Good morning, everyone, and welcome to the presentation of EQT's 2023 year-end report. 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 everyone has time to ask questions, we suggest you focus on the most important topics, and as always, we're gonna be available for follow-ups also after the call. And with that, let's kick it off. I'll hand it over to Christian.
EQT's journey through 2023, which was a somewhat volatile year marked by strategic growth, but also lots of new initiatives. First, EQT solidified its globally leading position in active ownership strategies with the full integration of BPEA in Asia. We delivered on our strategic objective to open new distribution channels, offering access to our investment strategies for individual investors, and importantly, we invested with confidence into what we think is a quite attractive market to invest in. In fact, almost half of our investments related to infrastructure last year, making it the most active investment year ever for our infra franchise. 2023 was a year when performance, distribution track record, and ability to generate value from operational improvements were more critical to our clients than ever before. In this softer market, we made good fundraising progress.
EQT X will reach its hard cap in February, and we expect EQT Infrastructure VI to reach its target during 2024. Overall, we grew our management fees by almost 50% last year, and our total AUM is now above $250 billion. Having said this, we did hold back on exits in 2023 in preparation for more benign markets, and as a result, as you've seen, we've also had lower carried interest last year. Finally, seeing the benefits of our scale, we kept headcount largely flat while selectively adding talent in core growth areas. And all in all, we're, I think, very well positioned for the future in what you see as a growing and consolidating market in private markets. Next page, please.
So this year, EQT is turning 30, 30 years old, and as we look back, EQT and our industry has changed profoundly over the past three decades. Private equity, in its early days, was about efficient capital structures, taking risks and finding value plays. And actually, only a decade ago, companies went public to get access to capital. Today, a large share of value creation takes place in private markets, with companies staying private for longer, at least three years longer, actually, and volumes of IPOs are down more than 50% since before the financial crisis. There are now more, far more actually, private equity-owned companies in the United States than there are public ones. So what does this mean for EQT? We have strategies that can support companies from early stage to proven businesses that need scaling to true global leaders.
All these strategies are supported by EQT's deep sector expertise, industrial advisors, and world-class capabilities in areas such as digitalization, AI, and sustainability. What we're doing is really transforming companies and industries, and we address fundamental challenges and opportunities of our time, such as the decarbonization of society, the aging population, and the exponential digitalization of the world. We're continuously striving to improve to be the best possible owner of companies and assets. In fact, we'd like to say we've been forward-thinking from the start, and that's why I think and I'm confident that we're primed to keep winning as EQT enters its next decade, our fourth decade. Next page, please. In 2023, we navigated a challenging market with private equity deal volumes down 40% year-over-year. Actually, while EQT's investment volume actually increased by 60%.
My reflection on that is I would say that our ability to source and execute deals across the world is truly, truly world-class. We're really combining thematic investing and being local with locals in every single country to create a unique sourcing machine. And looking into 2024, there are reasons to be constructive, and we do expect activity levels across the market to pick up. Interest rates have likely peaked. All sources of financing are again available. The IPO market is open, maybe not fully open, but open and opening. And we will eventually see private equity managers having to start realizing assets as their funds mature. Of course, 2023 is not gonna be without challenges. Inflation could turn out to be more sticky than we think. Central banks may lower rates only gradually, as we're seeing in the news today.
Global conflicts may also spread, which of course, beyond the human implications, could elevate uncertainty and also add to inflationary pressure. Also, 2024 is an important election year with multiple geopolitical scenarios and possible effects on global trade. So we're prepared to navigate an uncertain year, but we're prepared to execute well. Our realization volumes were relatively low in 2023, and this, of course, was partly due to the very active year we had in 2021, but also due to the marketplace. Fortunately, we have a quite young portfolio, and we're preparing exits in various forms for 2024, including IPOs, recaps, partial sales, and hopefully even some form of private IPOs that I've been talking about. But our focus will, of course, continue to be on performance in the companies.
And over time, I'm thus confident that we'll continue to deliver top-quartile returns and DPI, which is the cash returns to our investors, over time. Next page, please. 2023 was a landmark year for us in terms of innovation. We opened up new distribution channels, providing access for individuals to invest in private markets through what we call semi-liquid products. And last week, we kickstarted healthcare growth, a buyout strategy focused on scaling innovative, fast-growing healthcare companies. And in fact, EQT has invested over EUR 23 billion in more than 200 healthcare companies to date. So with this new strategy, we add another piece of the puzzle, so we can support healthcare companies in every stage of their development from early stage through growth to the long term, and we do the same thing, as you know, in technology.
In Asia, we introduced the BPEA Mid-Market Growth Fund, where the team has already made four investments, and we broke through the hard cap, and we continued to lean into future-proofing with AI, sustainability, and climate. So EQT's Motherbrain platform now allows deal teams across business lines to leverage collective insights across the world, and we actually manage our deal flow now in Motherbrain. And our experimental team, Motherbrain Labs, developed tools to help our portfolio companies find unique add-ons, unique technologies, and also talent, in fact. So as a further testimony to our leadership in digital, actually, we were interestingly awarded the first-ever patent in private markets on automation and AI.
Now, in sustainability, we're working to really sharpen our pencil and drive growth and revenues from sustainable products and sustainable services across our investments, to really make our companies more sustainable, more resilient, and of course, also thus, more valuable over the long term. And I would like to say the time of financial engineering is over. Now it's really about fundamentally improving companies and assets, and we've also sharpened our best of best value creation value creation methodologies by subsector, across the world. And doing all these things, really doing what EQT has been all about since day one, is being the best possible owner and developer of companies and buildings. Next slide, please. So our clients are now assessing more and more each manager on their ability to generate returns over time, across cycles, and of course, into the future.
So those firms with consistent performance, proven ability to return capital, and the scale, resources, and insights to be ahead of the curve are gonna continue to gain market share. That differentiation is becoming increasingly evident, and we see the larger share of commitments coming to larger funds at the expense of smaller funds or those funds without and firms without a real, real sharp edge. This slide is kind of interesting because it shows the historical performance versus the growth and fund size for a group of large private equity firms funds now in the current vintage. As you'll see, those with high performance are growing, and those with weaker performance are actually shrinking.
So this is one of the first proof points in the larger market where performance really, really matters, and that's, as you know, at the core of our mission. So EQT X grew, is growing almost 40% compared to its predecessor fund, and I think that's a great testimony from our clients and, we're also very thankful for it. Next slide, please. As we look forward, our focus is on four key priorities, all centered around our fundamental philosophy of, of active ownership. So first, performance and exits. Selectively, we're gonna continue to invest in companies and assets supported by these long-term secular growth trends. And, as markets continue to stabilize, we will also gradually increase exit activity. Second, we'll continue to develop our investment strategies, primarily organically, but also through M&A.
The healthcare growth strategy and BPEA Mid-Market Growth Asia are two recent examples, and we're creating strategies which build on our leadership and energy transition within infrastructure. And actually, this is truly one of the biggest investment opportunities of our lifetime, and I think we've all seen the sharpened interest in infra here over the past weeks and months, and we have a super strong franchise that Gustav will talk about. And having done a number of combinations and add-ons within EQT, we now have a real playbook on how to integrate firms together with EQT, but we do remain highly selective.
Third, we're continuously developing our client relationships, being adding new clients, offering more strategies to existing clients, improving our service level, our digital approach and everything, and also opening up new segments, as we've done by accessing, helping individual investors access our strategies in private wealth. Fourth, we're continuously developing our platform while driving efficiencies, allowing for us to have scalable growth, as you also saw there in 2023. So with those words, I'll pass the stage to Gustav, who will now delve into infrastructure, Asia, and fundraising. Next slide, please.
Great. Thank you, thank you, Chris. So starting off with infrastructure. Over the last 15 years, EQT has built a top performing infrastructure franchise, and today we're top three in value add infra globally. We expect infrastructure to continue to benefit from strong growth, driven by multiple factors, including that private markets is playing a critical role as public finances are constrained. Furthermore, EQT is playing a key role in the digitalization of societies through fiber and data center investments, as well as driving the energy transition across industry, most notably in transportation. We've seen a number of strategic transactions in infrastructure over the last six months, much on the back of healthy appetite among clients to invest more in the asset class, driven by resilient returns, downside protection, and low inflation risk nature of the asset class.
In this context, we are very well positioned to continue to take market share by growing our global flagship fund, scaling within the core space, and we're also, as Chris mentioned, preparing for strategies focused on the large opportunity within energy transition, building on our strong track record within the space through our flagship fund. With that, let's move into the Asia opportunity. Next slide, please. As of the start of this year, BPEA EQT is known now as EQT Private Capital Asia, having fully transitioned into EQT's global name and branded identity. We're even more excited about the opportunity set out in Asia today. Macro, demographic, and competitive dynamics are all in our favor, as we are one of the few players with a global approach and local teams in every major region in Asia.
And we have also have strong performance across the funds, but also across the different regions. This, of course, creates exciting deal opportunities. In particular, almost a third of our investments are in India, where we, we've built a very strong track record in software services, and this year, we also acquired India's largest chain of fertility clinics, Indira IVF. Furthermore, Japan is seeing a gradual shift, where over time, we expect this to be a very important market for us, both from a deal as well as from a client perspective. And over the last couple of months, we've announced two deals in Japan, and we expect more to come. We're still in the early innings when it comes to infrastructure and real estate investing in Asia Pacific.
We're today around 10% of our infra investments are in the region, and the equivalent number for real estate is less than 10%. As we've talked about in the past, we expect this to meaningfully grow over time. And with that, let's move into the fundraising side. Next slide, please. So we continue to be in a challenging fundraising environment, even though the denominator effect has abated over the last year as equity markets have come back and clients have started to adjust their alts allocation upwards. However, clients still remain liquidity constrained, having made substantial commitments in the recent years, while realizations remain low across the market. We therefore expect only a gradual improvement in fundraising markets, and fundraising timelines will continue to be prolonged across strategies, also for the flagship funds. However, there are bright spots.
We've seen clients who committed early in the fundraise to come back to increase the commitments as the market has slightly improved. We see large clients investing more and more broadly with us across PE, infra, and real estate, where our scale and breadth really becomes a real competitive advantage. Also, as highlighted on the previous page, that our clients are very supportive of our development in Asia, where we have raised the hard cap of our Asia mid-market growth fund with 40% to $1.4 billion. So looking at our ongoing fundraising activities, as Chris mentioned, EQT X is expected to reach its hard cap at EUR 21.5 billion in February. We've made good progress on EQT Infrastructure VI.
As of today, we've secured commitments of close to EUR 14.5 billion, up from EUR 10.9 billion at our Q3 announcement. We expect to reach our EUR 20 billion target fund size during 2024. In real estate, in 2022 and 2023, we raised three large logistics funds in Europe and the U.S. Given the market environment, we have been restrictive in re-investing this new capital, resulting in that we today have approximately $13 billion of dry powder within real estate. Hence, there will be some time before we raise the next round of larger logistics funds. So in 2024, we will mainly focus on our newer strategies, such as U.S. multifamily, as well as growing our presence in Asia.... EQT Nexus is progressing with good monthly inflow and addition of new distribution partners.
NAV is today amounting to more than EUR 500 million, and as we've previously mentioned, we will continue to scale Nexus over the coming years. Furthermore, we're progressing preparations for additional semi-liquid products with more information to follow during the year. Looking ahead, we expect BPEA, EQT BPEA IX to be the next flagship fund to be raised. EQT BPEA VIII is today 40%-45% invested, with the first investment done in early 2022, so approximately two years ago. As we want to get to 80%-85% invested before we activate the next fund, we have another 40% or so to be invested. We expect to invest this capital at a similar speed as we did in 2023, where we invested over 25%.
Hence, we're looking at an investment period of around three and a half years for BPEA VIII. With that, I'll leave it over to Olof. Next slide.
Thank you, Gustav. As we alluded to in the beginning, private equity deal volumes were down about 40% globally last year, and if you take the IPO volumes, they were down some 30%, or actually 80% if you compare it to 2021. Yet we've had one of our most active years ever with announced investments of about EUR 19 billion. So if you look at our flagship funds, you'll see that EQT X raised its investment levels by 20 percentage points to be 30%-35% invested. Infra VI invested about 30% of the fund and is now 30%-35% invested. And in BPEA VIII, we invested 25% of the fund to be 40%-45% invested. If you look by sectors, we invested primarily in healthcare, technology, and digital over the year.
Less than half of the investments were made in Europe, approximately a third in North America, and we continued to see good deal flow across Asia. As Christian mentioned, infrastructure had one of its most active years ever, with about EUR 9 billion of investments. And if you look at the larger investments that we did in Infra VI over the years, a few examples would include Heritage Environmental Services, a leading provider of industrial waste management in the U.S., Lazer Logistics, supporting the low carbon movement of goods, and Statera, a battery storage platform supporting U.K.'s renewable energy transition. If we turn to real estate, volumes were at around EUR 2 billion for the year. This team saw a continued repricing of real estate assets for most of the year, and therefore held off new investments until Q4, when activity levels picked up meaningfully.
About EUR 6 billion of exits were announced for the year, a multiyear low. So if we turn to 2024, we think it's likely that we're gonna see higher realization volumes compared to 2023. This will include streamlining portfolios, realizing assets in older vintages, and we also have certain larger assets who we think are well suited, some of them for public market exits, for example. Those deals would naturally depend on how equity markets develop, and if we look back in time, markets never reopen in a straight line. For, and for public market exits, in particular, there are certain execution windows over the years. And we'll also be testing different concepts and private market solutions when it comes to exit activity for the year. Next slide, please.
So let's look at how our AUM developed over the years. You'll see that our gross inflows of EUR 24 billion, they were mainly represented by our flagship fundraisings. That was 16 billion of the 24 billion of inflows. Five of that related to EQT X, and 11 billion to Infra VI. If you look at real estate, the gross inflows amounted to EUR 1 billion for 2023. Net of exits and other effects, AUM grew by 15%, whereas the comparable market is expected to have been largely flat in AUM growth last year. All our AUM growth in 2023 is organic, with no strategies having been acquired over the year. Total AUM, which includes fee-paying AUM at value, value of non-fee paying co-invests, and our dry powder, was north of $250 billion.
Next slide, please. Turning to our sustainability efforts, EQT has today supported 29 portfolio companies in setting validated Science-Based Targets, and we have another, approximately 30 companies who have initiated the process of setting Science-Based Targets. We also think that these efforts, in line with our strategic thinking around sustainability, will create more resilient and valuable companies. Separately, we're also very pleased to continue to be a constituent of the most prominent sustainability indices, globally. And with that, I'll leave it over to you, Kim. Next slide, please.
Thank you, Olof, and good morning, everyone. In 2023, the aggregate portfolio across our key funds increased by about 5% in value. Before going into some of the underlying drivers, let me remind you that firstly, we are valuing entire companies and assets, and this is different to the value of a marginal share in the public equity markets. Our valuations tend to be more resilient and move more slowly compared to public markets. As such, we had largely flat valuations in 2022, despite a 20% drop in global public equity markets. In 2023, global public equity markets were up, having rallied in the last two months of the year, and over a two-year time period, global markets are only marginally down.
This is in line with EQT's fund valuations, where some of our prior vintages, EQT VII and EQT VIII, are slightly down, whereas our Infra funds are up over the two-year period. Secondly, in our prior vintages, the value of the realized part of the portfolio does not change. So looking at Infra III, for example, where a large part of the fund is already realized, the valuation has been flat at 2.7x over a two-year time period. Third, in our most recent vintages, we're continuously investing, and every new investment is added at a gross MOIC of 1x, and it, it's only when a fund is fully invested that you start seeing the full value creation effect. Fourth, we apply a combination of valuation methods. In private equity, it's primarily, but not solely, public market reference multiples.
Of the infrastructure companies, many are also valued on a discounted cash flow basis. Transaction multiples, i.e., the relevant multiple for entire companies and control, can be a factor in valuations where relevant. Fifth, we have a very robust valuation process. Reference multiples are consistently applied over time, and in addition to our rigorous internal processes, our fund valuations are audited twice a year. So let us next look closer at some of the fund drivers in 2023. While public markets were higher in 2023, paced by The Magnificent 7, there's a wide distribution in reference multiples for the relevant sectors. In private capital, reference multiples were on average, slightly down, whereas Infra saw somewhat higher multiples on average. Importantly, we continue to see healthy top line and EBITDA growth across the private equity and infrastructure portfolios.
In private equity, top-line growth slowed somewhat, but we expanded EBITDA margins and accelerated EBITDA growth. Our infrastructure portfolio has remained quite robust over the past couple of years, with continued sound performance. About 70% of the portfolio companies in the key funds saw higher valuations. We had a number of companies with largely flat valuations and certain pockets of underperformance. The listed portfolio was down about 10%. This had a negative impact on our overall fund valuations of about 2 percentage points. Turning to real estate, the majority of valuation write-downs were taken already in 2022. In 2023, valuations have remained broadly flat or in some cases, slightly down. We enter 2024 with a strong portfolio. It's thematically invested and supported by long-term secular growth trends.
There are long-term financing structures in place, and we're continuously working hard to drive real value creation by building better companies and assets. Next slide, please. Thanks. Now over to financials. So we grew our total revenue by close to 40% in 2023, and our reported management fees grew 48% year-over-year. Even when adjusting for the full year effects of the BPEA combination, the growth was 20%+. The organic growth was driven mainly by increased commitments from our latest generation of key funds, with some catch-up fees, primarily from EQT X. In 2024, we will also see elements of catch-up fees from funds continuing their fundraising to 2034, mainly Infra VI.
The muted exit activity in 2023, combined with relatively flat valuations, is reflected in our recognized carried interest and investment income figure, which decreased approximately 30% on a like-for-like basis from 2022. In addition to growing our management fees, the focus on operational efficiencies and continuous scaling has enabled us to further increase our margins, which for the year 2023 stands at 54% on a fee-related basis and 58% when including carried interest and investment income. Our adjusted EBITDA figures exclude the non-cash charge related to EQT share and option programs. The effect of the programs will be accounted for as dilution over time. Next slide. Yeah. We've continued to invest in talent and increase personnel, but as you can see, at a slower pace than in the preceding years....
Going forward, select hiring will continue in strategic growth areas, and these areas are, as previously mentioned, North America, Asia, and in particular, private wealth and capital raising generally. From 2024, in order to further increase transparency, we will start reporting also carry based on undiscounted fund valuations, so-called mark-to-market carry. The carried interest and investment income definition in the adjusted P&L remains unchanged and is stated post the fund valuation buffer, serving as a good indication of mid-term expected cash flow. In 2023, we received EUR 150 million of cash related to carry interest, and combined with our recurring cash inflow from management fees, we have a strong cash position and balance sheet going into 2024. Our robust capitalization is also confirmed by our investment grade credit rating being affirmed in 2023 with a stable outlook.
Now over to Chris for some concluding remarks.
Thank you, Kim. So to summarize, in 2023, we continued to innovate for our clients, with the launch of EQT Nexus, EQRT, and a healthcare growth strategy, and also prepping for our energy transition strategy. We really re-accelerated our thematic investment pace despite market volumes being down, while of course, exit activity remained muted. We maintained fundraising momentum, albeit at a slower pace, with the expected finalization of EQT X and Infrastructure VI in 2024. Going forward, we now have an integrated global platform with world-class capabilities to drive transformation. And we have an ability to grow both organically in a market which is expected to double by 2030 and double again by 2040, at least, and also through acquisitions.
In the meantime, we're gonna remain razor-focused on performance for our clients and driving exits and new deals, even as these markets we're in remain a little bit uncertain. On the next slide, before we start the Q&A, I want to invite all of you to our Capital Markets Day that we're gonna host in person in Stockholm on the sixth of March 2024, this year. With that, let's open up for the questions. Thank you.
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. One moment, please. The first question comes from line of Arnaud Giblat from BNP Paribas Exane. Please go ahead.
Yeah, good morning. I've got three questions, please. Firstly, you talk about launching new strategies. I'm wondering, so particularly, healthcare and energy transition. I'm just wondering if you could give us a bit more in terms of the timing and perhaps what sort of fund target sizes you might be looking at. Secondly, thank you for the update on the portfolio evaluation. That was very useful. I'm just wondering if we could zoom in a bit on the underperforming companies within your portfolios and what sort of markdowns you've come there. I'm just trying to understand if there's any meaningful downside risk to valuations there. Finally, in the outlook, you talk about actively evaluating inorganic growth opportunities.
What are the key areas you might be looking at? I think... I mean, particularly, would it make sense to add a secondary strategy given your push into the wealth channel? Thank you.
Thank you, Arnaud. Excellent questions. On fund sizes, it's still relatively early days. We typically, when we're launching new strategies organically, we normally have targets of, you know, kind of in the EUR 1 billion-EUR 3 billion type of size. But as we-- You know, right now, we-- the processes that we go into pre-marketing discussions with clients, we set the size, we set the hard cap, and then we execute on the fundraise. So, I think that's that gives you a little bit of the lay of the land as to how we think about those types of initiatives.
But we're excited about both of them, and we believe that over time, both of those strategies, both healthcare, growth, and energy transition, can scale to significant size, and become real global strategies. On valuations, you want to take that one, Kim?
Yeah. Maybe firstly, just to be clear, there's no sort of general underperformance in the portfolio. There are certain companies which are in good and bad times, that are not performing to our acquisition plan, and there's nothing funny about that. I would say that we are taking markdowns on underperforming companies immediately each quarter. If I would know that there's a markdown, sort of further markdowns to be done, we would have already done them. So that's the marks we have right now are they are our best estimate of the current value of these companies.
And then when it comes to our growth through acquisitions, you know, we have. If you look at the map of EQT and where we are geographically and where we are in asset classes, that's one area we can do bolt-ons within, for example, life sciences, which now facilitated the healthcare growth strategy. So we can invest in early stage growth and younger companies or medium-sized companies, and then, of course, there's also the long term. So we have those kinds of fill-in acquisitions, if you could say that. We have, of course, also a possibility to look at geographic strategies like we have with BPEA, sharpening certain sectors or certain geographies in the world.
And then the third element is what you mentioned, you know, other strategies that are not necessarily directly related to active ownership, but rather distribution and solutions. We're, of course, considering all of these, but right now, as you can see, we're driving also those initiatives organically, pretty rapidly. And so, as we go forward with developing our business, we'll keep you informed.
Thank you very much.
Thank you.
Thank you. We will now take the next question from the line of Oliver Carruthers from Goldman Sachs. Please go ahead.
Hi, morning. Thanks for the presentation. I've got two questions. So if we look at the deployment levels of EQT X and Infra VI, they're both at 30%-35%. And at last year's investment pace, it looks like they could be at two-thirds invested by this time next year. You know, when you think about launching the fundraising processes for successive vintages, how important is it to your clients that we see a pickup in exits and cash distributions first before we get there? That's the first question. And then the second question, on slide 17, you're now showing a fee-related EBITDA margin, which is at 54%. We've seen a few of your U.S.-listed peers recently make commitments to increase their FRE margins by increasing carry contributions to deal teams and offsetting that by lowering FRE expenses.
Is that something that could make sense for EQT at some point, or are you happy with the current setup? Thank you.
Thanks, Oliver. The question on exits is, you have to look at that actually over generations. So if you benchmark EQT, which we, of course, do, in all the dimensions that we can, if you benchmark our strategies against our competition, you'll see that we're market leading in DPI and, you know, cash distribution to our investors across almost every strategy. And that consistency is what the investors look for. So, for a single fundraise, you know, the previous fund generation, just before that, is not gonna be the most important in terms of exits. It's gonna be rather the long-term track record of ability to generate liquidity in the portfolio through IPOs, M&A deals, exits to financial firms, recaps, whatever it might be.
But also, of course, the importance of driving liquidity is, is key, and that's why we're also trying to innovate, and create something, like a private IPO, where we could continue to own some of the companies and make a market in those companies ourselves. But there's no, there's no sort of black or white question. I, I think what's important is this long-term track record, and we have that. On the second question, Kim, do you wanna answer that one?
Yes, and I'd say that, first of all, important to note that we are solely focused on Active Ownership. We are not, we are, we're not driving AUM, but rather performance driven. And for that type of company, we think that the structure we have, with two-thirds of the carry going to the investment professionals and one-third to the house, approximately, is a good and balanced one, that we have thought through properly. I'm not ruling out that there over time could be changes to it, but this is how we are working right now, with a very well thought through structure that has served us well, and continues to serve us well.
Okay, very clear. Thank you.
Thank you. We will now take the next question. The next question is coming from the line of Ermin Keric from Carnegie. Please go ahead.
Good morning. Thanks for taking my questions. Maybe first one on exits. So on slide number 6, you showed how much exits have been as a percentage of average fee-paying AUM, and that one has been jumping quite a bit in the years as listed. How would you think about that one in a kind of more normalized level, more longer term? And then the second question would be, just on the cost outlook, you're quite clear that you are continuing to have some hiring, but could you quantify that pace, anything, or set it in relation to what we've seen more recently? Thank you.
Thanks. The first question is, you know, if we had a liquid strategy, like a hedge fund or something, then, of course, we could drive the kind of volume of exits in a different way. But what the reality is that we own companies and buildings, and we have 10-year capital. So, if the exit market isn't conducive, we'd rather keep the companies and drive transformation, innovation, change, add-on acquisitions, whatever the companies need to become stronger, better, and more valuable. So if you look at another dimension, which is an important one, and if you look at the expectation for, you know, for our key funds, you can see that all of them still expect to either deliver on plan or above plan in terms of returns.
That means that the fundamental value creation, you know, of those companies in those portfolios is going to increase over time and thus lead to exits. So if you look at this year, for example, 2024, we all hope that the exit markets will be more conducive given the elements I talked about. So we're super well prepared to execute on those, but it's gonna be the market that decides. And if the market is highly uncertain, we don't wanna put management teams through that full exit process, because it's a—that's a 6- to 9-month type of execution, and it takes time away from driving value. So that's the balance that we have. You know, we're owners of businesses and not just holders of shares, and that's the fundamental difference.
So hopefully that helps you, not quantitatively, but more philosophically understand how we think about it. And then Kim, for the next one.
Yeah. On head count and cost, I'd say that first of all, like Chris mentioned here, we have built one of the world's preeminent deal machines. So we have an amazing deal-making teams around the globe. And I think our platform is also at a very good and still improving level, supporting that deal team. Will we continue to grow? Yes, we will, but very selectively and sort of not ramping up anything, with the exception of certain parts of capital raising and including private wealth then. I'd say the growth we had in 2023 is not a bad assumption for 2024.
Thank you.
Can I just jump in?
Thank you.
We have a relatively long queue of questions, so I'd suggest for upcoming questions-
No, we can't hear you, actually.
Try to limit to one question as we go ahead, please.
Thank you. We will now take the next question from the line of Hubert Lam from Bank of America. Please go ahead.
Hi, thank you for taking my questions. Since I'm allowed only one now, let me ask... Can I ask you about the Nexus, the progress of Nexus? I think Gustav said you're currently about, like, NAV of EUR 500 million. Just wondering what, can you just talk a bit about, more about the target around Nexus, the timing, and maybe the more developments around the new partnerships you're getting, just a little bit more color on, in terms of the outlook for Nexus. Thank you.
Yeah, happy to do that. I think in general, as we've said, we have big hopes for Nexus to scale over time. But of course, also what we've said is that it will take some time before we're there. So now in the first six months, we are at around EUR 500 million or a little bit over that in NAV. And I think if you think about that on a monthly basis, I think you will get a fairly good feel for, let's say, the monthly inflows on that basis, so to speak. And that, of course, is something that we hope to continue to drive during 2024.
Of course, as we will also add some new distribution partners to that. So, it's gonna be a long-term game, but over time, it should be, hopefully, a fairly substantial part of the offering.
Great, thank you.
Thank you. We will now take the next question... From the line of Haley Tam from UBS. Please go ahead.
Morning. Thank you for the call. One question, that's gonna be hard. If I can, then could you give us any comment? Infrastructure is clearly a key interesting growth area for you. Could you give us any comment on the BlackRock GIP acquisition and how you see that might change the competitive landscape for you? Thank you.
Yeah, and that's why we also mentioned infrastructure. I think if you look at the infrastructure market globally, it's of course a younger market than traditional private equity. We were one of the absolute earliest investors into that market, starting back in 2007. We have the third or fourth largest franchise in the world, one of the absolutely best performing. Today, we have our value add fund, which you know is a EUR 20 billion target, and then we're in continuous fundraising of our active core fund, which is a more longer term strategy, and we're launching an energy transition strategy. So a lot of exciting things happening around infra. There are fewer players out in the world, so it's more fragmented also than private markets or private equity, I mean.
Therefore, I think you see now, you know, with this consolidation that's happening, which is driven by many, many factors, including the fact that, you know, there's something like 11,000 private markets firms out in the world, and that's probably too many. And as we've talked about before, you know, LPs, our clients are reducing the number of GPs that they wanna work with and reducing the number of managers they wanna work with. So there's all these different pressures that are driving capital towards the bigger players, like us and some of the niche players, in the world.
And you know, the other exciting element about infrastructure also is that a lot of the companies need capital to grow, whether it's a data center or a renewables business or whatever it might be. So it's a really exciting area, and it's helping drive the transition of the world. When I look at this deal in and of itself, I don't think it changes that much competitively. But of course, it is interesting to see that the world's largest asset manager is investing into the private markets. So I think it confirms our views that this space in the financial markets is highly attractive for the long term, is gonna continue to grow, and has a huge need for capital and a huge opportunity to invest.
We're excited about it, and thank you for asking the question.
Thank you.
Thank you. We will now take the next question. From the line of Magnus Andersson from ABG, please go ahead.
Yes, good morning. I was just wondering, first of all, you mentioned in Q3 that there's always some positive cyclicality in deal activity in Q2 and Q4. With that in mind, you had a quite significant pickup in Q4 here. Should we see part of that as due primarily to cyclicality, or does it reflect an improved deal environment that could remain into 2024? And on activity, just on exits, you guys for potentially higher exit activity in 2024. If you could tell us in what kind of exit environment you reported carried interest, for example, could fourfold, which is what is implied by current consensus expectations. Thank you.
Mm-hmm. Thanks. I'll start, and then Kim and Olof can add. You know, our ability to do deals and new investments is, as we talked about, actually, you know, we have deal teams now in 22 countries around the world in a number of different sectors across all these strategies, continuously searching for new investments. So the deal flow is actually always quite strong. The question is, you know, when do the right deals go through all the, you know, the funnel, and which ones do we win? Which ones do we ultimately invest in? That's not a quarter-by-quarter type of analysis.
But what we did say, if you remember a year ago, we said that we think that 2023 and the environment we're in is gonna be an attractive one to invest in. So we, of course, activated the machine even more to make sure we took advantage of that, and that's why our deal volume was up 60% over the year, while the market was down 40%. And I think that's an important fact. You know, we're one of the probably, you know, one of the top three generators of new deal investments in the private markets in the world, and that's what we're continuing to build on. And the timing quarter by quarter is less so. Overall, on exits, I think I commented on that. It's hard to know.
We're well prepared, but it's hard to know what this year will bring. So, I'll leave it at that for me, and then I give the word to Olof and Kim.
Yeah, maybe I can comment. I mean, I guess, we can take the exact mathematics offline, but the way I would urge you to think about this is to think about what percentage of carry comes to the house, how big a percentage is carry of the total value created, and what kind of size of exits do we need, thus, in order to create carry, assuming we have, say, a 50% or so discount on the assets that are on the book. So that's sort of the step in math that you need to do to get to it.
We don't know all of the answers on the value creation side or on how many exits and how much exits can be done during the year. Like Chris just mentioned, we are well prepared, and should the markets be conducive, there will be more exits. But if not, we have amazing value creation opportunities as well in the portfolio.
Yep. Okay. Thank you.
Thank you. We will now take the next question. From the line of Nicholas Herman from Citi. Please go ahead.
Yes, good morning. Thank you for the presentation. So my question, just a question, also questions also on, on, on exits. Just, just can I take it more specifically saying, rather than just saying, a more conducive market, is that kind of... Are you looking for financing markets to further reopen higher market levels, or is it if markets kind of stay as they are, then that would be- then you would see the exits that you expect? And can you give us an idea of the expected across-... for those exit routes between IPOs, private IPOs, recaps, rather than let's say, sponsor strategic sales. And then just, then just finally on the, on the, on the, private IPOs, do, do you see other managers using private IPOs?
I just, is there any cannibalization between Private IPOs and LP commitments, or do LPs treat those two pots separately? Thank you.
Thank you. Nick, Nick or Chris, do you want to kick off or?
Yeah, go for it, Olof. You start.
Yeah. Thank you. Thank you. Thanks, Nicholas. On the exit environment, I mean, what is needed and what type of exits are we seeing ahead of us? I think there are differences, both across our different strategies, and different types of exits. You know, as we alluded to, if you take the real estate market to start with, that was very, very slow in 2023. I think the interest rate environment has a very big effect on whether we see activity levels picking up in that segment. If you think about our ability to do IPOs, I think it's a general market sentiment that needs to improve. The IPO market, as you know, will start off with a few deals.
If they trade well, they're priced well, you build confidence in the market, you will continue to see activity picking up in the IPO market. But it's also a market that is subject to windows, right? And a bit back to the previous question on cyclicality over the year. You have a pretty open and clean window in H1, then you have the summer, you will have elections, et cetera, et cetera. So the ability to do IPOs over the year will be dictated by markets and windows. If you look in our assets in infrastructure, they're very resilient assets, typically very attractive to a wide number of buyers.
I think that's a market that is more resilient when it also comes to exit activity, and that's also a segment where we usually have less IPO activity and a higher share of strategic or financial buyers of the assets. So, then to your question on private IPOs, it's something that we are innovating, and the exact definitions and parameters of what that would look like depends a bit, and it depends on the objectives, right? First of all, it must be an ownership model that is good for the company. I think that's a requisite. Then it needs to be a setup that is beneficial to the clients, right?
Where you can mix and match who prefers liquidity and who wants to hold on to quite an interesting asset for a bit more. It's more about finding that market between different types of owners and different clients in that. So, let's see where we end up on that, but that's the principle. Generally, if you look back, in private capital, about 20% of our exit volumes have been through the public markets and IPOs, and the rest have been, you know, M&A or financial buyers to between strategics and financial buyers. I don't think longer term that changes, but if you think about size of companies, larger companies are typically more suited for the public markets.
Some of our exits that we have lined up for this year that were contemplated, they would be suited for the public markets, we think.
That, that's helpful. Thank you.
Thank you. We will now take the next question... From the line of Tom Mills from Jefferies. Please go ahead.
Oh, yeah. Morning, guys. Thanks for the presentation. I just wanted to pick up on Oliver's question on pace of deployment, and in particular, with respect to Infrastructure VI. Is it really tolerable to be back in front of LPs, potentially very soon after doing a final close of that fund and asking them to commit to a seventh vintage? And maybe just contextualizing the pace of deployment. Anecdotally, it feels like some of your peers have been slowing the pace of deployment in order to delay the need to return to fundraising. I guess your approach seems somewhat in contrast with that. So could you maybe share your thoughts there, please? Thank you.
Thank you. Good question. I'll start, and then Gustav can add to it, as well. As we talked about before, if you look at the average deployment timing of EQT, both private equity, and infrastructure funds since inception, we're roughly on a 3 to a little bit over a 3-year type of timeframe. In the current cycle, I would say that, you know, from the first investment, or from the activation of the fund, which is typically the same time, we're on something like a 3.5-year timeframe. And there were 2 periods of time that were kinda off that.
One was the, you know, let's say, the heated times around the pandemic, which went a little faster, which we also said was not something that was sustainable or to be expected to continue. And then during the financial crisis, it was longer. But otherwise, roughly three and a half years, and that's pretty much the timeframe that we're on across strategies now. Anything you want to add, Gustav?
No, I think that, that gives a good picture.
Okay, good.
Thanks.
Thank you. We will now take the next question... From the line of Jacob Hesslevik from SEB. Please go ahead.
... Good morning, everyone. So the run rate for raising Infra VI was at EUR 2.8 billion for second half of 2023. And regarding your comment that fundraising will continue well into 2024, is there a likelihood that fundraising for Infra VI actually will continue into 2025?
Should I-
Do you want to take that?
Yeah. I think you're right in that it was that for the second half, but it was of course also that for the run rate for Q4. Because of course, as we said, after the first close, there is often a, let's say, quiet period, and that is of course has now picked up again. So the run rate in Q4 was the EUR 2.8 billion. And then in addition to that, in the first weeks here of January, you have another EUR 0.8 billion, taking it to the EUR 14.5 billion.
So I think what we've said and what we are saying is that we expect to reach the target fund size of EUR 20 billion in 2024. So that is what we're planning for.
All right. Very clear. Thank you.
Thank you. We will now take the next question... From the line of Jakob Brink from Nordea. Please go ahead.
Thank you. Just to basically back to sort of the same question as the, not the previous one, but the one before that, on fundraising in flagship funds. So correct me if I'm wrong, but it's as far as I recall, EQT X was initiated in the first investment in August 2022. I think you said in your introduction remarks that also BPEA VIII was started in 2022, I think in September, and then Infra VI in December 2022. So with three and a half years, that would put them sort of into 2026. But can you do all three flagship funds in the same year, or how should we look at that, please? And did I hear you correct when you said that BPEA IX would be the next flagship fund you would raise?
Yeah. Maybe I can take that. I think you have the dates a little bit wrong. So what we say is that BPEA VIII was, well, the first investment was in January 2022. So that will then, with three and a half years, take it to, let's say, end of Q2 or thereabout, with the three and a half year cycle. And I think what we're then saying is, I would say that EQT X was started approximately six months later, and Infrastructure VI was another six months later. And I think as Chris alluded to, we're looking at around three and a half years for all three funds.
And right now, I would say the let's say the deployment speed in Infrastructure VI and EQT X is maybe a little bit quicker than what we have for BPEA VIII . So I think that that should hopefully give you a pretty good sense of when we think right now that we will activate the fund. That, of course, doesn't mean that that's the same time as when we will start the fundraising. But from a fee generation point of view, I think that that's a good mark of how you should think about it.
Okay. Thank you.
Thank you. We will now take the next question... From the line of Angeliki Bairaktari from JP Morgan. Please go ahead.
Good morning, and thank you for taking my, my question. Just, maybe a question for me on the Capital Markets Day, in March. At the time of the IPO, you had set some growth targets, if I remember correctly, AUM growth to be above the industry, a range in terms of the, EBITDA margin, and also a range in terms of the current interest and investment income. Shall we expect you to sort of give us an update on those sort of numerical targets? Or, shall we expect, any sort of, changes in, in terms of strategy? Thank you very much.
Thank you. Kim, do you want to take that?
Yeah. You're absolutely right in that we set financial targets at the time of the IPO in terms of growth, in terms of margin, and also a dividend growth statement. The others were more sort of guidance to give you a sense of how the financials hang together. Those financial targets, formal financial targets that we've given, they are still very valid. We have delivered on them and continue to do so. We will probably discuss them at the Capital Markets Day, and there's to the extent those would be changed, that would be a separate press release and a separate discussion point then.
So for now, they are very valid and something that we are working with. Oh, and you asked about strategic changes as well. I-
... the strategy is firm and in line with what Chris has mentioned already here at the early parts of this call.
Did that answer your questions?
Thank you.
Yeah. Good, thanks.
We will now take the next question... From the line of Nicholas Herman from Citi. Please go ahead.
Cool. Thank you. I so I've got another question, just in case we run out of time, because I have a couple of follow-ups, if that's okay. Just a couple of kind of technical questions. Just, one, could you please disclose the level of Catch-up Fees in the second half? And then secondly, the second question, please, was on, oh, God. Well, yes, so yeah, that'll be the question. I'm sorry, yeah, that'll be, that was the question. Thank you.
Thank you, Kim.
Yeah. The catch-up fees for during 2023 was 30 million EUR. And in H2 of that was 17, if I recall correctly.
So, EUR 17 million, is that right? So you said EUR 17 million-
Yeah, around 20. Say 30 for the year as a total. Around 20 in H2. Yeah.
So for the second half then, that kind of implies that then implies like a run rate or recurring management fees of about EUR 1,016 million, EUR 1,015 million, what have you. At 1 point we have EUR 1 million of management fees. On average fee-paying AUM, that implies a recurring fee rate of just shy of 160 basis points. How do I reconcile that to the 140 basis points-142 basis points recurring fee rate that you disclosed in the report, please?
It's a balance sheet fee calculation, actually. It's the year-end AUM per fund and the respective fee that we have in each fund that is weighted to provide the effective management fee rate. But very happy to follow up separately, Nicholas, and we can go through some of the details and modeling related aspects offline.
That'd be great. Thank you.
Thank you. There are no more questions. I would like to hand back over to the speakers.
Thank you. Thank you for excellent questions. We tried to sharpen them today with a little bit fewer. Hopefully, that was helpful to make sure we hit the hard and important ones. Thanks for starting your day with us, and have a great remaining end of the week.
Thank you.
Thank you.
Thank you.