Bridgepoint Group plc (BPT) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to Bridgepoint Group plc 2022 Interim Results. [Operator Instructions] I would like to remind all participants that this call is being recorded. And with that, I'll hand it over to William Jackson, Executive Chairman of Bridgepoint Group plc to open the presentation. Please go ahead.

Thanks, Christoph. Good morning, everybody, and thank you for joining us today. I'm William Jackson, Bridgepoint's Chairman. And I'm joined this morning by Adam Jones. Many of you know, Adam. Adam's our group CFO, here to take you through our interim results for the half year 2022 and the outlook for the rest of the year. So just to remind you, these are our first formal set of interim results since we listed just over a year ago. So I'm really pleased to report a strong set of maiden first half trading performance ahead of expectations. Within our numbers this morning, you'll see -- but importantly, we've now banked a high proportion of our exit activity for the full year into the first half performance. That gives us real confidence in our ability to deliver the full year results in line with expectations. So the key highlights for today of our interims this morning are our company's financial performance is ahead of expectations with some favorable first half weighting, as I just noted, driven by those exits. Fundraising activity, we're going to talk a bit about that in detail, is making good progress. And I'm also pleased to report strong underlying fund performance over the last 6 months with valuation uplifts in our main funds being driven both by the exits that I've just mentioned and a very strong EBITDA growth, which is offsetting some decline in benchmark valuations as a result of the market -- quoted market rotations and the multiples we're using for those valuations. I think the results demonstrate the strength of the Bridgepoint model in these challenging times. So just moving on to the next slide. I'd like to start a detailed look at the results with our H1 financial performance, which reflect the resilience and continued strong progress of our business despite, frankly, what is a much more volatile market backdrop than I think any of us expected at the beginning of the year. Prior to any fees from BE VII and there aren't any included in the first half numbers, in the first half of the year, the business generated revenues of GBP 140.1 million. That's an increase of 15% from H1 2021. Underlying EBITDA was GBP 61.8 million. That's an increase of 17% from the same period last year. And underlying profit before tax was GBP 51.9 million, an increase of 23% from H1 2021. That performance was driven by income from recently raised funds, strong investment performance in the first half of '22 and operating leverage helping drive our efficiency in our cost base. Our capital-raising plans for Bridgepoint Europe VII are new flagship fund and our direct lending fund remain on plan despite the congested markets we referred to in the last update we gave you. We believe that in these times, Bridgepoint Europe funds are actually very well suited to the current times, and that's certainly being reflected in the progress being made in capital made or Bridgepoint VII. I'm pleased to say that Bridgepoint Europe VI is now fully deployed. It's built a quality -- high-quality portfolio. And importantly, the transition to Bridgepoint Europe VII has been formalized with a mid-May 2022 transition likely. That sounds a bit bizarre to say it's likely to have happened in mid-May 2022. Just to explain there, the exact date gets confirmed on the receipt of competition clearance last Bridgepoint Europe VI investment. And we have to work for that clearance, otherwise we would be jumping the gun on that clearance. But at that -- we don't expect any issues out of that. We don't have any competition issues on that transaction at which point BE VII will start to contribute revenue-fee paying and AUM. At the start of 2022, our equity funds capitalized on attractive market conditions to deliver very strong exits ahead of the original timing that we were thinking of for the year in our pipeline of planned exits. At the full year results in March, we spoke about the exits of Element and Miller and the breakout retreat -- the returns we achieved then. I think what's noticeable is that since then in May, Bridgepoint Development Capital announced the sale of HKA, which delivered an outstanding return of 7x the original cost. So despite the external macro still delivering strong exits right up to most recent times. These exits, together with strong underlying trading across most of our portfolio companies have driven increases in our underlying valuations across our equity portfolios leading to fund performance ahead of expectations in H1 '22, more of which a little bit later. We are very alert to more volatile market conditions and the market backdrop than we'd expected at the beginning of the year, but we've maintained our fund investment activity in the first half of 2022 at a level slightly ahead of the first half of 2021, taking advantage of some of the new interesting opportunities that we're seeing in these markets. Our equity funds invest in profitable growth companies in attractive 21st century sectors, which, combined with disciplined portfolio construction, typically deliver strong absolute and risk-adjusted returns. In that context, Bridgepoint VII has been well placed to attract significant amounts of capital holding its first close in Q2 2022 of EUR 4 billion. Since then, the funds enjoyed further closes and is now working on the final third of its fundraising targets. With the market congestion that I mentioned earlier resulting in elongated fundraise time tables back towards the kind of length that funds used to take -- to raise, some investors have asked us to use 2023 allocations for that commitment. And as a result, we expect the fund to hold its final close in H1 2023. Remembering, of course, that the exact date of the final close doesn't influence the date at which the fund becomes fee-paying and people coming into the fund pay the fees back to the original transition date, an important point there. In summary, these results reflect a period of strong performance driven by both our equity and debt strategies with continued strong portfolio realizations and valuation uplifts recorded in H1 2022, in particular, with our 6 funds maturing really well, and we'll come back to that a little bit later. In the -- just moving on to the next slide. In the context of the current macro environment, I'd like to say a few words about the positioning of Bridgepoint in these times, because I think every company out there that's reporting results is faced of the backdrop of unexpected challenges in geopolitics, supply chain, monetary policies and facing the higher inflation. We are certainly not complacent about that environment, but we are confident in our business. We have a very experienced management team. We have a 40-year track record of delivering strong and compelling investor and shareholder returns. Our funds have delivered consistent investment performance through multiple economic cycles. Importantly, we construct private equity portfolios that deliver strong and absolute returns with both growth and resilience. And our strong fund performance is underpinned by disciplined portfolio construction. And I think we're very well positioned for the opportunities created in uncertain times in both our private equity and our private credit strategies. Now while we don't normally go into the level of detail I'm going to go into next, but on this occasion, I thought it would be really helpful to remind you of our long-term track record, how we do build resilience into our portfolios, and of most interest to shareholders, what that means for most recent fund performance. I'm focusing mainly on our equity funds here, because private credit is much more stable than private equity in the sense that it's a senior strategy. So I'm going to give you the stats mainly for the private equity portfolio. Looking at the next slide. As I mentioned earlier, Bridgepoint benefits from a very experienced management team, leadership of which has huge experience of operating in different economic cycles. And as you can see here that these are the 3-year rolling performance stats that our team has delivered since the GFC in 2008. And when it comes to building resilience into our portfolios, there are 3 key elements of the approach, which I think are worth highlighting, gatekeeping metrics; measured diversification, we don't like too much diversification because ultimately, we're focused on absolute returns, but measured diversification's important, particularly in vintage year deployment; and making sure you're not exposed to one particular point in macro; and very importantly, our sector-driven thematic investment strategy. On the next slide, you will -- there are strategies to acquire proven high-quality businesses, which are domestic or pan-European operating in niches which we -- which have potential for strong and sustainable end market growth. To be a good investment for Bridgepoint, the companies have to have attractive entry valuations but with the potential for operationally led value creation, where we can roll up our sleeves to help our mid-market businesses grow either through international expansion, through consolidation with buy-and-build acquisition, improved operational efficiencies or substantial market repositioning. Looking at the evolution of our key gatekeeping metrics across our 3 most recent flagship funds. The strength of our funds can be seen in the portfolio of companies showing increased revenue visibility. Very important that 1-year revenue visibility, you can see in Fund VI, 78% gives strong confidence in the outturn for the fund. High EBITDA margins are very important to us. It gives us potential to ride through difficult macros. And in the new world, demonstrates the fact that the portfolio is made up mainly of price makers, where you can have the ability to absorb some inflation pressure. And strong cash conversion is very important. So you see 88% cash conversion, that is after maintenance CapEx gives the ability to pay down debt as well as fund CapEx, important drivers of returns. Building on those attractive financial characteristics. We ensure that our portfolios are sensibly diversified by geography, by sector. And although not shown here, by vintage investment. That latter point is really, really important, and you're going to see that in the market in a moment. If you invest the fund in 12 months or 18 months, you get very exposed to 1 period in the macro. So our funds invest over 3 to 4 years for that reason. As you can see in the examples shown here, we typically invest between 16 and 18 assets in each flagship fund. And no asset represents more than 12% of the capital. Going to the next slide. whilst we carefully to construct our portfolios, as I mentioned earlier, our #1 focus is on absolute returns and doing that with a quality of return, so measured by the risk we take in portfolio construction. And that is driving strong performance across all key metrics. So our private equity funds show strong performance across all 3 metrics that we're just buying net IRR, total value to pay in capital and distributions paid in capital. And in these times, our mature fund values include a high level of realized value. These are not just paper gains. Very, very important that when people are worried at the valuation rotations that have been going on over the last 6 months. And people are looking closely for the validation of those unrealized valuations, because ultimately, we're marking our own homework there. To answer that question, we point to our history. Over the last 5 years, we've achieved a consistent premium on exit to the prior 2 quarters' unrealized value. So in that 5-year period, on average, we have achieved a 40% uplift to the prior unrealized value. And actually, in the last 12 months, that's been a remarkable 64% uplift, just demonstrating that there is prudence in the unrealized valuation. As you've heard me say before, the vast majority of our value creation at Bridgepoint is driven by earnings growth, rather than multiple expansion, and that has been the case in our most recent valuation. And each of our main equity funds has enjoyed a multiple number of what we would describe as breakout returns. Those are returns over 3x in capital invested. And just to give you some updated numbers, that has been, on average, to date, 7 exits in Fund V, which is our benchmark fund, our most mature fund, flagship fund. Those 7 exits, the total capital there has been realized at 3.7x cost. And in BDC, Bridgepoint Development Capital III, that is running at 3.4x money, is likely to rise quite fast with the impact of exits like HKA, BDC performing incredibly strongly. So that is encouraging as that fund comes to market towards the end of next year or early in '24. And I think I'd just also add to this data for you that those metrics are not achieved by taking in excessive risk. We do take risks. That risk we take is evidenced by a loss ratio of less than 1% of invested capital since the GFC. Now just moving on to final slide before I hand to Adam. Of course, in all of this, we also aim to be a responsible investor. Our approach is one of constant improvement in this area. I mean that's in all stages of the ESG maturity curve with the intention of making a difference and making sure that our portfolio of companies make a difference. And I'd like to just give you an update and highlight a few points here. Bridgepoint became carbon neutral in 2021 with all our offices now running on 100% renewable electricity. This year, we also appointed a new Head of Sustainability, reporting to our group CIO, Xavier Robert. And we became a founding member of the Private Equity Sustainable Markets Initiative and our funds are aligned with Article 8 of the Sustainable Finance Disclosure Regulation. And BE VII, the new flagship fund, will have a sustainably linked fund financing facility. So with that, now over to Adam to take a detailed look at our numbers. Adam, over to you.

Thank you, William. Good morning, everyone. As William said, I will now provide some more details about our financial performance for the first half of 2022 and to clarify our full year guidance. Let's start with AUM. The assets under management grew by 30% over the 12 months to June 2022 to EUR 37.1 billion and that reflects good momentum in both our equity and credit fundraising objectives with just over EUR 7 billion, EUR 7.1 billion raised over that 12-month period. In addition to that, the strong valuation gains that we described of EUR 5.4 billion. And probably, importantly to that growth is also net of significant realizations across our portfolio worth EUR 3.9 billion of capital return to our investors. And that reflects our established practice of regular distributions to our investors to drive fund performance metrics. Things like fee-paying AUM, that 6% increase is largely driven by the growth in invested capital across our credit strategies with credit-fee paying AUM growing by 37.5% over the last 12-month period. And again, that growth is net of EUR 2.1 billion of fee-paying capital reduction associated with realizations across both our equity and credit strategies. Obviously, fee-paying AUM will step up in the second half of 2022 as we start to charge fees on the closed commitments associated with Bridgepoint Europe Fund VII. Now let's look at revenue and fee margins. We delivered double-digit growth in group revenues, up 15% over the 12-month period. Management fees, which represented 72% of group revenues grew by just under 5%. That reflects both credit deployment and the strong credit exits ahead in the imminent acceleration from Bridgepoint Europe VII fees. Investment income, which represented the balance of 28% of group revenues, grew by 52%, reflects the increase in the value of the underlying co-investments in our funds with Bridgepoint Funds V, VI and Development Capital III delivering a majority of those gains. As you know, investment performance is not linear across the year and the performance for the first 6 months of 2022 is ahead of our expectations, and it should represent reassuring derisking of our full year forecast with almost 2/3 of our 2022 forecast already delivered. The annualized fee margin of 1.24% in the first half of 2020 is consistent with the prior year period and we expect it to remain stable, so at 1.22%. Now let's look at the investment in the platform. Operating expenses totaled GBP 78 million for the first 6 months of 2022. And those expenses have grown by 13% over the last 12 months, reflecting both investment in our PLC, infrastructure and investment in the robustness of our operating platform. As we said before, people cost are by far the most significant expense at 78% of that total, and those costs have increased by 10% to just over GBP 60 million. Full-time employee headcount has grown by 15% to 368 over the last year. And that growth breaks down to 10% in our investment team and 20% in our specialist functions. The growth in the investment team reflects ongoing investments to support the AUM growth across all of our strategies and the growth in our specialist teams reflects continued investments in the strength of our operating platform and additional hires to support our PLC status, including finance, legal, regulatory, compliance and shareholder relations. As we said previously, we expect more modest growth in headcount and personnel costs after this year as our PLC-related hiring is largely complete, and we continue to see the benefits of operating leverage. Other expenses increased by 27% to GBP 17 million, and that reflects principally a higher leasing regulatory spend to support the growth of the group and its listed status, higher premises costs associated mostly with our new lending office and more normalized levels of travel after COVID. Now let's look at EBITDA. Our revenue growth alongside investment in the operating platform led to EBITDA growth of 17% over the 12-month period and a slight increase in our EBITDA margin to 44%. Fee-related earnings margin for this period is 23%, and that's obviously ahead of the material step-up in the second half of '22 as Bridgepoint Europe Fund VII fees start being -- now it's a cost below EBITDA. As many of you will recall from our presentations last summer, we do have limited costs below EBITDA, namely depreciation, amortization and finance costs. So those totaled just over GBP 9 million for the first 6 months of '22. Our amortization charge related to the intangible assets acquired with the EQT Credit business, which are being expensed over 7 years. And the majority of our depreciation expense relates to office leases and the increase in 2021 reflects the start of our new London office lease in July 2021. And as previously advised, just to remind you, we are depreciating both our old and new London offices until we move in September 2022. So that double cost is expected to lead to a depreciation charge of approximately GBP 11.5 million this year before normalizing at GBP 10 million from 2022 onwards. Within finance costs, the movement in other is driven by a decrease in the amounts payable to Bridgepoint V co-investors and interest expense savings following the full repayment of our borrowing facilities which we did use in the IPO proceeds last summer. Now let's look at our balance sheet. Here is a sort of a high-level summary of the underlying Bridgepoint balance sheet, excluding the presentational impact of our CLO investments. As a reminder, we are a capital-light business and our aggregates co-investments represents approximately 1.2% of AUM by June 2022. Our cash position at the end of June '22 was GBP 239 million, plus obviously, we have the undrawn facilities of GBP 125 million, relative in the statutory P&L reconciliation and these are the components on this next slide. Exception of costs of those outside the normal course of business, and in 2022, those were mostly the costs relating to the acquisition of EQT Credit. The amortization adjustment related to the acquired intangible assets within the EQT Credit business that I mentioned earlier, an exceptional finance income related to remeasurement of the deferred consideration liability that we have for EQT Credit-type fundraising. So let's finish with our dividend and full year guidance. We are planning to pay an interim dividend of 4p per share, which represents a 10% increase on the 2021 dividend that was declared for the 6-month period post IPO. Subject to performance, we expect to split the total annual dividend 50-50 between the interim and final components. And beyond 2022, dividends are expected to grow progressively as the business scales. So just to pace, I'd like to reiterate our full year guidance as follows. The transition to Bridgepoint Europe VII, subject to competition trends, likely took place in mid-May 2022. Fees from Bridgepoint Europe VII in the second half of 2022 will clearly benefit profits and margins. We expect management fee rates to remain stable across all our strategies. Investment income guidance remains unchanged at 20% to 25%, taking revenue for the medium term. And our current investment commitments for future funds are expected to be in the 2% to 3% range. You should expect modest growth in headcount and personnel costs relative to fee rate growth over the medium term. And our full year guidance for 2022 cost remains unchanged at high single-digit percentage growth. With the transition to Bridgepoint Europe VII, our FRE margin is expected to be in the 30% to 35% range in 2023 and would expect the FRE margin to grow to 45% to 50% in the longer term once we have the impact of Bridgepoint Development Capital Fund V and Bridgepoint Europe Fund VIII. Our effective tax guidance remains unchanged at around 7.5% in both the short and medium term, subject to, of course, to any potential changes in the U.K. tax code. And we are well placed to deliver on the current consensus expectations for FY 2022. And with that, I'll hand back to William.

Great. Thanks, Adam. Not to detail there, so we'll open up for questions. But just before we do that, a few words on the outlook for the rest of the year. As I said at the beginning, the strong performance we're reporting today for the first half gives us a lot of confidence in delivering the financial performance for the full year, in line with expectations. Our pace of deployment and strong exits in the first half, I think, show the real strength of our business model that does not, in any way, show complacency to a more difficult market conditions that we're moving into as a whole. Disciplined fund construction and thematic sector-led origination helps us build resilience into our portfolio, and I think is underpinning our strong fund performance that we've shared with you today. And importantly, we remain very excited about the strategic development opportunities for our business. We continue to make progress with our long-term strategy of strengthening our mid-market platform, but we will do so in a patient and prudent way to make sure we make the best use of our strength and balance sheet, and we'll update you on our plans on that in due course. With all this in mind, we're confident that our business is -- has very strong prospects ahead. And as I've said many times before, our focus is on delivering strong returns to our fund investors. And if we do that, our shareholders do very well indeed alongside that. So with that, I'm going to pause and we'll open up for questions from those of you who have dialed in.

[Operator Instructions] And the first question is coming from Arnaud Giblat from BNPP Exane.

I've got 3 questions, please. Firstly, could you please confirm the base -- the cost base on which you're guiding to high single-digit growth? I think that there were some one-offs in the 2021 cost base, if you could confirm that. My second question is on the uplift you've seen in portfolio valuations over the last 6 months. Could you talk a bit about the MOICs, the multiple of investment capital for the V and VI and how these have evolved over the last 6 months? And since you've given us the realized portion of -- gave us a realized portion, can you talk a bit about the unrealized portion of those funds? And my final question is on the outlook for capital commitments. So capital deployed has stacked up over the last 12 months. How do we look from here?

Adam, do you want to take the first question there?

Yes, absolutely. So Arnaud, you're right. Last year's cost base included just under GBP 6 million of investment-related bonuses. So the cost base that's giving that was GBP 116 million for 2021.

Arnaud, on the -- on your second question on valuation uplift, do you want to just repeat that, Arnaud, the second question, make sure I've got it right?

Yes, I just were looking for the component parts in terms of the uplift. So you've talked about a significant uplift on realizations. I'm just wondering how your unrealized portion of your portfolios have evolved over the last 6 months.

Yes. Yes. So the unrealized has moved forward materially. So BE V flatlined at Q2 after a very strong Q1, mainly driven by those exits. BE VI is maturing fast and reflecting actually just quite an unusual period of its life where we tend to do more primary investments, first time buyouts with the consequence that it takes probably 18 months before some of the hands-on operational work starts to be reflected in the performance and of the business. And we're right at that moment on that time where that impact is starting to show through in the performance with the average life of the fund at about 2 years. And so the unrealized performance has gone -- the fund, as a whole, MOIC has gone from -- Adam will correct me on this, but roughly 1.4x money to 1.55. BE V is sitting at 2.5x MOIC. So both in strong position. Obviously, Fund VI is of less material. Fund VI running currently at a 33% net IRR. So strong performance, but that comes down over -- that will come down a bit over time, I would expect. BE III, performing very strongly. I think its MOIC -- Adam, please come in if I've got this wrong, it's currently running about 3.8, but forecast to be going into the 3s over the next 12 months.

That's correct. Just for context on that, I would add that about 40% of our H1, the investment returns was related to realized investment activity. So we then got 60% is effectively represented by paper gains. But when you look at our -- the breakdown between the EBITDA and multiple, it's about -- and again, just to emphasize William's point about being prudent, 78% -- sorry, 72% of our H1 valuation multiples were either flat or down. And therefore, with the lion's share of all the growth, which was delivered by EBITDA growth, with strong momentum over the first 6 months.

And I think that's an interesting point in the distinction between mid-market and large buyout. In large buyout, you get very favorable valuation moves as with highly leveraged businesses, where multiples are going up and you see the reverse when they're not. Obviously, in mid-market, you don't have the same high levels of leverage, and it's much more driven by EBITDA and an operating growth. So our average leverage across our portfolio is probably 4 to 4.5x. So we're much less exposed to those market corrections. On capital commitments, I think your question there was what was the outlook for capital commitments for the year? I think it's more of the same, really. We're seeing some interesting opportunities in this market. Obviously, we're looking at where do we see pockets of value, where there's been a correction, where we can use our operating skills to drive value, but we see plenty of opportunities out there at the moment. Does that answer your question, Arnaud?

It does. I kind of just have a very quick follow-up. You mentioned 72% of the valuation multiple is also down. Therefore, EBITDA growth compensating. So can you give us a bit more comment on what the EBITDA growth in -- of the footprint that have been?

It probably would be running, again, Adam come in if I'm wrong on this model. It's probably running in the mid-teens.

Yes, north of 10%.

The next question is coming from Bruce Hamilton from Morgan Stanley.

Maybe first on the opportunity for investments. Obviously, you talked about interesting opportunities. So it sounds like you don't anticipate there'll be much constraint from tighter financing markets and the sort of deals you're doing in the second half? Is that the way to read it? Then secondly, on the credit business, I guess just thinking around the opportunities for that side of the business, because presumably, the opportunity set should look better. But equally, you've got to manage risk. So are there any sort of areas of the market or sectors on the credit side, you're being quite sort of careful about? And the final question on strategic, seems like you're making progress. We'll hear more in due course. Should we still be thinking around strategic development evolving on a new strategy leg? I think, infrastructure and real estate, you talked about at the time of the IPO. Or could it be broader than that given some of the dislocation in the market?

Yes. Thanks, Bruce. So I think on the tighter financing markets, as far as our equity strategy is concerned, because we're not raising large amounts of debt, the access to that debt is easier. So in our recent financing, we're typically doing 4, 4.5x leverage in profitable growth companies. So pricing has gone up, but that will need to reflect in the entry price that we're buying at. But the access to debt has not so far been a problem. So we don't -- and actually, by the way, when we go back to the GFC or prior to that, that was never a problem. So we're not sort of -- I was interested to read the FT's comment on the sort of Morrison situation. We're not raising bulk amounts of debt, which requires vast underwriting. And so that's a real advantage in this market. I think Andrew kind of asked it this morning, Adam. So maybe Andrew -- is Andrew with us? He could give you a view on what's happening in the -- Andrew Coombs has the -- have Bridgepoint Credit and lots of interesting things going on there. So Andrew, do you want to answer that question?

I think, I mean, there were 2 questions. One was about the opportunities in the market, and you're absolutely right. Opportunities in the credit market, very attractive at the moment. It's really on 2 fronts. One is the primary market has become more of a private credit market. So with public markets aren't exactly closed, but certainly more constrained. We've seen a big market share gain in the private credit side, something in direct lending primarily here, which has been great from the standpoint of increased opportunity set, so you can be even more selective as well as slightly better terms and margins. On the -- you also mentioned managing risk. It's an interesting truism in a private credit business that the time to manage risk is a few years before a crisis actually hits. But I think the mentality that we have had in terms of how we manage our credit funds has been a focus, actually, on very similar industries that Bridgepoint as a whole does. There's more stable cash-generative, high-margin businesses in business services, TMT, as well as health care. So the portfolio is quite well positioned and quite stable, resilient, high-margin businesses that can absorb some of that inflation pressure that we've talked about but in quite good shape at the moment.

Thanks, Andrew. Bruce, just coming back to your strategic question, our day job is buying businesses. And we raised capital last year to strengthen our balance sheet to position us to add a third leg as and when we found the right opportunity. We've had our heads down focusing on delivering what we said we'd do in the core business first, obviously. But what's interesting is that I think, in many ways, the market has come towards us in that as there's been a recalibration of the values where the value of our cash has gone up and the opportunity set has broadened. So I think your question is bang on. When we were talking a year ago, we were saying that new leg is likely to be infrastructure. A real estate, it can be quite a bit broader now. But we are in -- we're in no hurry to execute on this. We will do it when we find the right thing that's right for the long-term business. And that is a great addition to the Bridgepoint portfolio. We've got a tremendous platform as it stands and we'll only execute when we find the right thing. We're not afraid of executing, just to be clear, but we're hypercritical on making sure we get it right.

The next question is coming from Philip Middleton from Bank of America.

I wondered if you could go into a little bit more detail about what you see the investment opportunities are in the next 6 to 12 months being, like, particularly more in the equity strategies. Are you seeing pricing adjust yet? Because the received wisdom is that pricing tends to be quite sticky when you see changes in the market. How much of that matter to you? And is that something you're seeing yet?

Yes, Philip. It's a good question. I mean, I think generally, in alternative markets, it takes 6 or 9 months for pricing rotations to come through. And what we tend to see is what -- you either can or can't sell a business. And the things that you would expect to come down in price become unsellable, because people just don't want to buy a risky, obese, kind of those riskier assets. And actually, if you've got assets that are of really high quality, which have either strong growth or defensive, then they maintain their value. I think that's a sort of generic sort of observation that I would make based on 20-plus years of investing in these markets. Our strategy is slightly different than this because what we're trying to do is take a look at medium term and look in spaces where we see -- and sort of niches as much as sectors, where we see really interesting long-term growth where we can use the rather unique skills that we've got, tools that we've got on our platform, which are very typical [ in-mind ] by our world, but not so typical in mid-market to create and add value. And we're looking for relative value as well. So we would expect prices to adjust in what we're acquiring. And we're pretty disciplined about that. And one of the strengths of Bridgepoint is that we've never really had origination issues. The big challenge, the intellectual challenge is always getting our heads around where do we think we're going to get the best growth. And of course, we've all practiced at that because we operate in Europe. And Europe has been, from a macro perspective, done for 25, 30 years. So I mean Europe's never had 6%, 7% GDP growth. But it does have some amazing niches where you get earlier businesses that you can grow strongly that they outpace the macro and particularly, in mid-market where you see the emerging companies in medtech, in agritech, in form of services, et cetera, some really great opportunities. So I'm not worried at all about our ability to find opportunities. And we have a long list of things that we're looking at. What we've got to spend time on is looking at how does the macro influence the ability to drive value in those companies. How is that going to lead us to tack in the way we execute and making sure we do get the price right on the way in, because that's one of the things that we can control. But having a big team of people in these markets is very advantageous, because you can look at a lot of different things before you decide what to do.

There are no further questions on the conference line. We will now address the questions submitted via the webcast page. I will now hand over to Adam Key to read to the written questions.

So we've got 2 questions online from David McCann at Numis. First of which, "Will be 7 charge catch-up fees back to May '22 for investors who come in after the first close?"

Yes, and I can tell you that. Yes, it's very simple, yes. So the timing of the close is not relevant. The time -- the date is the date of transition. So mid-May, all investors will be charged fees on that day regardless of when they came into the fund.

And just to be clear, how it works is that from mid-May, we have been -- the whole resource to Bridgepoint has been working on Fund VII and we would expect to -- shortly, to be announcing the first investments for that fund. And so when people come in to the fund, they get a proportion of the investments that you've already made. And so it's -- we make sure it's fair for every investor and people pay back their fee to the start of the fund life.

And the second question, "Is EBITDA growth in portfolio companies of over 10%, one, the first half of '22 versus the first half of '21? Or is it a 6-month growth rate?"

It's a 6-month growth rate.

Those are the 2 questions online.

Great, Well, unless there are any other questions, Adam, I think we will close. Is that right?

Yes.

Yes. Okay. Well, listen, thank you very much to everybody for joining us this morning. I hope this session has been useful. Please feel free to reach out to Adam Key, if you have any further questions. And in the meantime, what I hope from you -- you have taken from this morning on the results that Bridgepoint is on track doing what it said it would do. With that, thank you very much. Thank you, Christoph, for chairing the call this morning, and we'll close there. Thank you.

Thank you very much, everyone. That concludes your conference call for today. You may now disconnect. Thank you for joining, and enjoy the rest of your day.