to raise 2 flagship funds simultaneously if that were required, if Infrastructure 4 continues to invest at this higher pace. Exactly the timing between fundraisers is not something that we have yet deliberated. So I won't be able to comment on that. With regards to the solutions that are out there, there are actually quite a few. There is the one you mentioned, which is extending the size of the fund with the current LPs. There's utilizing the secondary markets in different ways. And there are bridges to the next fund. So there are a number of different alternatives. And if we continue with this investment pace at a higher level, we will dig into which one of those solutions is the most appropriate for the fund actually and that's also for EQT. And obviously, we will keep the market informed if we take any major decisions. Yes, sure. And I think your question on the conclusion, I think, I mean, let's first, we haven't concluded on the strategic review. It's still a review. But I think you're spot on in the sense that the way that we think about this and life in general is, of course, that we need to focus our resources, whether it's management time or it's capital, etcetera, on we can't do everything, right? So focusing the resources would be one thing that we'll look into. And the other thing is reducing complexity in our business. And of course, if we keep adding products that are different, both from an operational perspective as well as from an investing perspective that adds the complexity to our business. Great. Thank you. Thank you. Our next question comes from the line of Petr Kiesikov of SEB. Please go ahead. Your line is open. Yes. Good morning. So, three questions from my side on the strategic review. The first one is, I mean, why now? We know that going back to the IPO, it was quite clear that this was a niche segment. But what's happened now compared to some 6 months ago when the IPO process was ongoing for you to make this decision? Then just in terms of a small reminder, are you able to say anything in terms of what the fee model looks like and the fee levels look like in the credit side? And then just finally, I mean, are there any synergies really with the credits and the other strategies and your operating platform? Or is it just or is it so that they're close to none and that's pretty much why you're taking this decision? I think I'll take these questions. So starting with why now, I think I mean, it's basically we've come to a position where we have to make some decisions, both on the credit side in terms of strategies and in terms of growth perspectives as well as the rest of equity. And that sort of puts us in a position where we sort of need to make up our mind what we really want to do. And so that's what triggered this review. And your second question on fee model, I think we also covered this in the prospectus in the analyst presentation. But I think the fee model for credit is slightly different than for the rest of the firm. It's typically the majority of the products are where are the fees are based on deployed rather than committed capital. So the sort of revenue curve looks different. And then of course, credit products in general terms have a lower management fee level per AUM, so to speak, which is also then the reason that if you look at our AUM, 10% and revenue 6%. That is how the math works. And sorry, your last question, synergies on the operating platform. I think there is of course some similarities, but credit funds are there to some extent, but not as synergetic as the other funds are together. On the front end, it also depends a little bit on the product, but what you can say is that the more commoditized products like CLOs, etcetera, there is very limited synergies with the remaining the rest of EQT. If I may just shoot a follow-up question on the why now. I mean, going back to the IPO, one of the I believe one of the areas where you would use your own balance sheet in order to fund new strategies could potentially be CLO. And you mentioned that product in particular. And then now you're coming with the strategic ARU. Is it so that something has changed in the general pricing environment within the credit strategy that there's pricing pressures and so on, which are perhaps making it less attractive? No, I don't think there's nothing that has happened sort of between then and now in that perspective. I think in general terms, I think where you see a fee pressure in this industry in general terms would probably be more in credit than in the others. But that hasn't changed from a half year until now. That remains the same. I think we have we are using the balance sheet to fund our CLO expansion. So we are doing what we said that we were going to do. But that again, it puts the finger on, is this the way that we should spend our resources in growing CLOs, which is not a bad business. It's actually a fairly good business, but is it our business? And I think that's the big question. So I think very relevant questions from you. And maybe I should add that I think we're also we have a very large strategic agenda with a lot of initiatives and activities. And that also puts us a little bit on the spot where we need to make up our mind where we should focus the resources. All right. Thanks. Thank you. Our next question comes from the line of Jakob Brink of Nordea. Please go ahead. Your line is open. Thank you. And good morning. Just three quick questions. The first one is on coming back to the business unit credit. How many FTEs are employed in that segment roughly? Roughly 40. 40. Okay. Thank you. Then also partly related to what we talked about before. I think, Christian, you mentioned that you did not have the capacity to do fundraising in 2 major funds at one time. Do you maybe consider maybe doing some changes to the way you do fundraising then going forward so that wouldn't happen? Or is this extending Infrafor a good solution or good enough solution? Or how do you look at that? That's a good question. And we are given that we have multiple fund strategies, we're always raising several funds at the same time. The one thing that we think is probably not the right use of resources would be to try to raise 2 flagship funds at the same time because of the intensity of the effort and the size of fundraising and just the sheer number of employees globally around the world. So that's the decision that we've taken. And we do actually yes, your question is right also is that the solutions that are out there, we've used them before even 10 years ago. So those kinds of solutions are relatively straightforward to implement and we think is probably the best way to move this if we get into the situation where we would be needing to fund it at the same time or at the same time, we're not yet. Those solutions are good and we're quite confident they will work. Okay. Thanks. And then just finally, just so I understand, how would the terms be, let's say, go out and raise new money to Infra IV from not the current LPs, how would the terms be? Just I mean, is this is it very so I guess there must be some way that this is their money, this is their investments or how would that work? Yes. Given the I mentioned 3 of the solution possibilities earlier in the call And depending on the timing, the size and which route we go, there are quite a lot of variables there. So, I think it's actually too early for me to comment on that at this point in time. Okay. Thank you. Thank you. And our next question comes from the line of Patrick Vitellius of ABG. Please go ahead. Your line is open. Hi, good morning. I have a question regarding the number of FTEs. You said that we can expect more FTEs in absolute numbers in 2020 compared to 2019 here. So how is that expected to be divided throughout the year? Is it equally or first or second half? Can you shed some light on that? Yes. It would typically be so that the second half of the year would have more net hires just because of the way the finance industry work with bonuses, etcetera. So that would be typically. Do we have an exact plan per month how it's going to look like? Yes. But is it always going to play out exactly like that? And so that's And how is this connected with your strategic overview within the credit segment? Are you still going to hire within that segment? Or is that a little bit on hold? It is business as usual in credit during the strategic review. Okay. And what about the cost per FT? Has that changed anything in will that change anything in 2020 compared to 2019? We're not going to comment on that at this point in time. Okay. No further questions from me then. Our next question comes from the line of Mike Warren at UBS. Please go ahead. Your line is open. Thank you. Just to get back to the fundraising question with regards to Infra V. I believe given that you closed Infra 4 in November 2018 and EQT8 in May of 2018, there might have been a bit of an overlap when you were doing your last round of fundraising for your flagship products. Was there anything specific A, I guess can you confirm that there was an overlap back then? And then B, was there any specific lesson that you learned, any takeaway, any challenges coming from clients that are impacting your decision to ensure that you're not doing overlaps in terms of fundraising this time around? Thank you. Actually, there was no overlap. We made the first investment or commitment actually to EQT8 in May or so, but the fund was actually closed in February, if I remember correctly. It might have been March, but I think it's February. So there was no there was actually no overlap in the fundraising at that point in time. But the lessons so we haven't actually we haven't tried to do this. So we don't have any explicit lessons learned, but it's rather if you can imagine, we have in both of those flagship funds, we have more than 100 institutional investors globally. Each of those investors need a lot of time, attention, care, information, visits, etcetera, in order to commit their capital to us for the long term, which they are. And we really want to respect that. We want to spend the appropriate time with them and therefore structure the fundraise so that it's as positive an experience as it can be, even though it's tough for us and it's tough for the clients actually, these big projects. So it's rather that. It's rather our own internal process and our client service mindset that's driving it. Thank you. Thank you. And our next question comes from the line of Gertrude Campbell of JPMorgan. Please go ahead. Your line is open. Just two questions. Firstly, you obviously had a pickup in the investments that you've made during 2019 versus 2018. Could you just perhaps give us some color in terms of perhaps the size of the investments? Have you seen a pickup in the average size of what you're investing in? That's the first one. And then secondly, just on the exit environment, any color on where the investments are being made, whether it's IPOs, whether it's sort of P firms or strategic buyers? Thank you. Yes. I would say the given that we're growing over time. We're growing our funds in size. We're doing that, of course, not in the same geographic footprint, not always in the same thematic investment area. In other words, we're expanding both geographically and thematically. So there's not a direct correlation between our increasing size and increasing deal size. But we have, in 2019, made some very large transactions like Zayo, like Alderma. So if you were to look at an average, there is certainly some more equity capital being put to work. Although, as I mentioned before, we've done these kinds of large transactions all the way back from since the early 2000s with companies like ISS and GAMRA, etcetera. And sorry, what was the second question? Just to clarify. The exit environment, it really depends on the what we try to do is we try to buy companies that have all three exit alternatives possible. So IPO, trade sale and financial sale. And if you look at EQT's portfolio, we both on the buy side and on the sell side, we do do somewhat less or fewer secondary sales and purchases than others. So last year, we did a number of strategic sales, we did some financial buyer sales and we also did some IPOs. And I would expect that also for this year where the exit environment continues to be pretty strong and we have a combination of all those elements this year as well. Okay. Thank you. Thank you. Our next question comes from the line of Rhys Hamilton at Morgan Stanley. A couple of follow ups on sort of fundraising on the credit business. So just to check, given you've already started fundraising EQT-nine, where does this become a crunch point for infra? So I. E, if we were expecting infra is raised sort of second half twenty twenty one, Is that kind of doable on the normal fundraising time line? I was trying to assess where how big the gap you might have to bridge in timing terms. And then secondly, on the credit business, I think you said 6% of revenues at the moment come from this. So if we think about, say, we're to completely exit the sort of gap in terms of revenues and profits, would the profits similarly be around kind of 6%? And then linked to that, I guess you've done a really good job with partnerships, Wallenberg, 10 2nd, so forth. So I know it's very early in the process, but would partnership perhaps be the most likely outcome or we should think more clean break on the credit business? Okay. Thanks. I'll take the first one. The and I understand why you're trying to ask the question. You're trying to extrapolate when we would actually be fundraising into 5. 5. And what I can't tell you that, obviously, well, first of all, because it depends on us getting to the 80% to 90% of the fund committed, which is something that's going to happen at some point in the future. When that happens, then we'll evaluate the bridging option if we need it. And when we then deploy that additional capital, then we would go into fundraising. So the exact timing is actually that's just kind of the logic of how it probably will work, unless there isn't any overlap and then we could actually go into fundraising directly. So I can't be much more specific. What I can say is that once we formally start fundraising as we did last week with EPT-nine, our flagship funds are the bulk of the fundraising typically happens in about 6 to 7 months. Not that it necessarily closes that quickly, but that's where the bulk of the work is, gives you a little bit of a feel for the intensity of it. Okay. That's helpful. Thanks. And on the credit side, so remind me, what was your question? Sorry. So I guess, well, twofold. 1, and this is probably this may be tough, but on the strategic review, I guess, if I look at EQT's business model, you've been very strong on building business through partnerships, Temasek, one of those family connections and so forth. So is that the sort of the natural approach one should expect or rather than a clean exit was point 1? And then secondly, on the sort of I guess, if we look at our models and think 3 years in the future, the sort of gap in revenues of, let's you're saying 6%, I think, is the current revenue contribution from credit. Is it similar to profits? So if we think about how much you would need to make up through other growth, for example, to meet these expectations? Yes. I think let's start with sort of the possibility of doing some sort of partnership setup. I think as I said, I think all options are on the table and that would be one of them as well. And I think I mean, the honest answer is we have not made up our mind what is the best route forward. We haven't made up our mind to find out. And as soon as we think that we have come to that conclusion, we will let you guys know. But I think so that is on the table. Let's see. I think if you look on the margin of our business segment, credit in the first half was sort of 5% of the sort of EBITDA of the divisional EBITDA at a 38% margin, so slightly lower margin than we have on the PE side or the real asset side. And that is basically reflecting that it is a slightly different business model with lower fees. I'm not sure if that answers your question, but sort of that's as far as I can go. Okay. That's helpful. Thank you. Thank you. And our final question comes from the line of Roberta De Luca at Goldman Sachs. Please go ahead. Your line is open. Hi, good morning. The first question is on credit. You said business as usual. Does that mean you're still expecting to launch a CLO with the proceeds, primary proceeds from the IPO? And then the second question, still on your strategic review, sorry. At the time of the IPO, I remember you explained to us that the reason for having set up the credit business in the 1st place was basically mainly a request from clients to have a diversification within your portfolio. And obviously, that's a trend we've kind of seen throughout the market. So I wonder how you assess basically this issue in your strategic review? And then final question, investments. We've talked, I think, a bit about the size of the investments. But I guess more specifically maybe in Q4, we've seen slightly lower investments. Obviously, it's just 1 quarter and there's not much read across probably, but maybe it would be helpful to hear a bit more the market environment and the trends you've seen and kind of your expectations for this year? I'll start with the sort of credit questions and then Chris can maybe take the investment phase. But on the credit on the silo side, we are deploying money from the balance sheet to buy the assets, to be able to sort of print the first CLO. So that is work in progress. So as said, we continue with business as usual for credit until we've sort of taken a decision. And on your remark on sort of the our clients' request, I think that's a very valid point. As we've said, I think the synergies on the back end of our business and on the front end are sort of maybe diminishing a little bit. I mean to find out how our clients think about this is also something that we are doing during this review. There has historically been sort of a somewhat of a push from them and we but this market has also evolved. So let's see what we where we end up here. I can maybe add to that, Dose. If you look at the CLOs, typically our clients are not investing in the CLO themselves. So back to Casper's comment on where the credit business is moving is also a little bit away from our core LP base. So on the market, I wouldn't actually read anything into a 1 quarter of deals. Of course, we reported because we're required to, but 1 quarter is a little bit short. And as you've seen, after the quarter, we announced a number of deals. We announced SHL Medical. We announced MetLife Care. We announced the O2 Renewables Investment in India. And of course, those have been deals that we were working on in Q3 and Q4, but they happen to be finalized here in January. So I think it's better to look on a 12 month basis because then you get some of the seasonality out. And on the 12 month basis, I think the market route, as I said earlier in the call, is still quite good. There is some bifurcation. I would say that for high quality assets, there's a huge amount of interest in competition, both on the buy side and on the sell side. For lower quality assets or more cyclical assets, it's more difficult. It seems though now as the world is expecting the low interest rate environment to continue for quite a long time and the world economy to continue to grow slowly but surely and be a little bit more stable. So it may be that there might it may be that some of the more cyclical companies could come back into interest, but that is not what EQT focuses on. So that's more from an overall market point of view, what we kind of see is happening out there. We're focusing, as I talked about earlier, very much on our thematic investment strategy in our sectors and our geographies. Was that the final question? Just to see if anyone else added to the list? No further questions at this point. Okay. Very good then. Then thank everybody for your participation. Excellent questions. And we look forward to talking with you in a few weeks when we come with our financial results. Thank you very much. Have a great day.