Hello, everyone, and welcome to Onex's 2023 Investor Day. I'm Jill Homenuk, Managing Director, Shareholder Relations and Communications. It's great to see all of you. Thank you for joining us, both in person and online. Before we start, I want to draw your attention to the usual disclaimer and cautionary factors relating to any forward-looking statements discussed in the presentation, whether as part of remarks or responses to questions and relating to any private offering of securities. Actual results could differ materially from the conclusions, forecasts, and projections discussed in the presentation, as certain material factors and assumptions were applied in drawing conclusions. I also remind everyone that all references to dollar amounts are in U.S., unless otherwise stated. We have four speakers as part of our formal agenda today. Our CEO, Bobby Le Blanc, will begin today's session before turning it over to our Chief Financial Officer, Chris Govan.
After that, Nigel Wright from Onex Partners will represent the PE platform, and following a short break, we'll hear from Ronnie Jaber on our credit platform. We'll have a Q&A session with all of our speakers following the formal presentations, so please hold your questions until the end, and the team will be glad to answer them. We'll have mics in the room, and we will be taking questions from the webcast from pre-qualified analysts and shareholders. Please follow the online instructions to ask a question. Finally, for those of you who are staying with us for lunch, it will start shortly after the Q&A concludes. With that, I'll turn it over to Bobby.
Thanks, Jill. Good morning, everyone, and thanks for you being here today, especially those of you who had to travel in. If you flew and took WestJet, we are very thankful for that, and please use it more. I'm really honored to be standing here this morning as the second CEO in Onex's history and the support Gerry and the Board have given me. As CEO, and before that, President, I've had the opportunity to meet with many of you and appreciate your support, your input, and your candor. Having opportunities to connect, particularly in an event like this, is important for us as we continue to communicate our priorities and the opportunities we're focused on. There's a lot on our to-do list.
Let me start today with some of the things we've done recently that show we are committed to making progress and accelerating value creation for all shareholders. Starting with the MVS. This was a significant step in Onex's evolution and set a framework and a timeline to achieving one share, one vote. It also enabled the leadership transition from Gerry to me. Since the AGM in May, we strengthened our balance sheet with the sales of Celestica and Ryan Specialty shares, and we launched our first continuation vehicle, Ryan LLC, a positive outcome in a very tough realization environment. We've been buying back shares with conviction, and we've implemented a firm-wide cost management initiative that will reduce our annual expenses by $40 million. These individual actions are all representative of our willingness to act and act decisively to drive shareholder value, and there's more to come.
So I know there's been questions around what will change with my moving from the President role to CEO. Let me assure you, management has full autonomy and is 100% accountable to the Board and to you, our shareholders, for ensuring Onex successfully executes on our priorities. We have the benefit of a solid, experienced leadership team in supporting that journey, several of whom you'll hear from today. As CEO, it's of the utmost importance to me that we live up to our potential, which I think is substantial. To do that, we need to ensure we have an engaged and enthusiastic management team. We need a culture of entrepreneurism and that is driven to succeed, and we need to know where we have the right to compete and win. So where do I see us winning? We have wheelhouses where we shine.
In Private Equity, it's the sector verticals where we spent decades building up expertise and relationships. Corporate carve-outs and spinoffs are also a core strength, as is working with founder-owned businesses. These are our bread and butter. With our expertise and reputation, I think we can go head-to-head with anyone in these areas. Our investment in Convex is one great example of how our team wins. Leveraging our deep relationships in the insurance industry, we raised $2.7 billion in equity to establish a de novo specialty property casualty company. That was only 3.5 years ago. Today, Convex has $4 billion in assets, no debt, and should generate more than $400 million of net income this year.
Our learnings from our investments in USI and Ryan Specialty gave us the confidence and informational advantage to start this business with Stephen Catlin and Paul Brand... With credit, we have a platform that is on the cusp of scalability and earnings growth. We've already achieved that with our industry-leading CLO business, but even there, there's more for us to do. Across the platform, we're seeing the benefits of having a more diverse, customized set of investment strategies, such as SMAs and a BDC. We see credit as a very attractive growth area for Onex for years to come. And in keeping with the One Onex approach, we're constantly leveraging the benefits of our market and industry expertise across our PE and credit platforms. There's a high degree of connectivity between our teams, which drives information sharing and actionable intelligence.
We have our fair share of challenges as well. Without a doubt, fundraising for larger cap, I'll call it, PE, including Onex Partners, has been difficult, and I'd say the most difficult the industry has ever seen. One recent stat shows that the number of funds closed so far in 2023 is down 46%, and that's on top of a meaningful decline in 2022. Like many other larger cap PE funds, we've got caught in a bad part of the fundraising cycle and have had to contend with the knock-on effects, but we've navigated it pretty well overall.
The Onex Partners team is focused on continuing to build OP V's strong performance to date, getting more capital returned to our OP IV and OP V LPs, which is very important to them, and remain active in deploying the rest of OP V and new capital in 2024. It's important to remember, this is only one point in time and only one part of the Onex story. Fundraising for larger cap PE will eventually bounce back. In the meantime, we're driving forward with fundraising for ONCAP, Onex Falcon VII, and other products. ONCAP has a tremendous long-term track record, which includes never having had a capital impairment. Onex Falcon's last two funds are top quartile. Both of these platforms have the right to compete with any of their competitors.
Now, let me turn my attention to what you can expect from us when it comes to financial objectives. First, a little bit of historical context. Our PE businesses have delivered strong results for LPs and shareholders. The PE platform has compounded NAV at a blended rate of 18% over the last 10 years. That was 16% for OP and 33% for ONCAP. That blended return is even higher since we did the OP strategic review in 2018, with a blended rate of 20% since that time in 2018. So as we look ahead, our objective is to grow our net asset value or investing capital at a compound rate of 14%-16%. This blended return incorporates expected returns across our NAV components, which Chris will get into in more detail.
But based upon our track record and the known opportunities and headwinds within the current portfolio, we think that's achievable and translates into attractive returns at the shareholder level. Over the near to medium term, NAV compounding will be the primary driver of growth and shareholder value delivered by the PE platform. That's a reflection of the current fundraising environment and our need for additional time to grow our PE fee-generating assets under management. We have a strong portfolio of assets in our PE business across ONCAP and OP, and we're confident that we can deliver a high level of return from value creation and realization events over the coming years. Nigel will talk more about how we value our portfolio and the potential we see in it later this morning. We've already taken meaningful steps to align our cost base with our revenue opportunities at Onex Partners.
Expense management is something that will continue to get more time and attention going forward. We are committed to managing our PE platforms with a goal of profitability. Our intention is to drive this through revenue growth, including in identifying new opportunities to generate fee-generating AUM, but we're also prepared to manage expenses. We expect our credit business to be the main driver of FRE growth, with a run rate FRE target of $55 million by the end of 2025. We've made great strides in building a strong credit platform, and we feel confident that we can now successfully scale the business and drive profitability with the team and resources that we have in place. To support our teams in achieving the objectives we laid out, we're enhancing our talented client and product solutions team.
While we've been investing meaningfully in credit and other businesses, one of the areas where we've underinvested in the recent years has been sales and marketing. It's an area we'll be more focused on, including new channels like insurance and Private Wealth. Importantly, we're getting close to hiring a new leader for this group and hope to make that announcement soon. We also have added dedicated resources to support the team in driving our Private Wealth distribution strategy. This is to ensure we maximize the opportunity with RBC Wealth, as well as plans to expand our distribution with other Canadian wealth management firms, such as Nicola Wealth. Although our primary focus in the near term will be on the Canadian market, we are also exploring opportunities within the U.S. private client industry. Okay, so now let's switch gears to capital allocation for a few minutes.
When we think about capital allocation, we need to think about investing in the best risk-adjusted returns, and at the same time ensure we're creating enterprise value. As I've mentioned, we've been shoring up the balance sheet to be able to take advantage of opportunities and market dislocation. As I see it, we have three primary uses of our capital. One, investing through our current platforms and expanding our offerings with new strategies that have the potential to add enterprise value over time. Two, M&A to augment the businesses we're in. And three, buybacks, which we continue to do in earnest. As we consider each, here are some of the key inputs that inform our decision making. I'll start with investing through our platforms. This would generally take the form of the following. First, NAV compounding. This one's pretty straightforward.
As we consider investments through our current platforms, we expect to earn appropriate PE and credit returns that will help support compounding our total investing capital at the 14%-16% that I mentioned. Second, opportunistic short-term investments. This is an area that people don't appreciate enough. You know, this includes supporting our businesses like we recently did at ONCAP, investment in Biomerics, and as we're doing to support our CLO business in terms of equity investments during tougher markets, where we typically go syndicate the equity when the markets normalize. The benefit of these short-term capital allocations is that they allow our teams to move quickly and decisively when others can't. Third, organic longer-term growth prospects. Onex Transportation, or OTP, is a good example of this.
OTP, OTP is a new strategy that we're growing organically with a leader we know well, Wes Dick. Wes has considerable expertise and relationships in one of our core sectors of strength, transportation. The team is working hard to source one or two investments, which will be warehoused on our balance sheet. Having a proof of concept will provide a good foundation for when the team formally initiates fundraising. This type of strategy can also have broader benefits in terms of platform synergies and expansions into new areas, in this case, possible related infrastructure strategies. Another example of OTP is that similar to credit, it will be a less capital-intensive strategy for us. So hopefully you can see that we have significant opportunities to grow and expand organically within our existing businesses, but M&A can also be additive if the fit is right.
When it comes to M&A in the Asset Management industry, the overwhelming view is that it has to make sense from a cultural perspective, and I agree with that 100%. Any M&A that we will do will need to be with an entrepreneurial, collaborative, and winning organization. It would also need to be accretive to our strategic and financial objectives. That means looking at opportunities that could either enhance our strengths, our CLO platform is a primary example of that, or could contribute to our share price performance, such as the addition of a consistent FRE business in an area where we currently have a right to compete. M&A is rarely a magic bullet, but I do believe it can play a role in our longer-term aspirations. Finally, buybacks.
While our share price continues to sit at an unusual discount, we will continue to be active buyers of our shares. The economic argument and the value we create, particularly for our existing shareholders, is clear. But as many of you have heard me say, this is an opportunity we'd rather not have, and one that we're working hard to eradicate. Our goal is to get to a point where the economic argument is no longer as clear. Hopefully, all of this gives you a better understanding of how we view capital allocation, and those decisions across our business. Our objective in everything is to provide a framework for how to best measure our progress, and we'll continue to be as transparent as we can in measuring that progress. Transparency, after all, is one of our core values at Onex.
Our objective is to engage shareholders often, to articulate our priorities clearly, and to communicate frequently on progress. Onex has a responsibility to continue to show progress on the actions we're taking. This includes measures beyond financial and operational performance. The introduction of the sunset provision for Gerry's multiple voting shares was, as I mentioned before, a big step forward in for Onex, and we're fully aware of the need as an organization to be responsive and performance-driven. Here's some steps we've taken already. On the governance front, we brought on a new Board member, Lisa Carnoy. Lisa has deep financial expertise and was the CFO of AlixPartners and also the Head of Operations. She also is the former Co-chair of the Columbia Board of Trustees. I've personally known Lisa for 20 years, and I am positive she will be a great addition to the Board.
Going forward, we'll be looking at other opportunities to bring on new independent directors. In addition, the Board is adding nominating duties to the Audit and Corporate Governance Committee, which is a fully independent committee of our Board. Next is Net Zero. We're evolving our climate strategy to align with best practices. Today, I'm pleased to announce that we're developing a comprehensive strategy to deliver on a Net Zero goal by 2050.... Not only is this the responsible thing to do, it's pragmatic, and that it aligns with the direction of our LP investors and also our largest shareholders, 2/3 of whom have made Net Zero statements. And finally, and this is an important one, compensation alignment. We're working to have a more structured compensation framework that is more explicitly tied to specific business objectives.
It's true that Onex and our team have more capital invested in our investments than anyone, but alignment needs to go deeper. We need to ensure that people are properly motivated and compensated directly in line with KPIs and performance scorecards. This is one of my near-term priorities, and you can expect to hear more about that over the coming months and in next year's information circular. Each of these initiatives is about Onex becoming more accountable to our stakeholders. To wrap up, before I turn it over to Chris, I want to leave you with a few key takeaways. If we achieve what we know that we're capable of, we'll do the following: compound investing capital per share, investing capital, I'm sorry, at 14%-16%, achieve $55 million of FRE of credit by the end of 2025.
Through proactive revenue generation and expense management across all platforms, deliver total FRE at that same level, continue to build out our fundraising capabilities with the addition of new expertise and resources, deploy capital into accretive and profitable, organic and inorganic growth, and finally, progress on our goal to be a fully shareholder-focused organization. With that, I'll now hand it over to Chris. Chris? Nigel, the box works really well.
Thanks, Bobby, and good morning, everyone. As Bobby intimated, we are very focused on how we evolve the business and surface value for shareholders as we approach 2026. So my focus today will be on the financial performance we expect to deliver by the end of 2025. And it's not all a short-term story. We're committed to being positioned as we enter 2026 to deliver value in the long term. Oops! I'm gonna break the financial discussion down into three pieces. First, compounding our investing capital at 14%-16% by investing alongside our customers in Private Equity and credit. Second, Private Equity Asset Management, where in the near term, management fees and carried interest will enhance our investment returns.
And I'll explain that a bit more later, but the short story is that shareholders will be able to benefit from net returns on their Private Equity capital greater than the underlying gross returns. And that's an attractive position to be in while we rebuild AUM for Onex Partners. Third, Credit Asset Management, where the addition of a fee-generating AUM to already built-out strategies will lead to a significant increase in fee-related earnings and enterprise value. But before looking ahead, let's take a look at where we're at today. Onex has a strong foundation on which to build value going forward. We have just under $8 billion of investing capital, or about CAD 130 per share. Looking back for a moment, that's up about 25% since Investor Day 2021. So that's a little bit shy of our 14%-16% target.
But remember, that was achieved in a time when we had some significant headwinds, including the run-up of interest rates over the last 18 months. By comparison, the MSCI World Mid Cap Index was off 8% in the same timeframe. But back to the foundation. Onex has $10 billion of Private Equity fee-generating AUM, subject to carry, and currently generating run rate management fees of $110 million. We have $24 billion of credit fee-generating AUM, currently generating run rate management fees of $143 million, and $18 billion of that AUM is also subject to carry or incentive fees. Onex has $1.4 billion of cash and near cash, and we regularly generate significant distributable earnings, and that allows us to invest both through and in our platforms.
As Nigel and Ronnie will discuss, we have experienced and talented management teams and investment teams across the firm whom we expect will deliver attractive returns and around whom we can raise capital. And as Bobby explained, we're committed to quickly evolving the organization with a focus on performance, transparency, and governance. We believe these building blocks will allow us to achieve our goals and deliver meaningful value. So let's take a look at what you should expect to see. Compounding investing capital per share will continue to be the most significant source of value creation over the next few years. And of course, what drives that is the underlying returns from both our Private Equity and credit investments. And our expectations there really haven't changed very much.
We're still underwriting Private Equity investments in the high teens-20%, and given our mix at credit, we should see returns a little over 10%.... I'll leave it to Nigel and Ronnie to explain why those are reasonable goals. But I do want to point out, when you think about the returns over the next 2+ years, most of it's gonna come from investments in companies we already own and know well. With an average hold in Private Equity over five years, we're gonna own a bunch of the same businesses at the end of 2025 that we own today. And Nigel is gonna give you some insight into why we like that portfolio and why we believe it's gonna perform well going forward.
Our investing results are also affected by our mix of assets or our allocation of capital, as between Private Equity, credit, and cash. At June 30, that mix was 71%, 9%, and 20%. The credit allocation has been very stable of late, and we expect it to continue to be. The real swings happen between Private Equity and cash, and that's just the natural result of the fact that Private Equity has fairly lumpy realizations and investments, and so it moves around a little bit more quarter to quarter. But when you take a range of likely allocations and the performance targets I mentioned earlier, add in some return on cash, that's how we get to 14%-16% being the right target for us moving forward.
That target would translate into investing capital per share of about CAD 185 at the end of 2025. Before moving on to the performance we expect from our Asset Management platforms, I do wanna just take a bit of an aside and talk about one aspect of our investing capital, and that's our cash and near cash. We get questions often about just the sheer size of cash on our balance sheet and the drag it has on investment returns, and Bobby addressed some of this in his remarks as well. In the longer term, we plan to manage this business with less cash on the balance sheet. But what we're not gonna do is we're not gonna get there by taking on any material leverage, where the only source of repayment is a fairly illiquid underlying portfolio.
That, that mismatch, as you all know, has been the source of many bad outcomes in the world of finance, and we're just not gonna take Onex down that path. But there is a path to reduce the cash drag, whereby we rely less on long-term commitments to our funds to keep Onex invested and focus more on co-investments or balance sheet deals, which are a little bit more flexible in terms of timing and amount to keep Onex fully invested. But in the near term, we see a lot of opportunities to put Onex's capital to work, and Bobby mentioned some of those. But one of the things I'm focused on is the opportunities we expect across the firm to build platform value while also earning the underlying investment returns by supporting investing pace.
Again, that could be warehousing OTP's first deal or two, providing bridge-like capital to ONCAP V and Falcon VII as they march towards their final close. Opportunistically and temporarily taking a higher percentage of a CLO's equity in order to get a deal done in a choppy market. You're welcome, Ronnie. Or when OP V is closed out, funding new investments, focused in focused and bespoke arrangements with our best clients. The combination of all these opportunities requires some meaningful liquidity on Onex's balance sheet over the next year or so. But importantly, each of them supports quicker and more successful fundraising and AUM growth. With that, I'll pivot to our Asset Management platforms.
As I discussed on the Q1 call, we expect run rate Private Equity management fees to fall by about $40 million when OP V exits its investment period later this year. Some of that decline is gonna be offset by new capital being raised at ONCAP V and OTP going into next year. And as Bobby mentioned, we have about $40 million of cost saves that we've actioned or have line of sight on, much of which are focused on the PE business. But despite that, in the near term, we don't see Private Equity being a meaningful FRE contributor. In fact, once ONCAP V is raised and OTP is raised, we see PE having an FRE contribution of about -$8 million before any new capital raised for Onex Partners.
But what that means is you only need to raise about $500 million-$600 million for OP to get Private Equity back to breakeven. And I think it's important to note that our PE platform is a source of value, even if it's only breaking even on the FRE line. What that means is, at that point, Onex's $6 billion of invested PE assets are being managed by the Private, Private Equity platform on a zero-cost basis. Now, there are significant costs at the parent company associated with investing our capital, and it include all of what I would think of as the normal public company costs. You have a run rate at the parent company of about $30 million of expenses.
I know that's a relatively large number, and trust me, Bobby is focused on getting that number down, and we're all working hard at that. But even if you accept that as being the cost of managing Onex's $6 billion of Private Equity capital, it's actually quite reasonable. It translates into 2024, having a management expense ratio of about 50 basis points. And that's in an asset class where investors are often paying 150 basis points on invested capital and on committed capital. And the story's better if you roll in the carried interest opportunity. Onex has 8 points of carry on over $10 billion of Private Equity capital. And I know carry is not included in FRE, but it is value.
And if you look at our fund projection models, we'd expect that carry should represent about $200 million net to Onex over the next few years, which will more than offset all of those costs I mentioned earlier. And that's what gets you back to the point where shareholders should be earning net returns on the underlying Private Equity capital greater than the gross returns. Now, it's important for me to emphasize, I know Nigel's gonna make the point as well, that's not our long-term goal for Private Equity, right? We wanna have Private Equity be a meaningful FRE contributor, and Bobby and all of the PE leaders are committed to raising the capital and managing the businesses to that effect.
Although the uncertainty around the fundraising market makes it difficult to predict any near-term fundraising for OP, as Bobby said, we're committed to have the parent company and the Private Equity platforms combined operate at no worse than breakeven by the end of 2025. So now let's talk about our credit platform. Credit is poised to grow its FRE and its enterprise value meaningfully. Although we haven't hit the targets we set for this business at Investor Day 2021, as Ronnie will explain, we've continued to invest and build the credit business. The core engines of the business, origination and research, are much improved after the integration of Falcon and the addition of some key talent and technology.
Moreover, credit now brings a full suite of strategies and products to their clients, and the early success of the Evergreen Credit Fund is evidence that those additional capabilities add value. But the combination of those two things also means that we have several strategies, think direct lending, opportunistic, liquid, that are still in the early stages of building out their AUM. So while we do expect to see the benefit of scale across credit as we go forward, those strategies, in particular, should have extremely high margins on each dollar of incremental fees. The financial plan at credit for the next 2+ years is underpinned by a fundraising plan that sees us adding $9 billion of fee-generating AUM, taking us to $32 billion as we enter 2026. This goal reflects a kind of a blend of a bunch of different ranges for all of our strategies.
But when you boil it down, there's really only a handful of things you likely need to focus on over the next nine months or so. Falcon VII is gonna continue to march towards a final close next year with a target of $1.5 billion. In direct lending, we're continuing to fundraise for a closed-end institutional fund, with progress expected in the back half of this year. Also in direct lending, we expect the BDC to grow. It really should be a beneficiary of our push into Private Wealth. In structured, we're expecting the same type of growth for the CLO business as we've seen over the last few years.
And when you put those four initiatives together, they make up the lion's share of the projected growth in FGAUM, and so we'll make sure to keep you all updated on each of those as we go. That AUM forecast translates into credit exiting 2025 with $166 million of run rate management fees or run rate revenue. But also, FRE will be benefiting from some very significant cost takeouts, both from the elimination of our wealth management business and the portion of the cost saves that Bobby and I mentioned earlier that are allocated to credit. And we're not done with cost saves yet. I think, as I mentioned on the Q2 call, we're sort of in phase two now, where we're focused on our out-of-pocket cash expenses, and we're taking a zero-based approach to about $55 billion...
Not billion, sorry, $55 million of addressable spend. Putting the revenue and expense sides together, the forecast sees credit exiting 2025, as Bobby mentioned, with run rate FRE of $55 million and a margin of 33%. And at that point, we'd still have a very scalable business where we would expect margins to expand as we continue to leverage the infrastructure. We're happy that we've continued to invest and grow the credit business. We believe the economic and market, market conditions today are ones in which credit should thrive, and we see Onex being rewarded for that investment with some meaningful enterprise value being created.
You can all do your own work on what a credit business that's growing and has $32 billion of AUM and $55 million of FRE might be worth, but I suggest a reasonable range might be to put a 15x-20x FRE multiple on it. And if you did that, it would suggest an enterprise value in 2026 for our credit business of $800 million-$1.1 billion. And we're committed to having the value we create in our Asset Management businesses going forward, surfaced in the stock price. As we pull the investing and Asset Management pictures together, we see significant value creation in the near term and a platform for long-term value.
We expect investing capital to compound at 14%-16%, bringing investing capital per share to about CAD 185 at the end of 2025. And in the longer term, we want to be more nimble with our capital allocation, and we want to take down the cash drag to provide a little bit of upside to that 14%-16% range. In Asset Management, we are committed to managing and returning the Private Equity platform to positive FRE, and we will be working to ensure PE and the parent company combined are not a drag on overall FRE. But in the short term, the management fees and carried interest will allow net returns for shareholders to exceed gross returns. Again, not the long-term goal, but it's certainly a good interim spot....
Our credit platform is poised for scalable growth, driving towards $55 million of FRE at the end of 2025, performance that could translate in an enterprise value of about $1 billion or CAD 15 per share. We believe we have the teams in place across the firm to navigate these markets, to raise capital for our strategies and deliver value. With that, I'm gonna turn it over to Nigel, who's gonna discuss PE's role in building value.
Thanks, Chris. What I'd like to do this morning is take you through the role that the Onex Private Equity platforms will play in growing the investing capital of Onex. I'll start with a brief description of our three Private Equity platforms, and then comment has been heavily foreshadowed already on our asset valuations, which represent a big chunk of the Onex Corp investing capital. I'll finish with how we will continue to deliver NAV growth across our platforms into our shareholders. I'll do this mostly by reference to Onex Partners, which I'm closest, but we share the NAV growth objective across all three PE and infra strategies, and indeed across the credit platforms, too.
I also want to make sure, and I think Chris mentioned this, that while I'll be speaking mostly about NAV in this discussion, you should not think for one second that we are not at least equally focused on growing FRE in the PE business. Tawfiq and I, as we transition into the leadership of Onex Partners, have three core business objectives for OP, is to compound NAV by high teens percentage each year, to grow fee-generating assets under management over the medium term, but starting without delay, and thereby to generate positive FRE in the business over time. The critical enablers for this include, and Chris has mentioned this, too, a talented, deeply networked and highly engaged investing team, and we are beyond proud, beyond confident in the team we have and our colleagues.
The second big enabler is a strong investment process, and I'll speak about this a bit this morning, too, from target origination through asset selection, value creation during ownership, and optimized exits. In all these aspects of our business, Onex Partners has strengthened its processes and practices over the past several years under Bobby's leadership, and you should expect that to continue. When it comes to growing fee-generating assets, we are pleased that the recently announced Ryan continuation vehicle represents about $600 million of incremental fee-generating AUM for OP. Across Onex Private Equity, we're working on multiple fronts to grow AUM. We're raising ONCAP V now. We're preparing to raise the first Onex Transportation Partners fund.
At OP, while we pause the OP VI fund raise, we are exploring other ways in which investors can partner with us, and we expect to have more to say about that over time. I'll just cover briefly our three Private Equity platforms. ONCAP is the oldest fund family within Onex. It operates in a lower midcap LBO buyout sector in North America. Under Michael Lay's very talented leadership, Onex has delivered remarkable returns since 1999, 48% gross and about 35% modeled net IRR, without a single capital impairment across its realized investments. ONCAP invests in consumer, industrials, and services, and with a strong origination focus on family and founder-run businesses.
ONCAP is typically the first institutional capital in its businesses, and as you would expect from that track record, has a very strong hands-on approach to value creation. So capacity building, strengthening management teams, delivering on strategic growth. So Michael and the team have finished investing ONCAP's $1.1 billion fourth fund and are already... And raising fifth fund, as I mentioned, and are already investing out of the new fund. Onex Transportation Partners is the newest equity strategy that we have within Onex. It's set up to make value-added infra investments in transportation businesses with an emphasis on the green energy transition. Wes Dick has a team of seven other investment professionals, and they have a mandate to invest in asset-intensive, mid-market transport-linked businesses in both North America and Europe.
Their goal is to invest in businesses that have strong asset and cash flow protection, but also that can be grown nicely. So a little differentiated from classic infra, and we believe that institutional investors are looking for that value-add aspect to infra and will find a differentiated product with OTP. Through BBAM, we have known Wes and have been in business with Wes for more than 15 years, and we have full confidence in him and his team. Onex Partners remains the largest Private Equity platform. We have deep expertise in subsectors within industrials, biz services, healthcare, and financial services.
It's an upper mid-market buyout strategy operating in North America and Europe with a very hands-on approach to value creation, and a bit like ONCAP, a strong emphasis on founder-run businesses, with 40% of our investments in Fund V done in partnership with Founder CEOs, who roll a meaningful portion of their equity into our transactions. For our LPs, Onex Partners has delivered annual returns on invested capital, 28% gross and 16%-20% modeled net, both before and after the reset we did following our brief wobble in the middle of the last decade. You'll note that mid-cap and mid-market, I know Bob said larger, but mid-market, mid-cap are adjectives that we use across all three of these strategies. We believe this is the part of the Private Equity sector that delivers the best risk-adjusted returns.
It's where alpha can still be found, but businesses are large enough to have solid systems and structures to attract top talent, but still have lots of room to grow, both in their business and get better. With almost $23 billion under management across these three Private Equity strategies, PE, as Chris mentioned, represents 71% of Onex's investing capital, but about 89% of that capital when you exclude cash. Before I jump into the two main topics I have, which is the NAV values that we have, particularly in our private company marks and our growth of that NAV, Jill thought it would be a bit, perhaps of interest if I were to briefly survey current conditions affecting the Private Equity market. Our style always has been and remains to invest, as alpha.
So we look at the particular attributes of businesses and management teams that should enable them to perform well, irrespective of normal fluctuations in macro circumstances. So we build our portfolio to do okay or better than okay with the normal vicissitudes of the economy. But there are things right now that are that kind of are looming on the horizon that are a bit out of the normal that are beginning to affect us. Three in particular now dominate. The first is the impact of geopolitics on the economy. I'm going to argue that that's different than it has been. The liquidity and capital allocation constraints on institutional investors in Private Equity, which is also different than it has been, and the credit markets, which are a little bit different than they have been. So I'll start with geopolitics.
The conundrum we have is that the economy generally is doing okay. The U.S. economy is actually quite strong. Outside the Middle East, it's weaker generally elsewhere in the world, but we do not perceive unusual or immediate risks from the business cycle for most of our businesses. The types of imbalances that are out there are ones that we see and prepare for. But there are extraneous factors looming over the economy. I suspect every generation feels that they live in unusual and difficult times, but the fact is that we probably should marvel at how benign the decade has been since the global financial crisis, notwithstanding the pandemic. We should probably marvel at how benign the last three decades have been, but for the global financial crisis.
We have, right now, a major war in Europe, and we have, I think, for the first time, the ability of China to project military power throughout the South China Sea and across the Taiwan Strait. This is unlike anything we've experienced in the past 50 years. Combine this with the fact that that public sector debt has reached levels that are unknown in the post-war period. So the U.S. public debt is 123% of GDP, in the U.K., it's 105%. Public and private debt together in China are 250% of GDP, which is remarkable for a middle-income country.
This is at a time not only of high interest rates, but it's at a time when central banks have stopped absorbing the issue of public sector debt, and traditional large buyers of gilts and treasuries, like China and Russia, are out of that market. So this is a problem which is looming. It's also at a time when the very foreseeable consequences of pumping $8 trillion of newly printed money into the financial system is having its effect on inflation, which is worrying both consumers and business. So as I say, we have, we have - we're preparing our portfolio for what actually feels like fairly calm sailing today, but with significant and unusual risks on the horizon. So what do we do about it?
Starting in 2021, we started preparing our portfolio companies to push through price increases to cover input cost increases. If you were a salesperson with 10 years of experience or less, you probably never asked a customer for a price increase in 2021. So the idea of how to do this, assistance for doing it, and tracking and everything else were new, which we pushed through. Early in 2022, we moved decisively across our portfolio to fix floating rate debt and get ahead of interest rate increases, and we feel pretty good about that. And then starting last year, and really to the point I was just making, we've moved the focus to cost control levers in our businesses and also putting a very high value on liquidity. So this is what, this is what we've been doing.
I'll turn to the second of those big factors now, which is the funding constraints facing our limited partners. You all have heard of and be aware of the denominator effect on LP allocations to alternative assets, and this particularly affects pension funds, certainly more than sovereigns or family offices. Their risk committees stipulate what percentage of their assets can be invested in Private Equity. Because Private Equity asset valuations have risen or at least held their own, while listed equities and fixed income instruments have fallen in value, many of these institutions have been seriously overallocated to Private Equity for two, three or more years. Compounding that situation, and this is, I think, a little less known, is that GP deployments have seriously outpaced monetizations, not just in this year, but for a few years.
Some large GPs, particularly tech-focused ones, have invested big size Private Equity funds in two years rather than the typical four or five. Across the whole industry, LPs have had more capital called from them for PE investments than they've had returned to them for four of the last five years. So there are not only allocation constraints, but sometimes liquidity constraints. So LPs are working to limit their PE holdings. This is not permanent. This is not structural. This is a moment in time, and ironically, it is happening because PE is the best performing asset class of these investors. But it is happening, and LPs are responding by pausing new commitments to Private Equity funds and selling PE stakes in secondary markets. This has obviously affected our own fundraising at Onex and that of many other GPs.
As Bobby mentioned, the number of Private Equity funds closed this year on an annualized basis is down 46% from last year and down 2/3 from 2021. As Bobby also mentioned, it's raised the importance of realizations and distributions back to LPs in a way that we haven't experienced before. In this regard, Onex Partners is part of the solution, not part of the problem. We've returned more capital to our limited partners over the past 12 months than we've called from them, and this will continue to remain a focus. Finally, I'll comment on the LBO credit markets. As you all know, the cost of borrowing is up, not just the base rate, but also the spreads demanded by lenders. Good thing for Ronnie and Sandeep, I think.
One major impact of this is that when Private Equity evaluates new transactions today, coverage ratios more than leverage ratios are governing factors on the amount of debt that new companies can safely bear. It seems clear that a good number of PE-owned assets, which are facing 2024 maturities, will not be able to refinance at the level of their maturing debt. If these are in old funds, the sponsors might not have the equity to bridge that gap. So this is also good for Ronnie and Sandeep and the Onex Credit, but we think also prevents or presents or will present buying opportunities for buyers like us. Again, we feel good about our own situation in this regard. As I said, we made a significant move to fix floating rate debt in 2022 before most rate hikes took effect.
The average leverage today across the Onex Partners portfolio is about 4x EBITDA, compared to about 6x for our peer group. About on the Onex Partners total debt, about 90% of it matures in 2026 or later. So we don't feel that we're facing the same kind of near-term maturity hurdle that some of our peers are. ONCAP also is being very prudent with its debt strategies. Over the past 15 years or so, ONCAP going in debt has been around 3.8x EBITDA, which is markedly lower than its peer group. So overall, we see credit conditions as something we keep an eye on, but perhaps creating more opportunity than challenge on, on balance for our PE strategies.
So our message, when we put this all in the mix, is we're comfortable with our portfolio and comfortable with our ability to continue creating value with it, and we are still investing. ONCAP has recently completed two significant transactions in its newest fund. OTP has a strong pipeline, and Onex Partners is in the advanced stages of a couple of investments that we like. Now moving on to the topic of NAV or investing capital and the discount applied to it by our share price. Long-time Onex shareholders will be a little tired of us, as the Brits say, banging on about this, but we have to keep banging on about it because we haven't seen, we haven't seen it get to where we want to. It bothers us a lot.
If you value our balance sheet cash and near cash at 100%, if you give credit for only 90% of the trading value of the listed shares we hold, and only 90% of our credit markets, and if you zero out entirely the unrealized carry interest of Onex Corp, if you do all that, then you will see that our share price, as of a couple of days ago, implies a 59% discount to the values at which we mark our unlisted Private Equity holdings, i.e., we're giving credit for only 41% of the value we believe those companies have. Perhaps we have to accept some discount. Other asset managers suffer from that too, but this simply feels excessive to us. Our valuation process is detailed. It involves back testing, calibration with secondary approaches for most investments, and an internal challenge process.
And these marks are reviewed quarterly by our external auditors, and they are audited annually. We view it as very important in making the case about our NAVs, and we hope shareholders do too, that third-party arm's length transactions have validated our marks over a long period of time. So over the past 10 years, the average value that Onex Partners achieved in a third-party realization, so this is cash changing hands between willing buyers and sellers. The average premium was 26% to our unaffected marks, and our term for that is basically the mark we had two quarters prior to the quarter in which a transaction was signed up. This pattern continued over the past 12 months through Q2 this year.
So during that time, we signed five full or partial realizations, and these were done at an average premium of 28% over our unaffected marks. So sometimes we hear from shareholders, "Fine, we hear you about the premium, but you're only selling your very best assets, right now." And even if that were true for the past 12 months, it does not refute the 10-year track record. And even if it were true for the past 12 months, it would be basically making the argument that even your very best investments, you're discounting by-- your marks are too, we're selling them at 28% above our mark. So it's not an argument that we find persuasive. I'm not saying that our marks are deliberately or even unusually conservative. We strive to make them fair and right.
I'm not even saying that we're more conservative than our peer group in setting our marks. Bain has done a report recently showing that across the PE buyout sector, 70% of buyout funds are making their exits at above their prior quarter marks over the past 10 years. I'm not saying that we're doing things deliberately to set them conservatively. What I am saying is that if you look at our track record of realizations, you cannot get to the point that our marks warrant a 59% discount. The other source of third-party valuation that we have for our marks is the fact, and this is relatively new, that billions of dollars of LP stakes trade in the secondary markets each year. In this market, sophisticated buyers and sellers use GP marks as the gold standard critical valuation metric.
Over the long term, until about 15 months ago or so, valuations in the secondary market for diversified LP buyout stakes were typically done at about 100 cents on the dollar, so 100% of the private marks, which we think is a pretty clear endorsement of them. In the past 12 or 15 months or so, that fell into low 80s. By the way, these are all estimates. These are private markets, but these are what investment banks active in the secondary markets tell us. So they went from 100 down to 84, and the current view is now the secondary market for LP stakes is now trading back up to about 90% of marks.
So this 10% reduction from marks might reflect some skepticism about PE marks during the current circumstances, but by far, the greater influence, in our view, is the great oversupply of LP secondary stakes for sale on the market relative to demand, which is simply a product of that over allocation to the sector I spoke about, particularly by pension funds. So my basic view is that—my basic point is that secondary trading is, broadly speaking, an endorsement of the marks across our industry. And of course, even if our own marks of our private companies were too high by 10%, it would not change the basic argument that we are not getting value in our shares for the fundamental value we have in our private companies. So I think that our shareholders should be confident in our private capital marks.
We follow a consistent approach to setting them. We have a record of monetizing them, both recently and over the long term, well above our marks. This is also true of our peers, and this is also endorsed by sophisticated buyers in the secondary markets. So we're confident that we're gonna continue to deliver full and partial realizations, at least equal to our marks. We're gonna do this not only, we're gonna do this for our current investments and recent investments, and we're gonna do this in challenging markets, and we're very comfortable being judged on the hard facts over time. I'd like now to spend a few moments addressing our ambition and the contribution the Private Equity platforms will make to achieving that 14%-16% growth in investing capital that Onex Corporation's goal is. As Chris mentioned, the Private Equity contribution to that is high teens.
I'm gonna talk a little bit about why we feel confident in being able to deliver that. As I mentioned, the Private Equity platforms represent about 90% of the non-cash investing capital of Onex Corporation, and our goal is shared equally across OTP, OP, and ONCAP to hit that, at least that high teens growth. So here are the data, and, and Bobby mentioned this a little bit. Onex Private Equity NAV has compounded by 18% annually over the 10 years to 2013. This is an all-in Private Equity number, net of the management team's carry, but including the benefit of Onex Corp's 8 points of carry.
That rate of compounding improves to 20% if you take the period since our reset, after Bobby set about reforming our origination, asset selection, and value creation practices, and it improves further to 23% if you take the past three years. Over the past 10 years, our Private Equity platforms have returned $4.1 billion of net distributions to Onex Corporation. So that's distributions out of our PE businesses, net of any reinvestment back into them by Corp. We're proud of this. Part of our confidence about being able to replicate this track record and sustain that NAV growth going forward is it has not been generated with excess reliance on multiple expansion, and it has not been generated with excess reliance on leverage, both of which I think would be more difficult, pillars upon which to build a record going forward.
Multiple expansion accounts for just 15% of the gross gain on realized and current investments in the three most recent Onex Partners funds. By contrast, earnings growth and cash flow generation drove, together, about 60% of our investment gains over that period, which is what you would hope from a value-adding, hands-on investor. We believe, even if you look at that 15% that came from multiple expansion, we believe that a decent portion of that was actually earned. It was not gifted to us by central bank policies. Earned in the sense that we believe that the businesses we sold merited a higher multiple on exit than when we paid for them, because during our ownership, we had increased the rate of earnings growth, developed better routes to market, worked on their product and service offerings, whatever it was.
So if we assume that improvements in business performance account for half that, that 15% is about a 0.2 x of our invested capital uplift. If we assume that half of that was a gift from central banks and half of it was earned, even if you take away the gift from central banks, we still comfortably meet that high teens compounding target for the next few years. Now, I'll talk about... And this presumably is arguments that are well accepted. We'll talk about how we generate these returns. The four pillars of value creation in Private Equity are differentiated deal origination, strong asset selection through our investment committee processes, value creation during ownership, and then selling well. In each of these areas, as I've said, we've done better since our reset at Onex Partners.
I'll start with origination, and I've mentioned this already. So at ONCAP, more than half of their investments are done where they're the first institutional capital in, and a good chunk of the remaining investments have founders and family owners rolling in with ONCAP. For Onex Partners, it's the same. I mentioned 40% of our OP V deals are done in partnership with rolling founders and families, but also 30% of our deals ever fall in that category. So this is differentiated deal flow. These are transactions where the sellers to us are focused not just on maximizing value in the moment, but they're trying to find a capital partner who can help them with a longer-term growth, health, and expansion of their businesses.
These entrepreneurs, and they've generally built businesses worth hundreds of millions of dollars when we meet them, are disproportionately choosing Onex Partners and ONCAP teams to be their partners because they recognize deep expertise, they recognize the value of our networks, they recognize our ability to help them accelerate their earnings growth. I think our teams across ONCAP, OTP, and OP are second to none in this regard. The second pillar is asset selection, and I won't go into massive detail here, but when we did the OP reset back in 2018 and early 2019, it involved changing the compensation of our investment committee, introducing a rigid set of qualitative and quantitative KPIs against which each prospective new investment is measured against every other investment we've ever done, with call-outs where it deviates from those when the KPI performance of our best investments.
It involved the introduction of new tools and practices to surface all views and minimize groupthink, and it involved bringing more personal accountability to our team for investment performance. We think that if you look at the four or five years of returns since that reset, the evidence is there that it's working. The third pillar of our performance or NAV growth is the value creation during ownership. So as I say, about 40% of our value creation comes from earnings growth, about 20% from cash flow generation, and about 25% from M&A value accretion. This pattern of 60% of our value accretion coming from earnings growth and cash flow generation holds true, even if you divide our holdings between those that are substantially or fully realized and those that we hold today.
So this is a source of value creation that's as current in our platform today as it has been over the past 10 years, actually, through the whole Onex Partners through five. We are delivering across our portfolio, annual EBITDA growth rates in the teens. This comes from usually four sort of toolkits that we deploy in our companies. Commercial and top-line initiatives, typically around sales force, organization training and incentives, as well as pricing and segmentation, which has become a big focus recently. Cost efficiencies and productivity, which is what we built our business on. Cash collection and management, accretive M&A, where there's true logic, and increasingly, getting the best out of innovation and R&D resources, where I think we're just beginning to discover new ways of doing that.
Absolutely, one thing that gives us confidence about our ability to continue growing NAV at the rate we have, is that we are today growing EBITDA in the current OP portfolio at an organic compounding annual growth rate of 8% and at 15% compounding when M&A is included. When you combine that 15% EBITDA growth CAGR with modest benefits from leverage and value accretion in M&A transactions, it's pretty straightforward to see how we should be able to achieve high teens NAV growth across the portfolio. And then the fourth pillar is selling well. It's sort of what we get paid for is meticulous preparation, timing, and analytic decision-making when it's best to sell our businesses.
It is by these fundamental investing strengths that we aim to generate equity returns despite the vicissitudes of normal economic
... cycles, but also larger scale economic disruptions. We feel confident about our marks. We feel confident about delivering high teens returns, growth in the NAV that we have today, and we're determined, as Chris said, to have that show up in the value of our Onex share price. So with that, we'll take a short break of about 20 minutes, and then we'll hear from Ronnie about the credit platforms. Thank you.
We're gonna, we're gonna try to start in two minutes. two-minute warning.
Hello, I'm Ronnie Jaber. I Co-head the credit business at Onex, and this morning I'll take you through our business, the market, where we expect to take our platform, our focus on growing fee-generating AUM, and more importantly, fee-related earnings and our profitability. Today, at $26 billion, credit is a little more than half of Onex's AUM. We have 85 investment professionals focused on lending money in liquid, private, and alternative credit. Our platform is set up to provide solutions to companies, small-cap to large-cap, mirroring our Private Equity business. Additionally, we can lend in both performing and stress situations. Our scale gives us access to broad opportunities, but allows us to remain nimble in deployment.
Our model also serves our current and target investor base by allowing us to create investment vehicles with a spectrum of risk and return profiles suitable to a diverse global investor base. We have high quality investment grade, yield-oriented products that are suitable for ratings-focused buyers like banks and insurance companies, all the way up to higher returning strategies like equity-like returns for institutional clients. We offer both closed-end and open-ended strategies, and now Evergreen strategies as well. We have client interest in rated note structures, particularly for insurance companies and more retail-friendly vehicles like interval funds. We've spent the past three years investing in our team and improving our platform. We've enhanced our team, refined our credit processes, implemented new technology, operations, accounting, and risk management systems. We are proud of the team and setup we have in place, and we're ready to accelerate our growth.
Quick snapshot of our platform. I'll start with what we're doing well, both from a performance and distribution perspective. CLOs, we have steady growth, new clients, and are ranked in the top quartile across many metrics. I'll dive deeper into this a little bit later. Our structured and asset-backed products. This is a differentiated offering with strong performance and continued demand, allowing us to scale new and adjacent strategies with existing resources. Our mezzanine and junior capital product. We've got strong interest, great deal flow, and a healthy pipeline of investors. And as Bobby mentioned, our last few funds have been top quartile. Our retail-focused, direct lending BDC has high-quality portfolio metrics with an annualized Q3 dividend yield of 11.4%, and we're about to expand our offering across our partners on the retail side with RBC here in Canada.
Our cross-platform multi-strat credit funds, our partnership with Mercer. We have lots of interest in taxable credit and Evergreen Credit strategies. Mercer's network is getting us in front of new clients, and we're excited about the opportunities there. Here's where we've got some more work to do, where we're a little earlier in our evolution. Unlevered direct lending, we have anchor supporting us for a first-time fund, but we must build out more institutional demand. It's a tough fundraising environment, as you heard earlier, but we're focused on developing new clients in that space. Other areas where investment performance has been solid, but we need to focus on increasing AUM are opportunistic and liquid strategies. Many of our liquid strategies are top quartile or top decile, and have performed well through periods of volatility and stress.
But we need to expand distribution meaningfully there, in particular in the institutional and retail channels. As growth slows, we expect more opportunity for opportunistic strategies. I'm gonna talk a little bit about what sets our platform apart. Our key strengths are our integration within the platform and across the firm, One Onex, our scale and ability to be nimble, and our strong alignment of interests with our LPs. We have a core engine of origination, underwriting, and research across North America and Europe. This allows us to source unique opportunities and provide flexible solutions to borrowers. Instead of leading with a single fund or product, we can figure out what structure best suits the company and provide them with the appropriate financing to meet their needs. Are they a large borrower looking for a syndicated loan?
Are they a small company that is tight on liquidity and needs a capital solution? Are they a bank that needs to free up risk-based capital and looking to transfer risk assets? We can do all of that. Importantly, this setup allows us to scale and provides leverage to grow our business. We can add AUM to current strategies and add new and adjacent strategies without material incremental cost. This is a key part of our business model going forward, scaling up fee-related earnings around our core team and focusing on adjacent strategies, adding new fund structures to access different investor segments while using the same core engine.... One Onex. Access to our PE teams is a distinct advantage versus standalone credit managers and mega firms who lend to their own portfolio companies. We do not lend to our own portfolio companies.
We have differentiated forward-looking insights across sectors and regions. Most credit investors rely on scale earnings and projections. We get real, we get real perspectives. By looking at our own Private Equity portfolio, it can inform what consumer demand is like in North America and Europe, segments of labor market under continued strain, commodity price pressure at different businesses, what a business might be worth, and what management teams are best in class. It provides early warning signs and signals of stabilization in the markets. There's reciprocal information flow. The breadth of our credit portfolio provides insights to the PE teams, and our market knowledge informs our capital markets team. Scale. To, to given the breadth of our platform, we have great origination and deal flow. The other side of that is that we're not so big that we have to deploy in all markets.
We don't have that pressure. We can, we can be nimble and target the best ideas, driving alpha for our investors. Don't get me wrong, we've got plenty of capacity to grow, and even at two times our size, our origination would remain differentiated versus our peers, where many are competing in increasingly crowded markets. In uncertain and volatile markets, being nimble is a strength. We are large enough to bring in attractive investment ideas, but not so large that we are forced to deploy into unfavorable markets. The scope of our investment ideas relative to capital is an attractive balance for limited partners, and our ability to offer co-invest across the platform is driving many new discussions with investors. As money flows into credit, alignment of interest is a key factor for investors.
We are known as a stable, fundamental credit investor with about $1.6 billion committed from the team and the firm to our Credit Strategies. Investors see us as a strong partner, investing side by side with them, and believe that we'll be more vigilant with their capital, with our own commitments invested side by side. We are in every strategy. The balance sheets provided warehousing, as you heard from Bobby and Chris, for newer strategies and strategic balance sheet capital can be used in periods of stress and dislocation. Nigel highlighted some of the broader macro challenges. He also used the word vicissitude twice, which I'm not using. I'm going to dig in a bit further on some of the larger implications in the market for credit. Global central banks have raised interest rates to the highest level since 2007, aside from Japan.
With persistent inflationary pressure and low unemployment, we expect interest rates to remain high through at least 2024. On one hand, higher rates are beneficial for lenders. I apologize, Tawfiq and Nigel. At over 5% in the U.S. and at 4% in Europe, investors are seeing material benefit in all-in yields. We're talking about 10%+ on first lien senior secured loans. The other side of that is higher interest rates are starting to weigh on companies with higher interest expense and consumers who've exhausted much of their COVID savings. We expect higher rates to slow growth globally. We are seeing pockets of weakness in our credit portfolio already, and forward indicators from our Private Equity portfolio are showing signs of the consumer softening. We're not calling for a hard landing, just weakness and continued uncertainty.
Slowing growth fits us as an active and defensively oriented credit manager. It also creates volatility, which is good for our solutions-oriented and tactical Credit Strategies. Stability of returns and attractive income profiles are going to create a powerful technical for credit inflows. Most of our investors globally are looking at expanding credit mandates and allocations across strategies and credit. Target returns for investors are typically in the 7%-11% area. That is imminently achievable on credit. When rates were closer to zero, investors take a lot more risk to achieve target returns. Now they do not. With moderating global growth, we like moving up in quality while being patient around volatility and dislocations. It's a great time to be a lender. We're getting better pricing, less leverage structures, and tighter documentation. We don't expect this dynamic to change anytime soon.
One area where we've shown our strength is in our senior secured lending business, particularly in our CLO structure. So I'm going to dive into that in a little bit of depth. Including our two recent CLOs we priced in the U.S. and Europe, today, we have just under $15 billion in AUM in our CLO business, growing 55% since the end of 2019. We have low loss rates and improved equity performance. Average annualized equity distributions, approximately 16% in U.S. and Europe. We rank in the top quartile on most risk metrics in both U.S. and Europe. Our loss rate on our U.S. CLOs is less than 25 basis points, 0.25%, versus a market that's closer to 1%. In Europe, we've never had a default. We are first quartile on average loan portfolio price.
That's a percent of the underlying loans in our deals. The percent of assets below 80, we're one of the lowest in the entire market. We own less stressed loans.... and our percent holdings of riskier CCC assets is one of the lowest in the market. We've been innovative in our structures to meet different investor objectives. Japanese banks target longer deals, U.S. banks and asset managers target shorter deals. On a year-to-date basis, we're a top 12 global issuer. We've priced three U.S. deals and one European deal, and the year is not over. Some of our nearest CLOs are expecting to generate incentive fees or carried interest for the first time in Onex's history. A little bit more to the points we described earlier in balance sheet usage that Bobby and Chris highlighted.
It's a little bit of a noisy slide, but the blue bars are the LTM management fees for our CLOs, and the black line that's trending down is the investment of our balance sheet in the CLOs. So our fees are going up as the business is growing. We're actually reducing our balance sheet usage. This is the model we expect to employ across our business. By investing in our team and enhancing our performance, it allows us to reduce our balance sheet via new investors we've been able to bring on, or secondary sales, typically well above our marks, while still growing the platform. As Bobby said, the firm's balance sheet will continue to support capital allocated to credit funds, but we are focused on areas where we can generate attractive risk-adjusted returns and create enterprise value by creating or extending our management fee streams.
Chris mentioned the 10% compounding on credit. We think we'll be able to do a little bit better than that when looking across our balance sheet investments in credit over the next five years. Additionally, we think we'll be able to generate carry across our mezzanine funds, across our structured credit funds, across our BDC, across our opportunistic, and our tactical Credit strategies on our newer CLOs, and we'll generate performance fees in our liquid strategies as well. The lifeblood for us is fundraising. Our LP base has grown materially over the past three years. We've added over 90 new institutional LPs across the credit platform, and importantly, been able to drive better cross-selling across our strategies. Over 40% of our fund investors investing now in multiple Onex Credit products or Onex funds.
This was done with a relatively small distribution team, but as Bobby mentioned, the upcoming addition of a new head of our client team, an insurance specialist, and retail-focused specialist who've both recently joined, we expect to really accelerate our distribution globally as and across investor segments. It is a competitive fundraising environment, but we have the right strategies and structures to continue to accelerate our distribution efforts. On Private Wealth and the products managed historically out of the legacy Gluskin Sheff business, nearly everything has been moved on to Funds erv, making the products available to Canadian brokers. The plumbing is all in order. We're working on setting up our wholesaling efforts and distribution strategy with RBC and some of our other partners.
We diligence our strategies versus our peers, and we believe our long-standing stable returns show competitive performance, and our fee structures are in line with the market. We are moving substantially all of our products over for transfer in kind, and we believe we have the right to compete in all. But as with all of our strategies, profitability will be a focus, and we're focused on fee-related earnings generation there as well. As we scale up strategies in retail, we expect to deliver material value from these different strategies. This is our future state for year-end 2025. Our credit platform is poised to scale, with target run rate fees of $166 million on fee-generating AUM of over $32 billion. Much of our fee-generating AUM increases drop to fee-related earnings, result and continue to grow and achieve our targets in any market backdrop.
Profitability is a key focus for the platform. As you hear from Chris and Bobby, we are focused on costs and making sure every strategy can stand on its own. It has to have a path to success or create distinctive value for our LPs or the platform. We will be disciplined, and we'll be quick to pivot and make tough decisions when necessary. We expect to steadily grow our CLO business in both the U.S. and Europe. We've developed new client relationships and have been oversubscribed across our liabilities on our most recent transactions. We expect to do approximately four U.S. deals a year and two European deals. We have good momentum on our Falcon Fund VII, our middle market junior capital fundraise.
We expect to have an upcoming close, and with client interest, expect to exceed $1 billion, approaching our $1.5 billion target for next year. We will scale up our direct lending efforts on the retail BDC and unlevered direct lending vehicle. We expect to be anchored by a large global insurance company with a close in the next few months. Our Evergreen Credit Fund, supported by our partner Mercer, is performing well, and interest in multi-strat, private, and alternative credit continues to grow. Evergreen structures are extremely popular. Mercer's clients are starting to come in, and we are getting interest from new and existing Onex investors. On the liquid funds, we expect to see modest growth as we initially move on to the RBC platform.
But as we get embedded, we expect to scale up across our liquid strategies, including some of the strong equity-focused and long-short investment-grade strategies we have. Our track record in senior credit and high yield continues to stand out, and we are now working towards larger institutional mandates in that space. We will have some adjacent products which we love because we can use our core engine that's in place and create new AUM streams. For example, we expect to launch a CLO income-oriented strategy, while follow-on vehicles are closed in funds in the coming years. As we scale up our direct lending business, we expect to use our CLO technology to start issuing middle market CLOs. That's probably about a year out. Dislocation in the middle market may create opportunities for us in a structured equity product, which could invest alongside our Mezz and capital solutions funds.
All of this is organic, but as Bobby mentioned, we expect there to be inorganic opportunities as well. The lowest hanging fruit, as Bobby highlighted, would be adding CLO contracts, an area I have experience in. We've had many discussions with other platforms and expect there to be many opportunities over the coming years as numerous managers struggle to raise both equity and liability capital at attractive levels. At the right price, we can add scale without any material costs. There's a lot of demand for other asset-backed products, tremendous amounts of investment-grade product that are suitable for both banks and insurance companies and other institutional investors. Our unique expertise in transport assets and knowledge of structured products would give us an edge and certainly the ability to compete while offering a differentiated solution to clients, while addressing the growing financing needs of a large and growing asset class.
Just to wrap it up, we feel great about the team we have in place and our trajectory. By enhancing our distribution efforts, we expect to continue to grow at a steady pace. And so you all should know, I am being compensated based on the performance of our funds and meeting our FRE and growth objectives for the business. So I'm fully aligned with our limited partners and our shareholders, including you here in the room today. Thank you for taking the time to listen to credit. We're going to start the Q&A momentarily, and I'll invite my colleagues to join on stage.
As a reminder, we have a mic in the room, so if you do have a question here, please just put up your hand. And then on the webcast for pre-registered shareholders and analysts, there is the opportunity to ask a question through the webcast as well. To get us started, we did have a request, actually, Nigel, from the webcast. If you wouldn't mind repeating the debt, the leverage numbers that you had provided for OP. I think it wasn't very easy to hear you through that.
Are you sure that's not available?
I think the mics are going to be managed through the back. Is that right?
Oh, you can trust us. Put them on.
So, I think what I'm hearing is I did not elocute properly while I was up there. The average leverage, which is net debt to EBITDA across the Onex portfolio today, is around 4x, and I mentioned that a peer group would be around 6x. I mentioned that over the last 15 years or so, ONCAP has gone into transactions around 3.8x net debt to EBITDA.
Okay. And also, I think the maturation schedule.
Sure. I said that, this is also true, by the way, that 90% of the debt across OP matures in 2026 and after.
Okay. Thank you. Chris, can you talk a little bit about cash and expected return on cash go forward as we think about the 14-16 compound NAV?
We didn't know this was going to be a Q&A with Jill, but here we go.
That's on. So in the model, to get us to the 14%-16%, what we've got in there is a 5% return on cash, which is what we're currently yielding on our cash balance. You know, we're typically on the short end of the curve because we want our cash to be liquid. Today, that's a good place to be. And so it's about 5% in the model.
Thank you. And Bobby, I actually did hear that question at the break, so there you go. I'm going to go into the audience here and just see if anybody here right now. We have a few others that we could ask, but if anyone in the audience has a question, please raise your hand. I think we're going to hear from Graham Ryding first.
Thanks. Graham Ryding from TD. Two questions. Just, I guess, Bobby, this would be for you. There was a lot of 2025 targets put out today, around AUM and FRE. Previously, I think you guys had 2026 targets out, so just why the deliberate focus on 2025? Is that due to the sunset multi-voting shares in 2026, or is there another reason? Thanks.
That was certainly part of it, when the MVS sunsets, but three years is also enough time to have visibility in what we do. It's important, because I don't think it came out enough today, that although we talk a lot about three-year plans, we try to build Onex every day, thinking about, you know, 10 years plus, and make decisions that are going to create long-term value. There is a lot of focus on the MVS sunset, but when we wake up every day and we manage Onex every day, we're aware of that, but we're trying to build... You know, we're trying to continue to build the business to have long-term, sustainable value.
... Great. Maybe I could throw one more in. Just, Chris, this will be for you, the invested capital or, or the NAV target of 14%-16%, how does that compare to, you know, what's your track record been on that for the last five or the last 10 years? You know, all in NAV growth.
Yeah. So it's the last five years, we did not hit that target. We were a little bit below it. There are some contributing factors to that. One, in particular, was we did have a higher cash drag over that period of time than we expect to have going forward, just given the interest rate environment. And then we also had some M&A, whether it be Falcon or Gluskin Sheff, that took capital away from our compounding of capital. And we had a different mindset around cost controls, and we invested a lot of money in OpEx to build out the credit platform, the OTP platform. And all of those things we expect to be different going forward, and should get us into the range.
If you look at the timeframe going back to, I'll call it the OP reset, so middle of 2018, so that's not quite five years, we're in that range, particularly once you include the benefit of the normal course issuer bid. But there are a few things that are gonna be different going forward that kind of bridge most of that gap.
I think, I think it's important to note, on that when we do M&A, and Chris alluded to it, the dollars come out of NAV. And if we do M&A, and we buy earnings, and nobody gives value to the earnings, like, the value just kind of goes poof, right? And that doesn't make any sense. So if we do begin to do things organically, please keep that in mind. Like, if you buy a Falcon, that doesn't, that's not dilutive the day you do it, because the NAV goes away. We're doing that for a reason, right? So just keep that in mind going forward.
Geoff, did you have a question?
Yeah. Geoff Kwan, RBC. First question I had was on the ONCAP side. I think the mention was, like, $1.6 billion has been invested by either Onex or, I guess, the, the investment team. My question is, is, is on the investment team, are there the same kind of, like, need to require... or, sorry, invest in the various strategies similar to Onex Partners? And if so, can you give some details on that?
The question is, are the team investing in the strategies like Onex Partners are?
I think if they have requirements to do that.
Minimum 1%.
Yeah. So, we currently don't have minimums or requirements. I think some of the structures don't lend themselves well to internal investing. We have a lot of demand and interest in investing from the team, and so we're working on adjusting some of our structures to allow for that. But there is both from a carry perspective and alignment perspective, a lot of that. And I would say all the funds that do or are capable of taking investing team capital, it has exceeded the kind of minimums that we would normally expect. So there is tremendous alignment on the team.
Okay. And just my second question was on the transportation fund. How would that differ in terms of so there's no conflict of interest on the types of deals Onex Partners would do historically?
The return profile is a bit different for OTP. They're targeting more in the 14%-16% range. They'll have more structured transactions than we do at OP. But I do, I think the informational advantage, as Tawfiq likes to call it, will certainly be there between our PE teams and OTP. But it's really the return profile and the risk profile that'll look different.
Nigel, while we're waiting to see if there's any other questions in the room, can you just, a follow-on on the debt question. What amount of OP debt is fixed versus floating, and whether some of floating was swapped into fixed and when? If you could just provide a little bit more commentary on that.
For OP, a little under half of its debt is fixed, and therefore, around half is floating. We have some investments in the floating category, which we view as nearer term exits and therefore not appropriate for fixing. So we think if you dial forward a few months, that ratio kind of becomes significantly more than 0.5%, more than half fixed. And, the second part of the question, Jill, I think, is about the move, and we basically fixed about a third of the total debt amount during 2022, the earlier part of 2022.
Okay. We'll just go back to the floor and see if there's any other questions on the floor.
Thank you. Jack Hidi, Caravel institutional shareholder. Two questions, if you'll indulge me. Firstly, for Chris, can you confirm that $185 NAV per share number wouldn't account for any of the NCIB activity, given where you guys are buying it relative to NAV?
That, that's correct. NCIB activity would be additive to that, model, if you will.
Okay, cool. And then secondly, for the credit platform, the growth targets there, can really any of you just speak to where you guys see that coming from, from the institutional side? Thinking, I guess, specifically about insurance, given your team's knowledge and expertise there, as well as some of the deals that your peers in the U.S. have made with the insurance companies down there.
... I would say that, insurance is a key factor for us in terms of our growth going forward. We've hired an insurance dedicated specialist who just joined us. We're creating a lot new, a lot of new conversations, and showing the expertise we have on the Onex Partners side in insurance. We think we're really powerful, in that regard, both in building structures and products. So our dialogue with insurance companies has been dialed up materially. I think from an institutional perspective, we expect growth not just from insurance, but from sovereign wealth funds and pension funds as well. I would say, having been all over the world, almost every region is interested in growing in credit. Bobby and I are going to the Middle East next week, for example. So it's a lot of institutional interest in credit.
We'd love more insurance capital. We're working on some things in that space currently. But I think you're gonna see it across the investor spectrum.
Anything else from the floor? We don't have any questions from the webcast. There we go.
Just about, you know, higher interest rates in the last couple months, and just have you seen a significant change in how, when you're looking at new investments, the valuation in the marketplace for those investments?
Yes. We're, you know, the good news is we are, we are, we are and will be making some realizations and also some investments. But we're in exactly what happened, in the phase that is exactly what happens right now when there are interest rate changes in Private Equity, in that there are an enormous number of broken deals. So we ourselves have found ourselves to be the last person in a process, and still, by the way, both buying and selling, being unable to close the value gap to a buyer and seller. And it's not clear yet how this will get resolved, whether it's you know, who, who, who's gonna give in first. But there is a disconnect right now between valuation views, and it's largely driven by the availability and cost of credit.
Anything else? Okay, well, I'm gonna pass it over to Bobby to do some wrap-up remarks, but I just wanna say thank you to all of you on behalf of the shareholder relations team. As always, if you have any questions or need any follow-up, please do reach out to us directly, although we would appreciate it if you waited until Monday. All right, over to you, Bobby.
Just one clarifying point. Even though we've moved the cost structure of the OP team down to- with the assumption, Nigel, that we still believe we're gonna be raising, you know, money for OP VI eventually, we just wanted to get the cost structure right for today's reality, to be clear. The other thing that didn't come through, I just wanna make sure you understand, is over the last couple of years, you know, all the changes we've made in senior management, like the team we have, the team we have on the field now is a team I feel really good about, on the senior level.
When we lay out all these strategies today, I have, you know, the utmost confidence that the team around me is gonna be able to execute and do it in a way that's, you know, very Onex-like, in a very Onex-like culture, which is something that I'm very proud of. Thank you for the time today. This was more efficient. I thought we'd get a lot more questions than we did, but hopefully, you'll have an early lunch with us, and you can get back to work a little bit earlier. Thanks for coming.