Earnings Call: Q3 2021

Oct 20, 2021

Q3 2021 presentation. During the past quarter, we have taken further steps to future proof EQT for continued growth. We have taken our sustainability agenda to the next level, continued to invest in EQT's operating platform, and we've improved the lock up structure, which was put in place at the time of EQT's IPO. Together with Christian, Casper and Kim, we will today talk about more about these aspects as well as fund valuations, which are developing very well, activity levels and the development in AUM. After the presentation, there'll be a Q and A. As always, in order to ask questions during Q and A, you need to be dialed into the conference line. And with that, I'll hand over to Christian. Next slide, please. Thank you, Rolf, and good morning, everyone. I'm excited to present to you a number of steps we've taken to build a stronger EQT for the future. We announced this morning the official launch of the EQT Future Fund and our longer hold strategy within private capital. The EQT Future strategy strengthens EQT's platform wide commitment to make a positive impact. I'm proud to say that EQT as the first private markets firm globally has set science based targets in line with the Paris agreement and more importantly, committed that our portfolio companies We'll do the same. We continue to be busy when it comes to fundraising and we're currently preparing for EQT 10, a long term core infrastructure strategy and Ventures 3. Investment and exit activity continued to be good during the quarter at €8,000,000,000 and €5,000,000,000 respectively, supported by the market conditions seen during most of the period. EQT's mission is to create superior returns for our fund investors in a responsible way. And I'm very happy to see that all of our strategies are performing very strongly and we're driving value creation across the board. Importantly, EQT8 is now expected to perform above plan and EQT7 and INFRA3 continue to develop above plan as well. Having said this, the global economy is facing potential challenges when it comes to inflation and higher rates as well as supply shortages and increasing energy prices. As for others, EQT would also be affected by a slowdown in the global economy. But we also see strength in EQT's sole focus on active ownership strategies. Our value creation agenda builds on active ownership and transformation of companies, not financial products. And we do this in sectors driven by long term secular trends. We continue to invest in people in our platform and we're now approaching 1,000 or 1100 actually employees across the globe. We announced the recently strategic hires in our sustainability team and our new heads of Private Equity and Infrastructure in Japan have now joined us as well as Head of Infrastructure in Korea. In September, we took a proactive step to improve the lockup structure we'd put in place at the time of the IPO. Less than 2 years after the IPO, EQT had already delivered where we expected to be after 4 years based on the plan set at IPO. This meant the IPO lockup was outdated. EQT realized a need to improve the structure to the benefit of EQT and our stakeholders. The result is that partners will reinvest half of the net proceeds from the offering into EQT funds, aligning the interests with our clients. In addition, we've nearly doubled the lockup duration. EQT has more control of the shares after the sell down And the final expiry of the lockup is now taking place 9 years post IPO for our most senior partners. Casper will come back with more details on the revised structure later. We're also continuing to invest in EQT platform across people, Technology and sustainability, which as Kim will talk about, will drive costs as well. As mentioned in our first half update, We continue to look actively for M and A candidates that can strengthen EQT in line with our strategy and our culture. Next slide please. In the last few months, we've taken important steps to strengthen EQT's ability to make a positive impact at scale. We'll also support our portfolio companies on their journey towards having their own science based targets Our 4th target relates to the real estate funds The EQT real estate fund set up which will set out to reduce indirect emissions by 55% per square meter floor area. And EQT Exeter targets will be coming in due course. As recently announced, we've strengthened our sustainability team with the appointments of Bahar Hakshenes and Sophie Walker. Bahar has assumed the overall responsibility for sustainability globally at EQT And Sophy is partnering with the investment advisory teams throughout the lifecycle of an investment. So we welcome them again. Next slide, please. This morning, we officially launched EQT Future, EQT's impact driven longer hold fund. EQT's purpose is to future proof companies and make a positive impact, and this applies to all of our strategies and everything that we do. We have a firm wide approach to embed positive impact into every investment. Together with our science based targets and EQT Future's impact driven investment thesis were raising the bar further for EQT and ultimately for all of our investment strategies. EQT Future is a natural extension of our strategies within private capital. EQT's active ownership strategies already span from ventures to growth to market leading companies in equity. And now with EQT Future, we have a strategy that can invest in companies with market shaping impact potential, where transformation actually requires a longer ownership horizon. We also have the ability to partner up with long term investors through a more flexible mandate. With EQT Future, we have the foundation to grasp the most exciting opportunity and responsibility of our time, which is to support businesses that can really accelerate change for the benefit of the environment and society at large. Investments will be made in line with 3 key objectives: planet, safeguarding resources and protecting our climate People, improving mental and physical health and prosperity, creating equality of opportunity. We've set a target of €4,000,000,000 for the Equity Future Fund, while no hard cap is set yet. As previously announced, management fees for the EQT Future Fund will be charged on invested capital during its full term. This means that management fees will be charged only as and when Investments are made by the Fund. The Fund will also have a carry structure partly based on impact related KPIs and the overall carry is somewhat lower than in EQT Equity. Next slide, please. Each investment EQT Future Fund makes needs to have a clear impact thesis. That is why we have established an impact management framework designed to drive impact both at portfolio level and at company level. And these will cover Reduction of greenhouse gas emissions using the science based targets, of course, improved employee well-being aiming to progress towards top quartile employee NPS scores and gender diversity, we will aim to progress towards a minimum fifty-fifty split of the top 20% earners in the portfolio companies. To achieve these ambitious targets, EQT Future will deploy an impact acceleration plan for all its portfolio companies. In addition, EQT Future will apply EQT's active ownership model to accelerate sustainable transformation of companies alongside creating long term good risk adjusted returns. We've made sure that interest are aligned with EQT Future. And an example of this is that up to 20% of EQT Future's Total carried interest will be linked to achieving the portfolio level impact KPIs. EQT Future will also be supported by a diverse mission board that will provide strategic direction and impact focus advice. The Mission Board is going to be co chaired by Jacob Wallenberg and Paul Polman, and we look forward to announcing additional members within short. And with that, I hand over to Casper. Thank you, Christian. Next slide, please. Okay. Let me next highlight a few points when it comes to our upcoming fundraisings. As previously mentioned, we expect that the flagship fundraisers to be on a relatively short cycle given the healthy investment pace that we currently see. That as well as a very strong performance we see across the EQT funds. We are making preparations for EQT10 to start fundraising in early 2022. We expect that fund to be activated at some point during 2022. And fundraising will likely Take at least a year from start until final close. When it comes to size, it's still early days And keep in mind that we are 1st and foremost performance driven, not AUM driven. But having said that, we don't really see any Structural limitations to growing the fund meaningfully. And there are other funds that are significantly larger than EQT9, which is a €5,500,000,000 fund. Again, early days and no decision has been made yet. So updates will be made as and when a decision on target fund size has been made. Infrastructure 6 could be launched after EQT 10. And but we will not be fundraising 2 flagship funds in parallel in their active phases just as before. It is more likely that we follow a similar sequencing as we did when it came to the recent fundraisings Of the IKT9 and Infra5, where Infra5 was launched when the active part of the IKT9 fundraise was materially concluded. We see scope to grow the size of our flagship infra fund as well, but it's also too early to comment on this And we have not even had a final close on Infra5. In addition to IKUT 10 and Infra6, we are making preparations for the Infra core strategy, the long haul strategy of infrastructure as well as ventures 3. We're continuing to strengthen our commitment to APAC with the recent appointments of the heads of Private Equity and Infrastructure in Japan. We're also building the team in Korea and we opened an office in Sydney last year and we continue to see interesting investment opportunities across the region. But given the accelerated timeline for EQT 10, we have however decided to postpone the launch of a dedicated APAC fund. In the meanwhile, we continue to invest across the region through our existing funds. As we look ahead, we also see scope to continue to grow EQT's global platform through specialization when it comes to sectors and or regions like we do now with the longer hold strategies. Finally, as mentioned in our first half update, We continue to evaluate various M and A opportunities, but the bar continues to be high both when it comes to cultural as well as strategic fit. The situations we're currently reviewing would be more add on like to complement Our presence in certain sectors or strategies. Next slide, please. Next, I will share some background on the decision to revise and extend our lockup structure and the placing of shares that partners did in early September. Given EQT's strong performance since the IPO, The original lock gap structure had become obsolete and we faced a few challenges which we set out to proactively address. EQT AB share was up over 5 times since the IPO and the amounts that were due to be released In 2022 had become far too large for the market to absorb. Broadly speaking, What used to be a €1,000,000,000 in release shares in September 2022 had become €5,000,000,000 in release. The lock up expires were scheduled for September 2022, 2023 2024, I. E. Effectively more than €20,000,000,000 in releases over 24 month timeframe. That we saw was not something that we could actually execute on. In addition, we had no right to coordinate any partner share since after 2023. So in short, this was not a prudent structure anymore. Furthermore, with fundraisings being well ahead of plan At the IPO, we saw the need to free up capital, especially for some of our more junior partners to invest in the EQT funds. The investment professionals are all expected and required to have significant investments in the EQT funds, which serves to strengthen the alignment with our clients. The EQT share was also relatively illiquid and by releasing shares EQT had the opportunity to diversify the ownership and improve liquidity somewhat. All in all, there was a need to change the structure, but also an opportunity to do it in a way that could benefit all of our stakeholders. Next slide, please. Let's have a look at the new versus the old structure. The revised structure nearly doubles the lockup duration. To put this in perspective, a normal IPO lockup in Sweden is 6 to 12 months. Already at the IPO, we set a longer structure, 3 to 5 years, given the importance of our people. This was the longest lockup ever in Sweden at that point in time. Now we've extended the structure to end in 2026 for some partners And for the most senior partners in 2028, almost 10 years post IPO. This structure is very much aligned with EQT's very long term approach and mindset. The revision included the release of less than half the shares, which would have been otherwise released in 2022. The remaining portion of the original 2022 release was moved into 2023. In addition, the selling partners have committed to reinvest at least half of the net proceeds from the sale into EQT funds. This was not the case in the original look up structure. On average, the partners sold about 11% of their holdings And still retain about 83% of the shares held prior to the IPO in 2019. So to sum it up, longer lockups, Prolonged coordination, improved stock liquidity and increased customer alignment through increased fund investments. Those are basically the 4 components that we believe that we achieved. As you will have seen, the Swedish FSA is reviewing whether EQT should have disclosed information in relation to the contemplated lockup provision differently. In our opinion EQT has acted correctly and we took expert legal advice throughout the entire process. We therefore welcome the review and we are responding to any questions that the SFSA may have. To the extent the SFSA would come to the conclusion that we should have acted differently, we will learn from it. But we will not comment further on this topic today. And while the investigation is ongoing, we will of course provide further updates if and when appropriate. And with that, I hand over to Olof. Thank you, Casper. Both exit and investment activity continued the strong trend from Q2. Notable investments included Parexel by EQT9 and Covanta, Minotidio Logi, BLIK and EdgeConnects by Impro5. This means deployment continued at a good pace. EQT9 is now 65% to 70% invested and infra5 is 60% to 65% invested. We will increasingly focus on creating co invest opportunities for our clients. We expect this to reduce the equity needs for new investments and all else equal, thereby also the near term deployment pace of the key funds. In terms of exits, a number of material exits were announced across funds. Notably EQT 8 announced the sale of iGenomics to VitroLife and the partial exit of Acelis. Furthermore, EQT 7 realized more of its holding in Satara and EQT Infrastructure 3 sold to Delta Fiber. Next slide, please. EQT 8 has a strong portfolio and we see the current gross margin at 2.6 times. We have therefore upgraded the expectation for EQT8 to perform above plan. This means the we expect the fund to deliver a gross MoiC of more than 2.5 times. Furthermore, EQT 8 has had 4 exits, of which 2 are partial and the fund has been active for over 3 years. Our rule of thumb criteria for when we typically expect to recognize carry in our accounting have thereby been met. Note, however, that the Fund is relatively early in its lifecycle. 2 of the 4 exits are IPOs where the fund maintains meaningful holdings. It will take several years for EQT8 to realize all its holdings and the valuation of the unrealized portfolio will naturally be affected by broader market conditions. EQT7 and Infra3 both continue to develop above plan. While value creation is developing well across all key Funds valuations are also supported by public market benchmarks, which remain at high levels. To the extent we were to see material market correction, our fund valuations may be impacted as well. So in summary, we see strong fund valuations and a continued active exit agenda. And with that, I'll hand over to Kym. Thank you. Thank you, Olof and good morning everyone. And let's start by having a quick look at the development of our assets under management. AUM was broadly stable in Q3 compared to Q2. As you know, the AUM base in older funds is reduced with the cost of investments as the fund exits holdings. So we saw €2,400,000,000 of exits closed during the quarter, which resulted in a small decrease in AUM compared to Q2. And as we look ahead, some of the previously announced but not yet closed exits will impact AUM in Q4 and Q1 next year. The step down in Q3 is mainly related to the mid market Europe being fully invested and thus ending the commitment period. In terms of inflows, fundraising is developing according to plan. In Q3, we had inflows mainly from ongoing fundraisings in EQT Growth in Infrastructure 5 and in Exeter. AUM growth is expected to accelerate again during 2022 based on the various upcoming fundraisers, which Christian and Kasper outlined earlier. Next slide please. In order to continue Future proof EQT, we will be hiring more people in areas such as client relations and capital raising, in tech and in fund operations, but also across EQT's investment strategies. In Q3, We added another 85 FTEs and we have a large number of people expected to join in Q4 and H1 next year as well. And all of this is in order to ensure that we have the resources to deliver on EQT's high activity level and also due to some catching up with the hiring pause we had in place during the early parts of the pandemic. So far this year, we've added over 400 people of which about 230 joined us from Exeter. Today, approximately 260 of the total FTE plus base are Exeter And together with EQT's existing real estate business now makes up almost 300 persons. The relatively large number of people supports The unique operating model of EQT Exeter, which does its own in house leasing and on the ground deal making and therefore helps drive the top rental performance of EQT Exeter Funds. Next slide, please. A few comments on our financial targets starting with the EBITDA margin. The 69% margin we reported in H1 was partly inflated by the retroactive fees representing some 3 percentage points of the margin as mentioned in our H1 report. As we look ahead, our long term target which should be seen across the fund cycle of 55% to 65% continues to be valid and also in light of us continuing to hire to support the growth. As I just mentioned, we're currently making and will continue to make significant OpEx investments in our platform. We have previously said that we expect to grow net FTEs by approximately 100 persons per year. As said, we added 85 FTEs in this quarter alone and the cost will naturally only apply to the time period from when they join. So there will be an uplift already this year, but the full effect on the next year's numbers. And based on the current hiring pace, we will have a meaningfully higher number of people joining us also next year. We expect thereafter there to be adding well above the net 100 people on a yearly basis as we grow from a larger base. The cost per FDA may over time also increase a bit as we grow globally. Fund valuations are strong, partly supported by a generally higher valuation levels in the market and we continue to drive exits. Should this market environment remain, we may continue to see further carrier recognition this year. As Olof mentioned, EQT 8 is now meeting the rule of thumb criteria we have set for carry recognition. The fund is performing above Plan with evaluation of 2.6 times and the fund has already seen 4 exits of which 2 are partial. Conversely, we are monitoring the potential implications of inflation and potentially higher interest rates as well as the impact on the world economy and on general valuation levels from factors such as higher energy prices and constrained supply chains. And with that, I would like to open up for questions. Thank Once your name is announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial 2 to cancel. Our first question comes from the line of Ermin Kari from Carnegie. Please go ahead. Good morning and thanks for taking the question. First, a few questions on the EQT Future Fund. Will that now include anti Semex and be activated from basically from today, because you mainly mentioned that you're about to start Fundraising of it. And then also if you could talk a bit more about target size of the holdings you're looking for. Is it possible to recycle capital? What fee structure should we expect apart from invested capital? Is it still The same fee level. And you mentioned that the carrier structure is a bit different. Could you elaborate a bit on that perhaps? Thank you. Thanks for the question. I'll leave Kim to handle the timing of antisemex and the structure. As we mentioned, the fees will be on invested capital. So that means that as capital is deployed into the companies in the portfolio, we expect, Say around 10 companies to be in that portfolio, management fees will then be will be charged from that point in time. The carry structure is given it's a very long term fund, we're looking to make substantial capital gains. The target multiple invested costs will be around 3.5 times the money over an 8 to 10 year time period. And in order to align the best we can with our clients, we set a carry structure or a carry percentage, which is a little bit lower than in the normal equity and infrastructure value add funds. The size of the investments given that the target $4,000,000,000 We have not yet set a hard cap, and we're going to have around 10 companies in the portfolio. The average equity ticket We'll then give itself at around SEK 400,000,000, but we're looking to do somewhat large investments in this fund as well like anti Semex. So we expect significant co investments as well in the strategy. So I think that covers A number of the questions. Kim, do you want to comment on timing of Yes. The future fund will start charging Management fees when Antisemix is closed which it should do shortly but has not done as of yet. And then as Chris mentioned, it's on invested capital, so it will ramp up from there rather than start immediately at the full fund size. Got it. Thank you. And then on I suppose this is relevant for several of the funds. You mentioned that you're looking To do more co investment. How do you think about that philosophically? I suppose your clients aren't Paying for that service, they get more exposures than they kind of directly pay for. Does that kind of create any Conflict of interest between other LPs that aren't allowed to do the co investments? And also does this Require you to basically come up with more ideas to still deploy all the capital. Thanks for the question. We've been We at EQT and the market has been doing co investments with our clients since the beginning actually. And the way that we think about it from the EQT side is that it facilitates actually a better portfolio construction. So if we do a deal that's maybe 20% of the fund, but we'd like to allocate only 10% of the fund in that deal. We will bring Our clients into the transaction to make to get that better portfolio construction. From the client side, It gives them an ability to allocate capital to certain themes or certain sectors or certain companies that they particularly like. When it comes to fees, it's I'd say most of the co investments we do are not fee generating, But there are some that are. It depends a bit on the investment strategy and the situation itself. But that's a Yes, case by case type of structure. So from a conflict of interest point of view, We don't really see that because we have a very open and transparent process to offer co investments to our clients. And yes, like I said, we have been managing that for a long time and we have people internally in our capital raising team who are responsible for making sure it's handled in a good way. All for making sure it's handled in a good way. Thanks. Just one last question perhaps if I may. On the M and A side, you mentioned that you're actively looking for additions. Obviously, EQT has been growing quite rapidly. You're approaching 11 Now do you see any challenges with kind of maintaining your culture, which At least from the outside appears to have been a big key driver to delivering the performance you have in well ever since EQT was founded basically. Yes. That's incredibly important. And as you heard Casper comment on as well, there are really 2 criteria we look at when we're growing and Expanding, both when we're hiring individuals, but also when we're looking at M and A. And that is strategy and culture, and culture obviously being Ultimately, the most important and why after quite a long time, we found EQT Exeter as the kind of the first significant move that we've made, but has a very similar value base and culture as ours. So we have what we do is without going into too much detail, we really build values and culture into everything we do, Every hiring situation, every promotion situation, every time there's a leaving situation, coaching on the ground at EQT, Everything is really related to that. So even if we're growing quickly, our whole machinery is set up to make sure that we continue to build on our values culture, which is at the core of EQT. And that is, I'd say, if I turn it around, What's our limitation to growth? It's not necessarily to the market potential because as you know, the private markets industry is growing rapidly and is Quite large, but it's rather making sure that we get the people in the organization right. So a lot of efforts going into that and that will continue. That's super helpful. Thanks for taking the questions. Thank you. And the next question comes from the line of Hubert Lam from Bank of America. Please go ahead. Hi, guys. A couple of questions for me. Firstly, can you give us an update on how the exit environment possibly has changed over the last month, given the greater market volatility? And Has there been a difference between the IPO market and say, trade sales? And I guess the other question based on that is, can you any guidance you can give us on performance fees Yes, I'll comment on exits. Yes, there has been actually throughout this year, there have been pockets of volatility. And now also during the past 4 to 6 weeks, There's some more uncertainties in the global economy with energy prices spiking and problems with property, large property companies in China, possible inflationary tendencies, etcetera. So of course, we're quite wary about that. But if you look at our exit performance and The companies we've taken public recently like SUSE, like Azelis, those are performing well. And I think that they are doing so because we have With our investment strategy, which is quite thematic, quite long term, following these secular trends in society, those Companies have quite a good potential. And when we're doing IPOs, we also want to make sure that we set up the company to perform and that we have a good and positive aftermarket. So overall, I think the exit market actually will continue to be quite strong. There's a lot of capital out there. Interest rates overall remain quite low. And there are strategic buyers, financial buyers, IPO opportunities and Family owned companies that are interested in continuing to grow and develop. But having said all that, there is more uncertainty. And of course, when there is, that might mean that some exits are either postponed or stopped. Maybe I should comment on the carry part. As before, we're not giving Numerical guidance on our sort of carried timing. I think the way we look at it is always over the life of a fund and I think thereby the importance is really what kind of gross moiQ we are expecting over the life of the fund. Having said that, as we mentioned already here in the formal part of the speech, there are some important funds that have not met Our rule of thumb and therefore should the markets continue as they are would be in carry recognition mode. I'll stop there for the time being. Great. Thank you. And the next question comes from the line of Mike Warner from UBS. Please go ahead. Thank you. Two questions and kind of maybe follow ups with regards to EQT future. First, in terms of sourcing your acquisitions, obviously, Antisemex This is coming from your existing fund range. Do you plan or how do you think about the mix, the optimal mix in terms of Potentially sourcing external investment ideas versus those sourced internally from existing EQT investments. And then second, I think the longer hold strategy absolutely makes a lot of sense. We have been seeing some other private market firms Increasing their exposure to more permanent capital vehicles. And I was just wondering, your thoughts on permanent capital vehicles and how that Could or could not potentially fit into EQT's long term strategy? Thank you. Yes, very good questions. Thank you. On the sourcing side, We plan for EQT Future to utilize EQT's global network. We're in 23 or 24 countries now. The future team is really integrated into the total private capital team, so it has a lot of resources and benefits both ways. So by far, the majority of companies will be sourced externally. Now we have the first one being sourced internally, It was the last investment in that fund and a company which we believe we can really help to transform over the coming 8 to 10 years, Actually not only the company, but also that whole industry and making it much more sustainable and future proofed. So that is a unique situation and is one of the few ways that we will once in a while continue to hold an investment for the longer term to always say run with the winners to make sure that we can continue driving value creation for a longer period of time. When it comes to permanent capital, looking to Casper, do you want to reflect a little bit on our discussions there? Well, yes, sure. I think the I mean, there are, of course, some so called permanent capital vehicles out there. I think it's more common on the real estate And we also have it on the real estate side in terms of It's basically what we call more managed accounts. So it's indefinite in terms of time, but it's not permanent capital as such Because you still have a client that can take the capital back. So I think that It's suitable in certain situations and in certain areas, but I think maybe it's In my opinion, it's a little bit exaggerated sort of the it sounds great with permanent capital, but I don't know How permanent it is, so to speak. So I think we're obviously looking into what we can do and what makes sense to us, but it's And there will be more growth in this for us as well. But I don't think we don't put sort of form over substance. Thank you, Casper. The other thing I can mention is when you look when we're going to inform further about infrastructure core Over the coming months, that is going to be a significantly longer strategy than even EQT Future. But permanent capital, you just heard our internal debates. We're here to really create value and drive long term returns for our clients. And we do that in strategies that have an active ownership element to it. And therefore, we don't we're not planning either to have Any kind of passive products that are just kind of there on the balance sheet. Thanks. Thanks guys. Appreciate it. Our next question comes from the line of Maxi Liedel from SEB. Please go ahead. Yes, good morning and thank you. I believe most questions have been answered here, but perhaps you could shed some light On the Exeter Industrial Corp. Fund 4, I don't think if you Anything on size, timing we have that you are starting it now, but if we could Do you you want to start a little bit on maybe talk a little bit about Exeter's multiple different strategies? Yes. I mean, what we can say is, of course, we have on Exeter, we have a number of products. So and you can say you split them into value add and core or core plus And we do that on the industrial side and we do that on the office side. And there will probably be other Industry verticals within real estate that we will also explore. And this also then applies to U. S. As well as Europe. So there's a lot of so it's a different type of fund setup for Exeter with in terms of Each individual funds will be inherently much smaller than on the equity side as an example. So I don't think we've communicated the target sizes of these funds, And I don't think we will either. And but the individual funds as such are not very big. But I think overall, we're pretty happy with the development that we have in on the fundraising side in today. And it continues to develop well in line with our plans. Also the underlying exited funds are performing very strongly. So on an overall, We're talking SEK 5,000,000,000 or more like size 10 than, I mean, the EQT 10 size at least? Yes, I would say even smaller than that. I think, Ecotex there has not had funds that are bigger than €2,000,000,000 €2,500,000,000 I think are the maximum size that we've seen. Yeah. It's not and it's not that it they will never be bigger, but I think it's The way we cut that market and slice and dice it quite specifically and also a fairly rapid deployment period, They will not be huge funds. That's not how they're constructed to be. Okay. Thank you. And the next question comes from the line of Bruce Hamilton from Morgan Stanley. Please go ahead. Hi, morning guys and thanks for the presentation. Just two questions from me. On the sort of the high net worth Or retail opportunity. Obviously, in the last flagship infra and PE funds, you had a kind of modest allocation. But how should we think about that Going forward as you move to raise your next sort of flagship funds and new strategies, or is there just so much demand from institutional clients that it's kind of not a priority For the near term. And then secondly, just on fund sizes, I mean, I think you alluded to scope to raise In a new flagship funds that are worth a fair bit bigger. I mean, should we look at the sort of historic step up in fund So I think the last one was what, 45% bigger for PE and 65% for infra or given the already Fairly substantial size of those. I presume we should say that a bit, but I just how we should think about that. Thank you. Thanks, Chris. First of all, on retail private wealth, We have now a team internally that's responsible for that and a partner Peter Biske Nielsen who Building up our capabilities and strengthening it. So we've both in EQT 9 and then for 5, we've increased The total capital that's coming from that channel, same we're seeing in EQT growth, which is great. In the next fund generations, We're going to continue to increase and it's coming from several sources. One is the private bank network. Also, the digital channels are growing. And of course, we have our own overall industrial advisory network around the world. So And this is something that's going to continue to increase. We haven't set publicly a target yet, but it is a significant initiative and we're making, I'd say, good progress to build our presence in those channels. What we're not going to do though is there There are certain ways to create a product that's more suited to a retail channel. We think about it differently. We are working to create products that where we can really perform very, very well for our clients And then we'll make sure that those products are also able to be sold through the retail channel in the appropriate way. And then maybe on fund size, I give the word to Casper. Yes. And maybe also to comment because I think we did comment on the infra6 And sort of the high net worth share and we've said that it's sort of it's not insignificant. I think It's high single digits in terms of percentage of the fund size. I expect that over time to maybe increase, but It's not going to overtake anywhere in nowhere near the institutional capital. But it's going to be a growing part for sure. When it comes to the fund sizes, I think it's too early to tell. But I think it's a little bit dangerous to start thinking about percentage increases. I think we already between 8% and 9%, we started talking about you shouldn't really look at The percent increase between 7% and 8%, the more guidance is maybe more the absolute terms in increase between the fund sizes We said then and I think without we haven't concluded on size yet, but I would still say that's Probably the more right way to think about it rather than as a percentage increase. Great. Thank you. And the next question comes from the line of Tom Mills from Jefferies. Please go ahead. Hi, good morning. I I was just looking at the pace of deployment that you've seen. Obviously, the level in 3Q was It was about 2x the average in 1Q and 2Q. And I just wondered how does the pipeline there Look, obviously, the sort of investment period for EQT-nine has been quite compressed as we're seeing elsewhere In the industry, but do you feel like in the near term, the ability to deploy This kind of rate could continue into your new kind of flagship buyout launch? Thank you. Thanks for the question. The this is private equity, the private markets industry It's not a liquid flow. It's really dependent on A lot of work for a very long time in sectors and geographies to unlock transactions. So the pace of deployment that's now there is partly of course because of market conditions being really good, but it's partly a result of also the way we work in our sector Teams and actually being the only private markets firm in the world that's local with locals in every country that we're investing in and both of those enable us To both source deals but also manage companies in a good way. Right now you've seen we've done a lot of exits and that of course also gives more space to make new investments and not on acquisitions. So having said that, the pace of deployment Faster than history. That's the last cycle has been around 2 years, maybe a little bit more. Historically, since 1994, we've been investing on 3 year cycle, I think we said before that when times are not so good like during the financial crisis, it might be a 5 year cycle when they're particularly good. And we have the capacity as we do now to do deals and it might come down even below 3 years. We still think about our investment strategies as the large ones as still being on a 3 year cycle. When it comes to the short term, I won't really comment on that directly. But of course, we're Given that we've been successfully investing both the flagship funds now relatively rapidly, we're highly selective in the next transactions that we are investing into. We're always selective, but let's just call it even particularly selective now. That's helpful. Thanks very much. And we have one more question from the line of JC Herman from IA Capital Markets. Please go ahead. Good morning. Sorry, good morning. With EQT owning First Group in North America and First Group being a major supplier to the oil companies in the tar sands in Northern Canada. Is there further investments and development coming from EQT for the tar sands? And is it part of EQT's environmental strategy going forward? Thank you. I actually don't know exactly how to answer that question. I don't recognize Company and we're not involved in that sector at all actually. Well, we own one company and But we're talking First Group, isn't that the public transport? That's the yellow buses. The yellow buses. Yes. Okay. Can you repeat the cadet and then I thought actually you were Referring to something totally different. Could you repeat the question if it's related to the is it related to the school buses in the U. S? Well, my understanding was EQT is a major supplier to the oil companies in the tar sands in Northern Canada. Is that correct? Yes, I think you might have that you might be thinking about EQT Corporation, which is an American company in the oil space. We're a Scandinavian private markets firm. So we don't have any involvement with that. But we do have under the name of First buses, we have we do own the largest school bus company in North America, which we're Which actually is on a really interesting transformation journey where I think the deal is closing pretty soon and our plan is to make It's to convert those buses to more sustainable energy, let's say, electrical vehicles most likely, possibly hydrogen, which will be more safer and healthier for the environment. So that's the only thing I can comment on. Otherwise, we have no activity in tar sands or anything like that. Okay, fair enough. Thank you very much. Thank you. And as there are no further audio questions, I will hand it back to the speakers for closing remarks. Thank you very much, everyone, for