Antin Infrastructure Partners S.A. (ANTIN) Earnings Call Transcript & Summary

Good morning. This is the conference operator. Welcome, and thank you for joining the Antin Half Year 2024 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Ludmilla Binet, Head of Shareholder Relations of Antin. Please go ahead, Madam.

Good morning, everyone, and thank you very much for joining the call today. I am Ludmilla Binet, Head of Shareholder Relations, and it is with great pleasure that I welcome you to our half year 2024 conference call. Earlier this morning, we issued a press release announcing our results for the first 6 months of the year. A copy of this release and of the slide presentation are available on the Shareholders section of our website. For today's presentation, I am joined by Alain Rauscher, Chairman and Chief Executive Officer; and Patrice Schuetz, Partner and Chief Financial Officer. They will present the highlights of the period, provide an update on the business activity and review the financial results of the first half of the year. The presentation will be followed by a Q&A session. And I will now hand over to Alain.

Thank you, Ludmilla, and good morning, everybody. It is my pleasure to welcome you on this call. Let me start by summarizing the key highlights of the first half of the year. First, we are seeing good momentum in our investment activity, which is supported by an improving macroeconomic environment. Inflation is coming down in most countries, and we are seeing a very tangible path towards lower interest rates, as further confirmed in the United States last week by the Chairman of the Fed. Deal activity is picking up, and that is reflected in our numbers. The amount of money we have invested in the first half of 2024 doubled compared to the first half of last year. We are also pleased that exit activity resumed. We signed the exit of Grandi Stazioni Retail, which was the last asset of Fund II. This fund is expected to generate a top quartile performance with a final gross multiple of 2.6x. This is a great outcome for our fund investors. We continue to be on track to raise Fund V at its EUR 10 billion target and potentially above. This would be a great success given the market conditions, and it makes flagship one the -- our Flagship Fund one of the fastest-growing infrastructure strategy in the world. As a result of this, our P&L continued to show strong growth across key metrics. Patrice will later in the presentation will detail those numbers. With respect to capital return, we maintained our dividend payout ratio at about 100%. This is well supported by our strong cash generation. As a last point, we continue to see a very positive dynamic in the infrastructure market. Megatrends such as the energy transition and digitalization of infrastructure requires significant capital investment. These are powerful trends that we believe will continue to support the growth of our business over the coming years. Looking at our investment activity. You will note that capital deployment doubled in the first half of 2024, reaching EUR 1.6 billion compared to EUR 0.8 billion last year. We see good momentum and engagement across our investment team that is reflected in our numbers. Looking more closely at our capital deployment. We announced 3 investments in the first half, 3 Flagship and 1 in NextGen. First, the investment in Portakabin, a modular building lessor, headquartered in the U.K. and expanding into Continental Europe. For those who are familiar with this concept, it's close to what Algeco does, but with a very important activity in education. The second investment is the launch of Proxima, the first privately-owned operator of high-speed passenger trains or TGVs in France, online servicing Paris to Bordeaux and Brittany. Most recently, NextGen Fund I invested in GTL leasing, a lessor of hydrogen transportation and storage equipment in North America. We are excited about these investments, and we believe they demonstrate well our differentiated positioning as a value-add and growth-oriented infrastructure investor. As for Mid Cap I, we had announced in January an investment in a radiology group called Excellence Imagerie. This investment didn't come to a closing because certain condition presented were not met. Taking stock on where we stand in the deployment of each of our fund strategies, we are seeing a slight lengthening of the investment period for the current set of vintages. You see in the middle column that we invested Fund II and Fund IV on average in around 3 years. We are currently trending closer to 3.5 to 4 years and potentially longer for Mid Cap Fund I and NexGen Fund I. We've experienced a period during which deal activity was less dynamic, and we decided to remain disciplined, especially when they were diverging [indiscernible] between buyers and sellers. We think that this will ultimately serve us well, and it's fully consistent with our performance-first mindset. With respect to Mid Cap Fund I, we're about 50% committed and need 2 to 3 additional investments to reach our 75% threshold, which in a normal environment would take about a year. We are hopeful we will actually finish investing this fund given our pipeline closer to -- in a shorter period to do that. In principle, we expect fund deployment period to return to 3 to 4 years in a normal market environment. On fundraising, Flagship Fund V had EUR 9.4 billion of commitments secured at the end of the semester, which represents 94% of the fund's target size and an upsizing of 45% compared to Fund IV. We are on track to reaching our target for Fund V by the end of the year and hopefully exceeding it. We are pleased that our funds continue to perform well, and for most of our funds, gross multiples increased in the first half of the year. Fund I announced the exit of Grandi Stazioni Retail in Italy, which was the last portfolio -- sorry, it's Fund II. Yes, Fund II, sorry, which was its last portfolio company after the quarter ended. The fund's final growth money multiple is expected -- actually it is 2.6x, which is a very solid performance. So we are very pleased about this exit. First, because Fund II is a top quartile performer as per Preqin. Second, we achieved a performance that is very consistent with Fund I. And third, our exit activity is resuming with the performance in line with target and realizing, again, a significant value uplift relative to the valuation we had in our books. We delivered those value uplifts at exit quite consistently in the past. And of course, they lend a lot of credibility to our valuations quarter after quarter. One more -- our more recent vintages are also making good progress, and that's across Flagship, Mid Cap and NexGen on the right-hand side. I would just like to flag something, which is that we are -- when we compare the performance on assets, which are completely realized, they are not directly comparable in numbers to NAVs, net asset values, which are proposed here for investment, which Antin is a portfolio. So it's not because -- you see 1.9x Flagship III in June, and before that we will not make more when we sell assets. In fact, we expect to make much, much more because only 37% of this fund has been realized. So more is to come. The performance of our funds is well supported by robust growth and profitability across our portfolio companies. Growth rates continue to be strong with an average revenue growth of plus 12% year-on-year at an average EBITDA growth of 19% year-on-year. Approximately 75% of our portfolio companies have improved their margins year-on-year, and we are also seeing positive trends with respect to profitability. These key metrics show that value creation initiatives continue to deliver results, both through organic and inorganic growth initiatives. We've been particularly active in executing our buy-and-build platform strategy with 86 add-on acquisitions made in the first half of 2024. Moreover, our financing team remains active in capital structure management. 73% of our portfolio company's debt is hedged, offered at variable rates that were secured prior to interest rate increases. We do not have any major refinancing needs this year and very well staggered debt maturities between 2025 up to 2030 and beyond. So no financing wall expected due to our very active capital management. The next slide, compared the upsizing and growth of Flagship Fund V versus the upsizing and growth of the largest infrastructure funds in the world. We have, of course, decided to anonymize this project. We're not there to give brownie points or bad to any of our peers. At the end of the second quarter, our Flagship Fund was 45% larger than its predecessor fund at 95% raised. Fundraising obviously continued and would take us to around plus 54% at the fund's target size of EUR 10 billion. As you can see, this positions Antin Flagship V among the fastest-growing infrastructure funds in the world. We talk here about very, very alternatives here, and I'm sure some of you will be able to put names on that. And if you need, probably Patrice can share with you some data -- public data. While it is a good accomplishment, we were obviously hoping to do more when we launch fundraising in different market context. Nevertheless, we need to take stock of where we stand. This is a very respectable -- actually a very solid growth, and we are obviously focused to continue to scale up as much as we move forward. Now when we talk about growth and our potential to scale over time, we need to begin by understanding the megatrends that drive our industry, the infrastructure industry. These are very long-term trends that will play out over decades. The energy transition, where we are seeing enormous investment needs, in order to achieve net zero by 2050, the world will need to invest an average of $3.5 trillion per year. I think trillion, not billion, right? That's a total of $110 trillion in capital investment. We are an experienced investor in this segment, whether it's renewable, EV charging, or for example, smart grid solutions. The digitalization of infrastructure has entered into a new chapter with the rise of artificial intelligence. It means we'll see more data center capacity and more fiber built. Again, we are very experienced in those segments and have produced excellent returns in those segments. Transport infrastructure benefits from a whole range of long-term trends, whether it is supply chains that are changing due to onshoring of manufacturing and changes due to geopolitical risks or whether it's an increased focus on sustainable modes of transportation such as rail. Then we are seeing significant and often drastic demographic changes across our developed economies with a rapidly aging population, as we put strain on our social infrastructures globally. With governments who are almost running high budget deficits and having built up significant debt burdens, private market investors will have an important role to play in supporting those trends. We are well positioned to be among a small number of infrastructure investment firms that have the expertise, experience and scale to play a meaningful role. This means that we have significant long-term growth potential. Just wanted to highlight a few numbers in this slide to give you an idea of what is the long term. I'm not suggesting to the next vintage, but the long-term potential for our industry. For Flagship, our largest competitors are operating EUR 25 billion funds, and these funds continue to grow, and I believe we'll see much larger funds when the next set of vintages are raised. You see that with EUR 10 billion-plus for Flagship V, we have a huge potential to grow in this strategy. In the Mid Cap category, we also see a capacity across Europe and North America that is greater than EUR 10 billion. And evidently, as the large cap funds are growing in size very drastically, there will be room for mid cap funds to themselves grow in size very rapidly. The mid-cap market is very large, and we believe it is going to continue to be a very attractive segment of the market. For NextGen, we see opportunity that we will well support EUR 5 billion-plus type of fund, and we believe the opportunity set will continue to grow over time. So it's possible this will expand as we continue to develop the strategy. Clearly, this is our level of ambition over time and not for the next vintage, but it gives a long-term direction of travel and an aspiration for our time. In addition, we will continue to expand our strategies organically within the infrastructure ecosystem and potentially beyond if we feel there is an attractive path to do some M&A. We continue to explore options for M&A. But as I've said on prior results calls, we do so with a high bar. And only when we are confident, it can create a meaningful value to our shareholders. With that, I will hand over to Patrice to talk about our financial performance.

Thank you, Alain. I will start by presenting key metrics for the first half of 2024, and I'm pleased to report that we continue to deliver growth across our key financials. Fee-paying AUMs, revenues, EBITDA and dividends, all increased relative to the first half of 2023. You will note that growth rates are more moderate versus the prior year, and that's really linked to the advanced nature of our fundraising cycle for Flagship Fund V. Now looking more closely at our AUM and revenue composition. Total AUM increased by 3% to EUR 31.7 billion, and fee-paying AUM increased by 4.2% to EUR 20.6 billion. That increase is driven primarily by additional commitments raised for Flagship Fund V. Revenue increased by 6.4% to EUR 146.9 million. And as in prior periods, the majority of this revenue are management fee revenues. So these revenues are long-term contracted, recurring and provide a really good visibility on our P&L going forward. The effective management fee rate stood at 1.33% and was largely stable versus the first half of 2023. Now looking at the components of the 6.4% revenue increase, we can see that about EUR 12 million in management fee revenues were added in relation to commitments that we raised for Fund V. An additional EUR 1.3 million were added in relation to add-on investments that we made in our Fund IV, so that fund continues to invest capital in the existing portfolio companies to support the growth and will continue to add management fee revenues as it does that. These effects were offset by realizations in Fund II, Fund III-B and Fund III, which are more mature. The remaining changes are relatively small and relate to NextGen catch-up fees that were recognized in the first half of 2023 and which are falling away now and slight changes in investment income and admin fees. So overall, that takes total revenue to EUR 146.9 million in the first half of 2024. Now this slide on carried interest talks about the potential for performance fee revenues from carry. Antin has so far not recognized material revenue related to carried interest because for funds that were raised prior to 2020 and prior to the IPO, the carried interest was allocated to the team. Now starting with Fund III-B and funds that were raised after that, a 20% portion of the carried interest is allocated to the firm. And the funds -- at the fund's target return levels, the revenue potential to Antin is approximately EUR 480 million in total, and it comes entirely on top of the management fee revenues that Antin generates today. So with respect to timing, the first fund that we anticipate to generate carried interest revenue is Fund III-B, and a first portion of that fund's carried interest could be recognized in 2025. So that's subject to performance and obviously also subject to realizations within that fund. For Mid Cap Fund II and Fund V, it's still early. We would typically see carried interest revenue in year 6 or year 7 of the fund's life. And so again, that's driven by value and fund performance and the pace of realizations. But overall, you can see a very substantial revenue potential that's not reflected in our P&L today. Now moving to our operating expenses. Our total expenses increased by 13.7%. Personnel expenses increased by 11.1%, which is linked to headcount growth, which was 10.8%, and wage increases. Operating expenses increased by 16.7%. Now overall, we're focused to manage our expenses in a controlled manner, as we continue to grow the business. I think one notable point on the headcount development is that we added a significant portion of new hires in North America. So you see that the headcount in our New York office grew by 38% over the past 2 years. And as we continue to scale our strategies, the North America platform will deliver significant capacity for additional capital deployment and, of course, more fundraising. And as you know, the U.S. is the largest market for both deployment and fundraising, so it's important that we continue to make progress there. Now taking all those elements and looking at our profits. With respect to our EBITDA and earnings, we achieved an EBITDA of EUR 84 million, which is 1.4% above the first half of 2023. Our EBITDA margins declined slightly to 57%, as we continue to expand the team. And our underlying net income grew to EUR 61.7 million and was up 1.5%, which resulted in earnings per share of EUR 0.34. It's clear that the earnings growth is more moderate in the first half of '24, which follows a very substantial step change in the prior year, and that's really linked to the fundraising cycle for Flagship Fund V, so in line with what we expected. Now moving to our cash. We continue to hold significant cash balances, EUR 392 million at the end of the second quarter. We have no borrowings, and we continue to generate significant cash as our business model is capital-light and tightly cash flow generated. Clearly, it's our intention to move towards an efficient capital structure and deploy this cash to generate value for our shareholders. Now we see 3 ways in how we can do that. The first one is to support the expansion into new investment strategies and potentially use some of that capital to seed investment strategies, and of course, to hire talent to support that growth. In addition, we could also slightly expand the co-investment portion, which we would only do within the capital-light framework that we've adopted. Two, could be to expand through opportunistic M&A, which Alain spoke about before. And three, through continued capital return to shareholders. In a first instance, that means that we're committed to continue paying an attractive dividend, and we will maintain that approach and policy as we move forward. Now that's a good segue to talk about the dividends. Over the last 3.5 years, we have gradually increased both our dividend payout ratio and our absolute dividends per share. We distributed a total of EUR 280 million to our shareholders since the IPO in September of '21, and we're pleased to announce today another increased interim dividend at EUR 0.34 per share, so that's 6% higher than the dividend announced in the first half of 2023. Wrapping up on the outlook before we jump into the Q&A, our outlook for 2024 remains unchanged. We expect to complete fundraising for Flagship Fund V above its EUR 10 billion target. We expect underlying EBITDA in '24 to be at or above the EUR 175 million we have achieved last year, probably quite close to that level, and we expect to distribute a majority of our earnings as a dividend. So I think this concludes the presentation, and I would open up for Q&A.

[Operator Instructions] The first question is from Nicholas Herman with Citi.

So 3 questions, please, actually all on growth. So the first question on fundraising for Fund V. You previously indicated that fundraising would be back-ended, that you've already raised EUR 0.4 billion in the first half of this year, so just shy of the EUR 1 billion to get to EUR 10 billion. I guess maybe I'm over extrapolating here, but it seems like, therefore, with that back-ended nature, you should be ending up ahead or even a fair bit ahead of the EUR 10 billion by the year-end. So just so if you could just talk to that, please. The second question on investment cycles. Thank you for that new disclosure on investment cycle duration. Again, turning back to Fund V, you have made, I think, 5 investments and committed about 40% of the funds. Historically, you've activated the next vintage when the current vintage is 70%, 80% committed. So it's taken you 2 years to get halfway there. But I guess, I would have thought that with looser, easier financing conditions that should make it easier for you to execute on your robust pipeline. So in that context, why should it take you another 2 years to deploy the remaining 30% to 40%? That just seems a little conservative to me. And then the final question on growth optionality. I appreciate that the BOP, M&A is high. I guess, it seems that now might be an attractive time to acquire given the chance, given accelerating consolidation in the industry and with your managers able to raise capital. You flagged on Slide 10 that you have growth optionality through M&A, through strategy expansion. I guess, how do you think about the relative mobility of using your cash between those 2 growth routes, please?

Yes. I can take -- it's Alain speaking. Maybe I can take the first question, and we split the others with Patrice. On the growth of Fund V, well, there are some statistics, which I think we can -- Patrice can share with you if you have some interest, which are essentially based on Preqin numbers and which show that 2024 for the fundraising market for infrastructure continues to be very difficult. In fact, 2023 was a low number. And 2024 is basically in line with 2023. So there are some people who managed to raise fund -- to raise some funds, but it is very difficult environment. And to give you a perspective, compared to 2022, which was the highest year, the fundraising in 2023 was down by about 40%, and we should expect this number to be more or less the same level in 2024. We have numbers for the first 8 months, but clearly, we should expect this to be there. So this is the reality of the market. You see big numbers of funds, which are in raising -- fundraising. And you also know if you investigate a bit that many of them are only -- have only been raised for a small portion, usually less than 50% and for a long time. So being at 94% in June, and frankly, seeing what we know, that we know we will meet our target, hopefully exceed it is a big achievement, per se. We cannot ignore market conditions because if we do ignore market conditions, say, well, I don't know, I put a 60% increase in my model, et cetera, why are you at 45% or 54%, I mean it makes no sense. The market is what it is. So please appreciate that. Now if we look at the history of our industry over a long period, and we have -- just in front of me I have the data for 10 years. There has been a continued -- I would say, continued growth in fundraisings of infrastructure funds, essentially because the market -- the underlying trends, as we discussed, are there, the money is there to be deployed, but clearly, high interest rates and geopolitical risk have put, I would say, a break on this evolution, and I'm very confident it will start soon, again. Second question is really why does Fund V take longer to deploy? That's an interesting question because we -- when we invest, we try to make -- we're not in a sort of, I would say, Olympic game, 100-meter final, where we try to be the first to close our fund to be the top fund. We try to make good investments. And you have to appreciate that interest rates have gone down very substantially over the last 2 years. So we have to be extremely careful about the price we are prepared to pay on those. And for that reason, we are very prudent on the investment that we make. So it may take a bit longer, fine, there's no problem with that. The only thing -- and again, I'm very insistent on that because I know you are looking at numbers for the next quarters, which is, of course, extremely important. But the main driver of product market company is performance, performance of the funds invested. The rest is the fact that we don't raise -- we raised EUR 1 billion less for this vintage is, in my view, completely irrelevant because we will raise EUR 1 billion more in the next vintage. So you see -- you have to integrate that we as managers are focused on making good investments. And today, we have seen some big pressure on interest rates. It is now loosening, but we certainly are extremely disciplined. Concerning M&A opportunities, yes, I mean -- maybe you want to say a word about that, Patrice?

Yes, of course. Nicholas, I'll just add one more thing on the fund cycle before we go there. I think on Mid Cap, we would need 2 to 3 more investments. And essentially, 2 to 3 more investments would mean in average, it could take us about a year to get to the finalization of the investment period for that fund. But then obviously, things can go faster if we see an improvement in the deal environment. And I think on Fund V, you're right, we've deployed 50% in 2 years. And if we see an improvement in the environment over the next 12 -- 24 months, the remaining portion may be invested faster, which would suggest we may be 3.5 years and not 4, but, yes, we're giving conservative guidance where we stand to date. And so still far away to engineer a point landing on that. On the growth optionality and M&A, I mean, we really need to split it into 2 components. I think one is what can we do on the organic side? And the second thing is, what can happen on M&A? On the organic side, clearly, if we see an improvement in the fundraising environment, we see optionality to seize that market opportunity and to do things, but we need to see that improvement. And on the acquisition side, I would say it always takes 2 to tango. And we set the bar high on what we believe would be interesting for us and what we would want to do. If we can do that, that's great. We would love to move forward. But if we don't, that's also perfectly fine, and we will focus on continuing scaling the existing strategies and progressively add to the strategy set through organic expansion. And we have -- absolutely have the capacity and the vision to do that.

The next question is from Arnaud Giblat with BNP Exane.

A few questions from my side as well. Could I come back to fundraising? And -- sorry, the time to deploy Fund V in mid-markets. During your prepared comments, I think you said that Fund V could be a 75% deployed within a year. Does that mean you could be back fundraising and then potentially activating Fund VI by the end of '25? And I suppose, again, you just said that mid-market should be substantially deployed within a year as well. So is it conceivable that -- for you to be in markets with Fund VI and mid-market, too, at the same time? Another question on that point is -- thanks for the -- giving the total addressable market. How should we be thinking about uplifts on Fund in class 1 in those 2 categories? And finally, staying on growth, I was wondering if you could talk a bit about new products. I mean in the past, you have indicated, and I think during the call as well that there's potential to do more. Is -- are there any concrete plans to do climate funds to -- or other new types of products? Are there any concrete plans emerging there?

Arnaud, let me maybe start on Mid Cap II and Fund V, and then, I can talk about the uplift. And I'll let Alain talk about the strategy. On the Fund V, I would see this today more as a 2026 event. But it's still early to say whether it will be mid-2026, but if you take the 4-year cycle, we have in the presentation, you will essentially look at mid-2026. Then, of course, this can be faster given where we stand today. But that's sort of what I would look at. For Mid Cap II, if we run at more than 4 years, which is currently sort of the base expectation, I would see a first close sometime in the second half of 2025. But again, it's driven by pace of deployment, and these are not necessarily things we control or project.

On this side, to be clear, quite frankly, for the sake of not getting -- being too concentrated in our investment, we expect to make 2 to 3 new investments to complement our Mid Cap fund, right? We may well announce a deal very shortly. In that case, the deadline could be shortened. And certainly, what we will do is once we -- once, and if we announce for the -- for Mid Cap fund, we will make sure you are made aware of that and adjust possibly your timetable. But we are very confident that the capital will be deployed in a timely manner. We are just cautious.

Then, on uplift, I would say it's too early to tell. We will define a fund target size. When we launched the fundraising for the funds, then we will inform the market accordingly, but we haven't decided. But it's clear that these funds, particularly the ones that are earlier in its growth trajectory has substantial room to scale and to grow. And the more mature ones will grow at lower rates, but they will still have significant opportunity to growth.

You have some indication of where we stood for Flagship Fund IV and Mid Cap Fund, which basically were in operation at the same time. So it gives you an idea where we are. Our main focus, because it's the same strategy, just the size changes, is that there should be no overlap between the 2 funds, so to avoid any kind of conflict of interest between LP basis. So this is the point. So we need to have some difference of that. Now we start with a firm which is going to be your flagship fund, which should be in the region of EUR 10 billion-plus, so I think it also gives you some highlights as to where we can expect it to be. And again, I mentioned in the earlier slide, long-term potential with large-cap fund in the world growing very substantially today, EUR 25 billion, and probably much, much more in the coming -- in the future. There is a potential to, I would say, grow this mid-cap strategy very substantially. And just to address larger mid-cap deals because the market is basically benefiting from getting access to capital to depend and grow our businesses. And also, another way would be to make more deals like the other side that we do today, so big potential of growth for this strategy.

And Arnaud, you had your last question on what would be a new investment strategy.

Yes. I must say it's a very -- it's a bit too early to tell because we have been -- we are spending enormous amounts of time thinking about that. Although I remind you that our main focus is to make good investments, that's what we are paid for, good investments and avoid bad investments. But yes, we certainly are thinking about new diversification. We are clearly thinking about some organic initiatives, which we alluded to in the past, and we are working with some working groups, which are formed to further investigate, and then, we'll see whether it makes sense or not. To be very direct with you, in a tough fundraising environment, the priority is to get the job done on our main strategy before venturing into new strategies. So the first thing is to do the job in a very good manner, raise Fund V, then new strategies -- before, I would say, envisaging some other initiatives. We, in particular, just a strategy about nearly 2 years ago, and market potential today is too limited because of limited investment capacities by LPs. So we just want to find the right slot. But trust us, we are focused on that.

The next question is from Sharath Kumar, Deutsche Bank.

I have 2. Firstly, operating costs, of course, I understand that it is growing at a steeper pace, but warranted. But in the context of your 2024 EBITDA guidance of being at least at 2023 level, I would imagine you would need some help from costs as well and not just from revenue. So in this context, I would expect it to be broadly flat in the second half versus first half. Maybe can you talk about your expectations here? Then, on carried interest, yes, your medium-term expectations are pretty reasonable in the context of your performance track record. But just for 2025, I note that consensus expects around EUR 20 million of fees. So I know all of it should probably come from Fund III-B, which I notice currently 26% realized. Just in terms of accounting for you to meet the hurdle rate, roughly how much of this needs to be realized for you to recognize in your P&L?

Thank you, Sharath. With respect to your first question on the operating cost base, the expectation is that we continue to see costs in the second half of the year increase, and there are really 2 reasons for that. The first one is just a technical one, which is when we hire people in the first half of the year, not the full cost of those hires are reflected in the numbers. So you're going to see the full cost of those reflected in the second half. And you're probably going to see some additional hires that will come through in the second half as well. I would say you will never see our cost move directly in line with revenue. In fact, what you see is that cost is increasing gradually as we continue to hire and integrate talent and make sure that everybody can fully perform and operate in their roles, while revenue will grow in lockstep with particular fundraising events that can be very substantial in one period and less so in another. So that's completely normal. At the same time, we're doing an over-proportional share of our hiring in North America, which will really unlock very substantial deployment and fundraising capacity in a market that is big and important and relevant. But those hires, they come at a higher cost. And so that's really why you see the cost base go up, but this will pay off. Then we have to move to the carried interest. I think if you look at Fund III-B, it only holds 4 assets. In addition, we also hold a very small portion, a very tiny portion of carry in Fund III, which is linked to employees that had, at some point, left the firm and a small amounts that we bought back. And in combination, those 2 would likely deliver some revenue in '25, provided that we have exits in those funds. And in Fund III-B, that would probably mean at least 1 realization, 1 exit of those 4 portfolio companies in Fund III-B. I think that's where we stand. Yes, I won't comment on the amounts you've mentioned because we're not guiding on the amount, and it's difficult to say. But in principle, I think there should be a good path to see in carried interest start.

The next question is from Hubert Lam, Bank of America.

I've got 3 of them. Firstly, as you reach the end of fundraising for Fund V, how should we think about the fee rate for this fund? One of your peers got it for the slower -- slightly lower fees in their flagship. Do you think it will be necessary to give fee discounts to close out this fund? That's the first question. On the second one, again, on costs, you talked about costs for this year and how we should think about it. But how should we think about headcount growth into next year? So you've grown headcount by about 12% to 13% per annum over the last 2 years, should I still expect double-digit headcount growth for 2025? And lastly, on wealth, I know you previously said that you have no plans to enter the wealth market. But is this still -- would this be part of your strategy in the medium term to maybe create some semi-liquid funds and put in infrastructure?

Maybe -- thank you, Hubert. Maybe I can take the first question, and then, Patrice will answer the last 2 ones. On Fund V, to finish Fund V, no, we don't expect, and we are not actually requested to provide any discount on fees, which I will remind you would apply to all our investors because they all benefit from the close of the most favored nation. So -- and no one asked. Let's be very clear. The reason why -- the main reason why people don't invest or invest less in the private market funds these days is because of fewer returns of capital because of fewer exits. So this is really the main driver. No one is saying we are prepared to invest in Fund V if you give us a discount. This is not the point at all. People are looking for return. And for -- in this respect the fact that you have a discount is irrelevant for investors. Maybe Patrice can answer the 2 other questions.