CapMan Oyj (CAPMAN) Earnings Call Transcript & Summary

Good morning, and welcome to this presentation of CapMan's Q3 Report 2025. Presenting today, we have Pia Kall, CEO of CapMan. And after the presentation, we will have a Q&A session, where you are welcome to send in questions at any time using the chat in the webcast link. Pia, please, I hand over to you.

Thank you, Charlotte. And welcome also from my side. CapMan had a strong third quarter, both financially and in executing on our growth strategy. At the end of the quarter, our assets under management are on a new record level at EUR 7.1 billion. It's a 17% growth since the start of the year, coming both from some EUR 560 million of new capital that we have raised and also the acquisition of CAERUS, adding EUR 640 million of assets under management. Revenue flat or on the same level as last year. During the first 3 quarters, we have not had exits that would have resulted in material carried interest. So that is lacking from the revenue. But if we look at the fee income, it is growing 6% per year, 6% compared to last year. Comparable EBIT, we are 46% above last year at EUR 19.1 million, the growth primarily driven by strong fair value development in our own fund investments. In our work, we're continuing to execute on our vision to become the most responsible private asset company in the Nordics with the investments we do, building the society that we want to see in the future. And if you take a snapshot of our portfolio at the end of the third quarter, 80% of our assets under management are invested in real assets and the remaining part in private equity and wealth. Real Estate, developing human-centric sustainable real estate across the Nordics is an owner of 259 properties through their funds. Infrastructure investing in energy, transportation and the telecom sectors being part of the green transition with, at the moment, 11 portfolio companies. In Natural Capital, we're investing in timberland in biological growth, climate change mitigation, a portfolio of 240,000 hectares across 8 European countries. And now also for the first time, Real Asset Debt as part of our portfolio, where we offer tailored real estate debt solutions across the entire real estate life cycle. At the moment, in our portfolio, 210 properties. Within our specialized private equity strategies, supporting small, midsized unlisted companies in their growth and internationalization, at the moment, 37 portfolio companies, a couple lower than at the end of the last quarter as we have had some successful exits in that area. We are a focused asset management house with our main business being management of our funds across our investment areas and the value drivers there, fee profit from these funds and carried interest when we realize successful exits. In addition, as a value driver, investment returns from our balance sheet investments that we focus primarily on investments into our own funds, also then supporting growth of that business. Looking at these key financials for the first 9 months. Fee profit at EUR 6.5 million is at the same level as last year. It is a strong development because this year, we have not had any retroactive fees for final closings in funds, which we had last year. So underlying business scaling nicely. When it comes to the carried interest, no material exits during the first 9 months that would have realized carry, therefore, a very low number. However, in October, we already had some exits that we'll realize, carry later and several in process that over the next 6 to 12 months should realize. When it comes to investment returns, a fair value uplift of 6.9% for the first 9 months or EUR 12.4 million, good development also compared to the last 2 years and total fair value of our investments, EUR 185 million at the end of the quarter. Taking a look then at fee income and fee profitability development. Fee income growing 6% compared to last year. If we exclude the retroactive fees that we had last year but haven't had this year, it is a double-digit growth that is in line with growth of our assets under management. Cost control has remained very good. Additions on the operational expense side are basically only the acquisition of CAERUS and the organization that transferred with the Midstar transaction that we did earlier in the year. And as a result then fee profit on the same level as last year, meaning that the underlying business is scaling and the relative profitability improving and on a track to further improve. When we then look at our balance sheet and our investments there, at the moment, we have private asset investments of EUR 185 million in total, EUR 50 million of remaining commitments into funds. It's a well-diversified portfolio and we have, during this year, used our balance sheet to support growth. There's been a solid, steady investment base across our investment areas deploying capital. And we also used our balance sheet to enable the Midstar transaction by providing an equity bridge from our balance sheet. So using it in line with our strategy to support growth. There's also been a good fair value development in the balance sheet throughout the year but it has not materialized yet into significant exits. That means that where we stand at the moment is that we have a net negative cash flow in our investment operations, but the value developed in the portfolio is not lost. So when the exits materialize and also when the exit market again reactivates, we expect this to reverse and see a strong positive cash flow from the balance sheet. The value of external funds continue to decrease, that's in line with our strategy. And we have sold off some of our stakes in external funds, both at the beginning of this year, end of last year and also now in the third quarter. And as said, strong fair value development. For the first 9 months, 6.9% uplift in fair value or EUR 12.4 million, primarily that is driven, again, by our own funds across investment areas, contributing EUR 11 million or almost 8% and external funds EUR 1.4 million or 3.5%. Already now with 9 months in, we are on a higher level in fair value development than we were full year in the last 2 years. As we then look at our EBIT components compound, we can see that we are at EUR 19.1 million, 46% above last year and the main driver so far this year being these positive fair value changes. On the balance sheet side, we maintain a solid, strong balance sheet with good liquidity. Equity ratio at 59% and we have cash and other short-term financial assets of EUR 54 million. This financial stability and strong liquidity enables us to continue to systematically execute on our growth strategy also in a more uncertain market. In practice, what it means is that we can use our liquidity to support growth in our asset management business, decrease interest-bearing debt and that way, deliver strong shareholder value creation. If we then move on to more of our strategy execution, but starting with a look on what's happening in the overall market. If we look at where we are now or the market sentiment right now, I would say that the economic and geopolitical uncertainty that spiked around April, when we had the U.S. tariff announcements that has somewhat now slowed down or diminished and we have a more stable environment. We see it as -- transaction activity is again resuming. It's picking up. It's still on low levels but it's higher than it was a year ago. And we also see some indications from market statistics that the fundraising times, median times would start to shorten compared to the very long times that we've seen in the market the last 2 years. I see these as early indications on that the market is bottoming out and turning positive. For 2025, it will still mean that this will be the fourth consecutive year when we have in a market less new capital raised into the industry. But then on the other hand, if we look at it in the bigger picture, it is a growth market. So even with lower new capital raised certain years, the assets under management in the overall private asset market is continuing to grow. And if we take a slightly longer midterm long-term view, it is a growth market with a solid 7%, 8% annual growth. We continue to implement our growth strategy and our CapMan WINS strategic programs with the objective to reach EUR 10 billion of assets under management and working across our Winning Team, Investors' Choice, Nimble Operations, and Sustainable programs. Looking at the assets under management development and our target, we are now at a record EUR 7.1 billion. So far year-to-date, it's been the acquisition of CAERUS, establishing Real Asset Debt as a new investment area that has contributed EUR 640 million. We've also taken in good new capital into our open-ended real estate funds and also on the wealth side. There are several fundraisings ongoing, actually across all of our investment areas at the moment, ongoing or being planned. In Natural Capital, our Forest Fund IV, we started the fundraising earlier this year and we expect to hold a first close in the fund still during this year. When it comes to Real Estate, what we see is more investor appetite for our open-ended funds at the moment, Hotels, Social Real Estate, Residential, where we've already taken in total during the year, some EUR 500 million of new capital and also expect more capital inflow there. What it then means with more interest there is that we are moving the target for the Nordic Real Estate IV fund first closing into 2026. Within Real Asset Debt with CAERUS, we have now jointly kicked off the fundraising for their VIII fund, early stages there, but the joint work progressing well. And also started planning for the Nordic Infrastructure III fund that is something that we'll start fundraising. At the moment, the plan is sometime during 2026. In addition, at the moment, on our private equity side, we have Nest IV so our credit fund and Special Situations II in fundraisings and also several of our wealth products taking in capital. So it's an active agenda, both for the rest of this year and also throughout of next year. But we continue to see strong appetite for our products, especially among international institutional investors. Total new capital intake during the year, EUR 1.1 billion so far, EUR 640 million from that from CAERUS, EUR 560 million that we have raised. When we look at the split, we are currently with roughly 50% -- a bit more than 50% -- 53% coming from outside of the Nordics. There, we've seen strong growth in the DACH region or Central European region during the year. But also in the Nordic side, especially with the Midstar transaction, good new investors coming in from the Nordic countries, especially Sweden. And if we double-click on the new capital raised into our funds, it is actually quite evident that what we've been successful with this year is attracting new investors to CapMan funds. 80% of the fundraising has been investors who have not before invested with us. It shows that our products are competitive and attractive for institutional investors. The cross-selling and re-up and top-up to our funds, re-ups at the moment, 12% for the first 9 months. That is basically top-ups through our open-ended funds. So investors who already are in our open-ended funds increasing their commitments to those same funds. We haven't had any large closings in closed-end funds, which is the reason why the re-up rate is low because there hasn't even been that possibility so far this year. But very happy to see these new investors join us and the large share of those, that's a good basis going forward. When it comes to the investment activity in our funds, it's been solid on the new investment side throughout the year. In total, we made 8 new investments since the start of the year; 6 of those have gone into our real estate funds. The market is attractive at the moment to make real estate investments, and we are capturing that opportunity. In addition, Special Situations and Nest being active on the new investment side. When it comes to exits, it's really only in the third quarter as we've seen exits materialize, 2 exits from our buyout fund, one from Growth II and a portfolio of Portuguese forest that was exited from the Dasos II fund. Also in October, already, we have announced 2 exits from the real estate side, very successful ones, both from Nordic Real Estate III and then the Kokoelmakeskus fund exiting their logistics center, also taking that fund into carry with that exit. And on the exit side, it's been a more challenging market but there are several projects ongoing and processes ongoing at the moment. So going forward, the next 6 to 12 months, we should have more exits realizing. We continue our systematic sustainability work across our main themes and combining the sustainability work with our financial value creation plans. A testament for that the work is successful and is also recognized is the annual GRESB International benchmarks, specifically for real estate and infrastructure funds. All of our funds improved their scores and their asset level scores in this year's benchmark. And we now have 4 of the real estate funds having the full 5 star rating, so an improvement from last year and also our second infrastructure fund having a full 5 star. Our Infrastructure I fund also improved their scores but the bar to reach 5 stars is actually going up year-on-year. So this year, we were just below that bar and got 4 stars, but it's still a strong development in the underlying assets. Our long-term financial objectives unchanged. We target a growth of 15% per year on average in revenue. This year 6%, but looking at a slightly longer period, a solid double-digit growth. Return on equity at the moment, somewhat below our target, but the equity ratio clearly above at 59%. When it comes to our distribution policy to pay sustainable distributions that grow over time. What it means in practice is the objective to distribute at least 70% of the group's profit without fair value changes, so basically meaning a fee profit and the carry. And then when we have strong positive cash flowing on our investment operations and we deem that we have excess cash also distributing that to our shareholders. For this year's outlook, we keep it unchanged. So our estimate is that assets under management will grow compared to last year and also fee profit will grow compared to last year. Thank you, and let's open up for Q&A. We also welcome Atte Rissanen to the stage, CFO of CapMan. So let's start with questions from the audience here in the room, please.

About the Kokoelmakeskus, you did the exit last week, I think. Can you give us a magnitude of the carry there?

We will see it in the fourth quarter figures.

Yes, exactly.

Okay. Then about this CBS, I think you said programs, not program. So can you elaborate a bit more on that since, I guess, at this stage, you have only done the CBS, the I, II, III, IV program?

Yes. So on the wealth side, well, obviously, wealth has several different products. Yes, we have the Investment Partners program where we raised the fourth fund and soon go into raising the fifth fund. And then actually, wealth has developed new products also during the year on the credit side, both open-ended and closed-ended programs, still kind of in the initial phase but also those are fundraising. So broadening their product scope.

Jaakko Tyrvainen from SEB. On CAERUS and the level of AUM around EUR 600 million right now. Could you elaborate a bit more what is the CAERUS impact on the fee profit side? I know that you provide some high-level numbers for us. But just to understand the fee profit going forward and how is the fundraising progressing? And what has been the investor take-up in the Nordics regarding this your new or you expanding your portfolio offering?

Yes. I can take the fee profit. So we've provided some details in connection with the preliminary purchase price allocation calculation. And there we state that the fee income during Q3 or basically now the first 2 months that CAERUS has been with us is EUR 0.6 million and the fee profit impact is EUR 0.1 million.

And I can take on the fundraising side. So the fundraising is really in the early stages. And as always, starting first with your existing LPs and their kind of re-ups. And there, what we see from the investor side is reactivating interest. So it's been tough on the real estate side, as we all know. And now we see several investors who are indicating that they will deploy during next year and we do discussions there, and then only starting up the discussions with the broader CapMan network.