EQT AB (publ) (EQT) Earnings Call Transcript & Summary

Good morning and welcome to EQT's 2020 year-end announcement. We have lots of exciting news to share with you all today. You will all have seen the announcement this morning that EQT is joining forces with Exeter. We will spend about 0.5 hour covering the highlights from 2020. We will then turn focus to Exeter for another 30 minutes before we open up for Q&A. [Operator Instructions] And with that, I'll hand over to Christian to start off the presentation. So please turn to the next slide, and over to you, Christian.

Thank you, Olof, and good morning, everyone. 2020 was quite a year. We all know it was a year of challenges, and for many, a year of hardship. But looking back, it was also a year of opportunities and solutions. And at EQT, we proved the strength of our thematic investment approach as the portfolio performed well despite the pandemic. We also developed the firm strategically and ended the year in quite a unique position. EQT is now fully focused on active ownership strategies. Strategies where we can future-proof companies and make a positive impact. Next slide, please. Looking forward with Exeter, we've taken a big leap in our ambitions at real estate as well as our plan to grow EQT's presence in North America. Exeter is a highly strategic transaction for EQT, and we'll talk a lot more about that in today's presentation. But now starting with EQT. So in terms of fund raising, we closed EQT Real Estate II as hard cap and we activated EQT IX and EQT Infrastructure IV, in line with our plans. Investment activity picked up materially in the second half of 2020, coupled with a few exits. And heading into 2021, we have a strong pipeline of exits lined up, of course, assuming that the markets remain healthy. In 2020, in line with our purpose, we also developed ways to drive sustainability in the portfolio companies. We launched ESG-linked bridge facilities, which linked funding cost to factors such as Board diversity and renewable energy transition. We also made our first grants and investments in the EQT Foundation, which we're very pleased about. Overall, the progress we made in 2020 has resulted in some quite strong numbers, as you've seen. Our end of period AUM grew by 46%, our revenues by 33%, paced by EQT IX and carry. And we're approaching our long-term 55% to 65% EBITDA margin target. Of course, a lot more about this in Kim's section. Next slide, please. Throughout 2020, we made significant progress in developing EQT's ecosystem of what we call active ownership strategies. We divested Credit, a strategy where we had more limited ability in the future-proof companies and make a positive impact, a more passive strategy. And we announced EQT Growth, which fits perfectly between Ventures and Private Equity. And with that, EQT is one of the only private markets firms in the world which can actually support companies from start-up stage all the way to mature leading businesses, and we find that to be quite unique and very value-added. Ventures continues to perform strongly with a top decile returns. And EQT Public Value also had a strong year with 45% returns and the business line is developing well. Separately, we've established clear mandates to finance investments in new strategies using the EQT balance sheet. And as announced yesterday, EQT Growth made its first investment in Wolt, a leading food delivery company, which has actually been backed by EQT Ventures since 2016 and is a very exciting business. The team also spent the year evaluating and preparing for new investment strategies including what we're going to do in Asia Pacific and for potential long hold funds. And we're going to talk a lot more about that, but that's going to be a little bit later this year. We, of course, also look for potential M&A opportunities across our growth areas, and Exeter turned out to be the perfect match. With Exeter, and after having divested credit, we're firmly established, with EQT being a global leader in active ownership strategies. And those are strategies where we can really impact the investments to drive long-term returns. Next slide, please. So investment activity picked up materially in the second half, as you saw. EQT IX is now 30% to 35% invested based on the target fund size, and EQT Infrastructure V is 20% to 25% invested. So what does this mean for the outlook for EQT's next round of flagship funds? A question we get right off quite often. Well, activity can be pretty lumpy, as we saw in 2020. Out of the EUR 13 billion we invested in 2020, 85% was announced in the second half. So what we typically say is that good companies are for sale in good markets. Looking back, it is true that recent fund cycles have been on the shorter end on the faster end. But if you look actually since our inception on the key funds, Equity and Infra, the average period of investment is actually around 3 years, and this is quite consistent. However, remember that during the financial crisis, it took 5 years. And after that, the fund sizes didn't grow particularly much. So this is -- when markets are good and we're performing well, we're on a 3-year kind of cycle, which we are now. Of course, we also need to manage portfolio construction, which means deployment pace going forward may not be at the same level as in H2, where a lot of positive things came together. So many also asked the question whether EQT will be -- will continue to be able to deliver strong and consistent returns. And we've gotten that question, of course, since our inception, and we try to keep our feet planted firmly on the ground. Competition is tough. We see plenty of capital looking to invest in companies, which have been resilient and growing during the pandemic, the typical EQT company. And we see high valuations as a result. Thus for us, of course, the bar for new investments is quite high, and we continuously need to improve and develop as investors and as owners. This means fine-tuning our long-term thematic focus: continuously developing the EQT playbook and really transforming the companies that we buy. For example, we keep investing in digitalization and driving sustainability as 2 very important levers to future-proof companies and create lasting value for the businesses. Furthermore, we're rolling out Motherbrain. EQT's proprietary AI platform to be used across all investment teams coming from the Ventures team. And this will also help us to find another edge, whether it's in sourcing or decision-making over time. And on the investment side, what kind of companies are we looking for? We're often looking for platforms, platforms that we can really build upon, that we can take from where they are today, invest in organic growth, invest in new product development, R&D, add-on acquisitions and really transform the company so that becomes a much bigger, more valuable entity in the future. It's not the old-fashioned private equity where you bought a company and relied on a strong management team. We are very active owners. And therefore, we're razor-focused, of course, on building the absolutely strongest possible management teams and Boards and our companies. Now given the strong performance, we maintain our target return levels, 2x to 2.5x in the key equity funds and 1.7x to 2.2x in the infrastructure funds. Clearly, we constantly need to stay ahead of the curve. Competition is tough. But with our pure focus on active ownership strategies, I'm actually quite confident we will continue to perform. And with that, I hand back to Olof.

Okay. Thank you, Christian. We will now turn to the fund valuations. The EQT funds with a significant exposure to TMT, health care and essential infrastructure, have generally developed well over the past year. Companies benefit from resilient growth, often supported by stable customers and recurring earnings. All funds remain on plan, except Infra III, which continues to develop above plan. EQT VII has performed very well and is now valued at 2.3x gross MOIC, up from 1.8x a year ago. To give you some color on EQT VII, about 2/3 of the companies in the funds were marked at higher valuations in 2020. Our COVID-proven companies, in particular, developed strongly. In addition, EQT VII realized certain exits during the second half of the year, including the successful IPO of Certara. These factors all drove fund performance, and in fact, we expect further value creation in the fund EQT VII. Kim, he will come back and comment on what this actually means for carry and what we booked this year and -- last year, and what it means for implications for this year. It's also worth noting that EQT IX is already valued at 1.2x gross MOIC. However, keep in mind that the fund is only about 1/3 invested and the valuation may come down as we had new investments marked at 1.0x at the entry. It's early days, and we consider the fund to be on plan. More broadly speaking, we continue to have a handful of companies across our key funds, which have been structurally impacted by COVID. In line with what we stated and expected in our Q3 update, we did not make any material equity injections in the second half of the year, and we still don't envisage any material equity injections at this point in time. Despite the broad recovery in H2, we remain vigilant. The investment teams maintain liquidity and covenant dashboards. They run downside scenarios to be ready, should we see another downturn be it related to the pandemic or other factors. Next slide, please. Thank you. As Christian mentioned, investment activity picked up materially towards the end of the year. In fact, 85% of our investments in 2020 were executed in the second half. Almost 80% of the investments last year were in health care and TMT. Within our focus sectors, we continuously refine EQT's investment approach and thematic mindset, as Christian was talking about. We have, for example, enhanced our focus on certain segments within health care and well-being technology, acceleration and digitalization, climate and sustainability and social infrastructure. Exit activity was subdued, down 50% from 2019. And again, more or less all of the exit activity took place in the second half of the year. We are preparing for and we're well underway with a number of significant exits currently. However, should market conditions deteriorate, we will retain companies for longer, always focused on meeting our gross MOIC targets through the fund life cycles. And with that, I'll hand over to Kim and ask for the next slide, please.

Thank you, Olof, and good morning, everyone. Let's start by having a look at the development in assets under management. AUM, based on year-end figures, increased by 46% in 2020 and mainly driven by the fundraising of the flagship funds, EQT IX and Infra V, both of which were activated in the second half of the year. Both fundraisings are developing well in line with planned. And as of year-end, EQT IX had raised EUR 14.6 billion, so just below its target size and its hard cap of EUR 15 billion; and Infra V had raised EUR 7.6 billion compared to a target size of EUR 12.5 billion and a hard cap of EUR 15 billion. As a reminder, commitments which are closed out in 2021 will pay management fees from the time the fund was first activated and the catch-up fees will then be booked in 2021. Worth highlighting are also the so-called step-downs that we experienced when a successor fund starts charging management fees in an existing investment strategy. So this is a step-down in the AUM base, but not in the management fee level. The activation last year of EQT IX and Infra V hence led to step-downs of about EUR 7 billion combined. And you can then find more information about this also in our appendix. Fee levels in the most recent funds in Private Equity and Infra, they remain materially in line with the previous generations, as we've said before. And our total blended fee margin, it remains around 1.4% also including our latest funds. Next slide, please. Management fees increased by 13% in 2020. The full impact of the new funds was not reflected in 2020, but will be seen in 2021. Carried interest and investment income increased to EUR 153 million in 2020, constituting now approximately 15% of our revenues in the year. And carry was primarily driven by EQT VII, following strong value creation, as mentioned by Olof here, and some realizations during the second half of the year. In total, our revenues grew by 34%, and let's revert to operating expenses within short. But as you can see here, operating leverage led to an EBITDA margin of 51% compared to 46% in 2019. In line with our dividend policy, we have an increased dividend proposal from the Board of SEK 2.40 per share compared to SEK 2.20 in 2019. Just quickly commenting on our balance sheet also that our cash position has remained solid. We have EUR 878 million as of year-end in cash on the balance sheet. And in addition, as you may have seen before Christmas there, we have put in place a EUR 1 billion revolving credit facility. Next slide, please. Given the increase in carried interest in 2020, we wanted to focus on the carry for a minute and take you back to what we said in the IPO. So we look at carry on a long-term basis over the lifetime of the funds, and the magnitude of the carry depends on how we deliver on our promise to our investors of strong relative returns. So if we deliver on our long-term gross MOIC targets, it will lead to a share of profits to EQT at -- over time is expected to comprise 25% to 30% of revenues, considering that we also raise new, usually larger funds in the meantime. The increase in carry over time is driven by a combination of both larger fund sizes and increased entitlement to EQT. And I repeat that whilst we are very confident in our ability to generate carry in the long run, any short-term perspective will be more lumpy, and we simply can't tell with good precision what the exact recognition will be in a given period. And EQT VII is now an example of a fund that has shown very strong development in the last 6 months with value creation across a number of assets, as mentioned, and a couple of successful exits as well. The long-term performance of the fund also looks very strong. But we would only change our guidance to above plan if the expected gross MOIC was persistently and materially above the 2.5x treasure we have. Next slide, please. So our dedicated employees, they continue to be our main assets, and we continued to recruit in 2020, although at a slower pace. So recruitments during the year include the buildup of a team for the EQT Growth strategy and expanding the Infrastructure team ahead of the increased investment capacity with Infra V. While the FTE count was almost flat in Q4, recruitments were being made and as a -- and a meaningful number of new colleagues are expected to start in Q1 2021, so now, essentially. When we think about '21 from a cost perspective, we continue to expect an increase in the number of employees. In addition to the historically approximately 100% net addition we've had, we expect to see a catch-up effect from the hiring pause we had in parts of 2020. And what areas are we investing in? We're investing in the launch of new strategies and geographies. We are investing in our global fundraising capabilities, and we are investing in the digitalization and scaling of the platform, just as example. As mentioned in some previous discussions, the U.S. and APAC are also in relative terms, more expensive regions, so over time, impacting the average cost per employee. We're happy to take questions on our results a bit later, but now we'll focus on Exeter. So I'm handing back to Christian. Next slide, please.

Thanks, Kim. Exeter is, what can I say, a hidden gem, a rare combination of a genuine market leader, a highly thematic investor with an exceptional performance track record and an aligned investment approach, including the local -- or local's mindset that we also have at EQT. And also similarly to us, they really transform the investments that they make. So we think we found a perfect match here, which is actually, in fact, also similar in terms of growth and financial profile and underlying culture. So it's really a perfect match. Next slide, please. As mentioned initially, EQT is now solely focused on active ownership strategies, and Exeter of course is another step in executing on this strategy. So if you add up EQT and Exeter's AUM as of year-end, we actually now have EUR 61 billion solely focused on active ownership strategies, meaning that we're actually one of the larger players in the world in those strategies, and we continue to grow. These strategies are all in line with EQT's focus on future-proofing companies and making a positive impact. Next slide, please. So real estate, as a market, we see is quite attractive. The growth has been strong, and we expect that to continue as a result of powerful structural drivers. Investors have been increasing allocations to real estate consistently and remain below target levels. The lower-for-longer interest rates have become 0 indefinitely, and there is a real demand for yield, which real estate provides. And given our size, M&A, we thought was the most logical option for us in real estate. And Exeter, like I said, is that rare opportunity to bring in a top-performing firm, a top-performing team that's truly focused on thematic and value-added investments and very much aligned with EQT. We also strengthened EQT, and I'm very happy to say that Ward will be joining our Executive Committee as part of this investment deal. Next slide, please. Together with Exeter, we accelerate our strategy. Not only does it -- do we move into real estate in a big way, but it also gives us a leading position in North America, a market which is mature and thus tough to build a platform upon organically, but is a market where there are very strong long-term returns and lots of investment opportunities. This transaction adds to our existing strength in infrastructure and our expanding private equity and venture capital presence in North America. So Exeter brings not only investment team presence, but also adds some very attractive North American clients to our platform, which we'll talk more about later. And the deal also diversifies our business further by FTE, capital raised and AUM. And with that, over to Caspar.

Thanks, Chris. Next slide, please. So Exeter is one of the leading and top-performing thematic real estate investors focused on value-add. Exeter's AUM today is about $10 billion and is growing rapidly with several ongoing fundraises which will meaningfully increase that number in the near future. The majority of this AUM is in the highly attractive logistics and industrial space, where Exeter is a market leader. This, together with the growing strategies in office and multifamily and a strong presence across both North America and Europe, together with Exeter's performance track record, which is arguably one of the best and most consistent in the whole industry of theirs, where their flagship funds have been consistently top 5%, and the track record of other strategies also very strong. This has been achieved through a best-in-class vertically integrated model that approaches value creation across investments, development, leasing and property management. Exeter has approximately $80 million in EBITDA in 2020 but with a higher expected run rate at completion during Q2 this year. Next slide, please. So Exeter core strength in logistics and industrial is benefiting from multiple clear structural growth trends. As e-commerce penetration grows globally, as supply chains reorient, this is also being accelerated by COVID-19. This aligns perfectly with the -- with EQT's thematic approach to investing across the EQT platform. Exeter is a clear leader in this space, both in terms of scale and also performance. And we see significant opportunity to further grow the platform. The flagship strategy will continue to scale attractively, and there is an opportunity to grow in every part of the world, including APAC. And we see big opportunities in attractive adjacencies, such as life science and suburban office and residential, where we have a similar strong thematic growth drivers. Next slide, please. Exeter's approach to investing is very closely aligned through our own -- with value creation-driven model and the local with locals approach. Exeter value creation model is across the real estate transaction life cycle. So a differentiated local deal sourcing, a focus on improving properties physically and through relationships with more than 1,200 tenants, including many of the global leaders such as Amazon, DHL and Procter & Gamble, and through exit, where Exeter packages assets into attractive large portfolios to realize pricing premium. Not quite similar actually to a normal buy-and-bill strategy within the PE world. Local with locals is also a key focus, with Exeter operating small teams across the local offices to deliver local market knowledge, a critical success factor in delivering returns. And Exeter's global scale also gives that competitive advantage when negotiating with the biggest tenants in the space like Amazon. Next slide, please. Exeter's offerings serve institutional investor demand across the spectrum of risk-return goals, geography and property sector, with separate vehicles for each region and each risk-reward profile. Exeter's core strength in North America value-add with a growing and highly complementary presence in Europe focused on logistics and industrials. Exeter also operates in a number of smaller core funds and managed accounts. These are cost-side permanent capital, albeit with LP termination rights, where assets from prior funds generations are transferred into new vehicles and held for longer periods. These managed account vehicles have similar overall economics to the core funds. Exeter also recognizes carried interests on its fund after 4 to 5 years, with value-add funds earning the highest carry interest. And as previously mentioned, Exeter also has a number of ongoing fundraises, with approximately $5 billion of AUM expected to be added in 2021 and $2 billion to $3 billion currently in fundraising. Next slide, please. Like EQT, Exeter has an exceptional track record of scaling strategies, delivering a 53% average increase in flagship fundraises and a record of more than tripling fund sizes in the European industrial value-add strategy. This has resulted from the group's exceptionally strong and consistent track record across its strategies. For Preqin, Exeter is the most consistent real estate investor globally in terms of returns. Next slide, please. Exeter's highly attractive client base is also key aspects of the strategic rationale for this deal for EQT with long-term support from many leading blue-chip clients globally. As you would expect, the weight of Exeter's client relationships today is in the U.S., but also brings some of the very attractive relationships in Europe and APAC. Importantly, there is relatively little overlap between Exeter and EQT in terms of clients. We also expect significant synergies from being able to offer Exeter's leading products to EQT investors, they are our leading capital-raising platform. Next slide, please. Organizationally, Real Estate will remain part of the Real Asset franchise. We will now have 2 scales and leading franchises in both Infrastructure and Real Estate. Next slide, please. Recognizing the strength of the Exeter brand, we will jointly build brand our real estate platform as EQT Exeter. The combined platform will be led by Ward Fitzgerald, and I'm delighted to welcome such a great leader and investor to the EQT family. Critically, there will be no change in the leadership in key investment personnel, business model and culture that have made Exeter so successful. On culture, Exeter is highly aligned with our own culture as a performance-driven organization, and this was a big factor for us in deciding to combine with Exeter. We have a well-developed plan for integration, which will be focused on ensuring no disruption to the core operations, and we will give the real estate platform the ability to scale efficiently and effectively globally. Next slide, please. EQT Exeter will have multiple drivers of AUM growth going forward. We see significant scope for continued scaling of core logistics and industrial strategy, supported by further build-out of local teams across the U.S. and Europe. Exeter's emerging strategies in U.S. life science and office value and EQT real estate platform in Europe will continue to execute on its unchanged strategy, now as a part of a significant strengthened global platform. We see significant opportunity to build a Pan Asia Pacific platform in the logistics and industrial as well replicating the existing Exeter setup and leveraging Exeter's track record as arguably the most successful investor in this space. Over to Kim for a summary of the transaction terms.

Thank you, Caspar. In summary, the transaction terms are as follows: we are acquiring 100% of the management company; 25% of the carried interest in certain of the existing funds; and then 35% of carry in all future funds, ensuring that we have the same carried interest model that -- as we have in the EQT current model. Total consideration is $1.870 billion, which is expected to be equivalent to a mid-teens run rate EBITDA multiple at completion, i.e., once the near-term fundraises are completed that were mentioned. Ward and the other management shareholders, they will receive 65% of their proceeds in shares and will enter into lockups similar to the existing EQT partners, so ensuring that there's a strong alignment of interest and the buy-in to the EQT platform. TA Associates, they currently own 40% of Exeter, and they will receive 25% of their proceeds in shares. They are not subject to any lockup clauses. The terms does lead to a cash consideration in the region of USD 1 billion and approximately 33 million new EQT AB shares being issued. We expect that the transaction will complete at the beginning of Q2, so once the customary regulatory clearances have been received. Next slide, please. Exeter has a very strong record of growing both assets under management, revenues and profitability, all of which have been growing at a CAGR of approximately 25% in the last 3 years. We expect this strong growth to continue in '21. We expect AUM to grow with a growth rate exceeding the growth in '19 to '20. So as Caspar mentioned, in the region of USD 5 billion. Exeter operates a vertically integrated model, which means that they also earn fees from other real estate-related services such as property management fees, leasing and construction, as you can see here. Fundamentally, these fees are predictable, they're derived from the commitments, the AUM and the properties under management. So we do think about them in a similar way to management fees in terms of their characteristics. And we will also report them as such, as management fees. The blended fee margins, including these real estate services are not materially different from the EQT group today. Do note that the financials on this page do not include carried interest as the carry entitlements for EQT there are going to be more recent funds yet to generate carry. We expect the transaction to be immediately accretive to EQT's earnings per share. And like Caspar already mentioned, following closing, EQT Exeter will then form part of our segment real assets. And at this point, we do not plan to do any changes to our segment reporting. Next slide, please. In addition to the strategic and cultural fit, which has been mentioned, the acquisition of Exeter is entirely consistent also with our group financial targets. We expect Exeter's revenue growth to exceed the long-term growth rate of private markets just as we expect EQT to do. Exeter's margin of 60% in 2020 is in line with our group target of 55% to 65%, and there will be no change to our dividend policy as a consequence of the transaction. With that, I'll hand over to Chris for some concluding remarks, and before we open up for Q&A. Chris, please?

Thanks, Kim and Caspar. So Exeter, it's a great business with a great culture that really matches EQT very well. And I'm sure our excitement for this combination has come across throughout this presentation. Exeter meaningfully accelerates our strategy in real estate and creates a global leader with EQT and Exeter together and active ownership strategies. The client relationships that Exeter brings are highly complementary, and strengthen our presence in the U.S., which is a group strategic goal. This is a highly synergistic transaction, with Exeter benefiting from our client relationships, our digital and sustainability focus and a strong combined real estate platform with essentially no overlap. EQT is culturally -- Exeter is culturally aligned with EQT, and we'll have significant skin in the game, which, of course, is one of our key M&A criteria as outlined at our IPO. Ward and his team are fantastic. They have a great culture, and we really now together have an opportunity to create the global leader in value-added real estate investing. So to conclude, EQT is now fully focused on active ownership strategies, where we already now are a global leader together with Exeter. We remain razor-focused on delivering strong returns in a responsible manner, and that will allow us to continue to grow, to future-proof companies and make a positive impact. With that, I thank you for listening, and we open up for Q&A.

[Operator Instructions] Our first question comes from the line of Arnaud Giblat from Exane BNP Paribas.

It's Arnaud Giblat from Exane BNP here. Three questions, please. Firstly, could you talk a bit more about Exeter and the opportunity to scale up the funds in the long term? I'm just wondering what peers you specialize in, in industrial and logistics. What sort of fund size that they run over the long term? And a follow-up on Exeter. You mentioned $5 billion plus in a year -- is that -- in 2021. Is that on a gross or net basis? My second question is on investment opportunities for the Private Equity and Infrastructure portfolios. Q4 clearly was very, very strong. How would you characterize Q4? Was it a case of catch-up where you had identified a bunch of companies throughout the year? And the markets opened up, and all of a sudden, you had an accelerated investment opportunity? Or is it just more a fact of the markets are -- more opportunity coming up and you're investing? I mean what I'm trying to get to is, if the markets remain buoyant with a lot of activity, could you sustain a high level of investments in the near future? Do you have the investing capacity to do so? And finally on your carried interest for 2020, clearly, it was a strong beat. I'm wondering, clearly, that comes from EQT VII. I noticed that, that fund in particular, had a strong level of plus in MOIC. Could you talk about those uplifts? Is it -- are you exiting portfolio companies well ahead of their of their holding value? Is that the big source of markups in EQT VII?

That was a number of questions together. I think we will share them across. If you look at the -- if I start, if you look at the long-term potential for Exeter, we believe it's similar to EQT's long-term potential for growth. We have a number of different investment areas they're investing in across industrials, residential, et cetera, logistics and actually bringing that further in North America, really penetrating Europe and of course, Asia Pacific being almost a clean slate. Lots of growth opportunities for Exeter, very similar to EQT, I would say. So we're not planning to change any of our long-term goals, as Kim mentioned, and we're quite confident that there is long-term growth potential for Exeter together with EQT. Now when it comes to it, and I'll give the word over to Kim in a minute, and he can add and then Caspar can add as well. When it comes to investment opportunities going forward across Private Capital and Infrastructure, I would take a step back and say -- and just think a little about EQT's model. We're local with locals in every single country we're investing in, same as Exeter. And with that local with locals approach, together with our thematic approach, we have 2 ways that we're looking for investments. One is the local teams, the other is all the sector teams and thematic teams. And that means that we actually continuously have quite strong deal flow. And that means that it's pretty rare that we don't have quite a long pipeline of deals. And every single country and every single sector we're working in, we actually have a very, very long list of companies that we want to own, and we try to prepare for whenever they become available or we can make them become available. Right now, the pipeline is pretty strong, the markets are good, and that means deals can still happen. But of course it is a -- it is still a time where we're in a pandemic. Most of us are in various forms of lockdowns. So we don't know exactly how that's going to impact the market over the coming months. And when it comes to exits, we have a pretty strong pipeline of exits. I think we mentioned that before. If whoever is typing, if you could mute. That would be great. Thank you very much. The exits are across a number of different funds. Some of them in EQT VII. And as Kim and Olof mentioned, EQT VII is performing quite strongly, and we expect to continue to create more value with that fund. I think I'll leave it there and give the word to Kim to follow up on some of the financial comments and then round off with Caspar.

Thanks. I'll -- you asked about the increase in AUM at Exeter. The $5 billion, just to start with, it's a round number, it's not an exact science. We -- Exeter has been very successful in taking this, their value-add real estate funds and then moving this into sort of more permanent vehicles. So the gross net question becomes less of a topic there, but it's essentially like that. And you also had a question about EQT VII and carry. And as Olof mentioned here, about 2/3 of the companies or more have been positively -- or the value has developed positively during 2020. So it is not a question only of 1 or 2 exits. It is a much broader, broader kind of trend or thesis in EQT VII. We have said that the fund is trading very strongly or -- and doing very well, but that we would only change our gross MOIC target if it's both materially and persistently above 2.5x. So I hope that answers a little bit of your question.

And in terms of sort of the potential fund sizes, I would -- it's a difficult question to answer, but I would put it like this. I think Exeter's model is quite unique. And I don't think there is actually anything like that really in the market. So if you look at their latest industrial value-add fund in the U.S. I think the number of underlying asset in that fund is 140 or something like that, 140 or 145. So it's a very granular model. It's not the model if you compare to PE, where you buy maybe 14, 15 assets. So -- and which means that this market is a very deep market. But you have to have a lot of local execution. So I think they really truly have a unique model, which you can't really compare to anyone else. And I think they very, very much create their own deal flow as opposed to sort of waiting for assets to be sold. So without sounding too bullish, I think it's really up to us and the Exeter team how we will continue to grow and develop this. And there are no other boundaries than ourselves in terms of getting the fund sizes right.

And the next question comes from the line of Bruce Hamilton from Morgan Stanley.

I guess just 2 or 3 for me. In terms of the cross-sell opportunity with Exeter, I mean, you mentioned that there's a lot of overlapping clients. Can you help us think about that a little bit more? And maybe also update on what the past trend has been in terms of existing clients returning to funds and therefore, because I guess you've probably still got quite a lot of expansion potential there. Secondly, on the growth capital fund, you made your first investment. How should we think about the time frame for raising third-party funds and having a first close? Should we expect that, that would be this year? Or would it fall into next year? Those -- I'll probably stop with those 2, please.

Very good, thanks. Caspar, do you want to take the first one with regards to the LPs?

Yes, sure. I think -- I mean, the cross-sell is, you can say, 2 ways, right? First of all, Exeter is bringing about 60 new relations to the EQT platform. So those are blue-chip investors, mainly U.S., that we are -- that are not clients of EQT from the start, and where we hope to be able to build from that relationship for the future in obviously selling more EQT funds to them. And then on the opposite side, we have some 500 or 450 clients of EQT that are not Exeter clients that we expect to -- at least some of them to convert into Exeter clients as we move along. And I think to have a -- we're -- I think Christian mentioned, we're actually one of the few now that has -- we're very active in all the active investing funds. And so I think we have a very full product offering, and quite uniquely so in the active funds industry. So we hope and expect to be able to cross-sell all our products in that platform.

And the 60 of the 90 clients that Exeter has are not clients yet of EQT. So there's cross-sell from that. And of course, we have around 500 clients that Exeter doesn't have. So there's potential both ways. If you think about growth, we are -- we have made our first investment. We have a very active investment committee on new deals, and we're preparing for fundraising. And we will report on that in -- yes, a little bit later this year. But all preparations are well on track. And when it comes to how we're thinking about it, we will be rounding off the mid-market Europe fund, which is a EUR 1.6 billion fund and launching growth as you can say, as the next generation of products attacking high-growth companies that are kind of between venture capital and private equity. And we would expect that the growth fund will be somewhat larger than the mid-market euro fund.

Sorry, so that's larger than the -- did you say the mid-market Europe fund is how large again? EUR 6 billion, did you say?

EUR 1.6 billion is the...

Sorry, EUR 1.6 billion. Yes, okay.

Thanks for clarifying. EUR 1.6 billion is the current mid-market Europe fund. And the growth fund is, I wouldn't call it a replacement, but it's kind of the next generation of funds that fits them perfectly between venture capital and private equity.

Got it. Okay. And sorry, and you may not be able to pin this down, but would a first close in this calendar year be a possibility then? Or can you not add anything further to that?

Yes, it would be.

Yes. Okay. Perfect. And sorry, could I ask 1 -- I had 1 other question on cost, actually, if I can just follow up. I guess you've been quite clear on the -- there's been a bit of a pause in recruitment that will pick up. If we're, say, adding 150 staff in 2021, that's about 20% increase, I mean should we expect that, that order of magnitude could be a guide for the kind of cost growth? I know there are obviously other costs. But is -- can you help us just think about the sort of 2021 costs finally?

Kim?

I think that order of magnitude in terms of headcount growth is not unreasonable. Then it will come through out throughout the year, so it's not all going to be sort of full cost from day 1 in January, but rather some of it will come in the first half and some of it in the second half. So you can't really do an exact math on that. But that's a good starting point for the analysis. And then like we've said, about 2/3 of the costs would, in a typical year, be personnel costs, and then you'd have other costs of another 30% to 35%.

And the next question comes from the line of Ermin Keric from Carnegie.

Starting perhaps on the deployment pace of EQT IX and Infra V, that's obviously been exceptional. But at the same time, we've heard some peers express that they include multiple contraction on -- in their base case for new investments. What's your view on that? I mean historically, I believe multiple expansion and strategic repositioning, I think it always has been 25% of your value bridge. So how do you think about that going forward?

That's an excellent question, and we've actually been modeling multiple contraction. What do you think, Caspar? Since day 1, I would say.

Well I would say at least the past 5, 7 years, yes.

Yes. Yes, and maybe it was even in the past, but we never expect, when we make the investments, to have a higher exit multiple than what we buy for. And the way that -- but of course, now as multiples increase and have increased over time, the way we think about it is not only that we have multiple contraction in the model. It's actually more thorough than that or more deeper than that. What we try to do is we try to find companies where we can really impact the business. So if you buy -- if we bought Anticimex for example -- it is just to say -- or a classic example that we often talk about, we bought a Swedish company with a little bit of operations in Norway and Finland in 2012. And we -- as a great platform in a great industry which we can modernize and actually drive a lot of sustainability actions. And we can build on that with add-on acquisitions, with R&D, with upgrading and strengthening the management team, et cetera. Now it's actually a global business. And the price that we paid for Anticimex in 2012, is not the determining factor of the returns. The determining factor of the returns is how good are we at developing the business. So that's where we really focus a lot of our time in the investment committee is figuring out is this company robust? Is it in a robust industry? What will happen over cycles? What will happen through a pandemic, as we've now all learned, and how do we add value to it in the best possible way? And flipping it around, if we see a good business that we can't add enough value to, then we're not going to go after it because then we're -- then we're just susceptible to the market moves, which we don't like to be.

That's very clear. Then if maybe we can move on to Exeter, a few questions. First, when you say that it will be around mid-teens multiple upon completion, is that including or excluding carry? I didn't catch exactly what you said there on the carry when the funds were -- you can see it's actually entitled to carry, when they are expected to enter carry mode. And then also just over in the U.S., more like philosophical macro question, do you have any assessment on how the environment for running a private capital operation will change now with democratic rule? And lastly, with their changes to opening up for private capital and defined contribution plans, what's the potential in that for EQT?

Very good. Kim, will you take the first one?

Yes, I'll take the first one, the politics I'll leave for you, Chris. And the -- no. The mid-teens multiple does not include carry. It just includes the fundraisings currently underway and the run rate fee levels expected from those.

Is it excluding?

Yes.

Is the answer. That was unclear. When it comes to U.S. macro, it's really more a philosophical question. We're coming from Europe. There's generally more regulation in Europe than in North America and in the U.S. And we have been -- we moved onshore already back in 2011, '12 to be a part of the EU system to be regulated. So philosophically, we're not so worried about new regulations or new tax schemes coming or whatever it might be. What we're razor focused on is buying the right assets and really improving them. And we've never been that dependent on financial engineering, we've never been dependent on a lot of tax planning or these kind of things. We're more fundamental investors I guess you could say. So that's how we attack it. The U.S. is actually still obviously, it's the biggest private capital markets in the world. It's actually also very well performing. It consistently has very high returns. I think only Scandinavia has equally high returns, actually. And therefore, it's a very attractive market to be in. So those are some of the strategic reasons we're there. I don't know if maybe Caspar has anything to add on the regulatory side.

No. I think -- I mean you can maybe say that I would actually argue that we're more regulated today in Europe than PE is in the U.S. today. So I don't foresee that being a huge impact. And we're already regulated in the U.S. today, SEC regulated. So I mean it's not that it will be a huge difference for us. I think with all regulation, it will, of course, impact us and others. But I think, as always, it's going to be the smaller guys that are more heavily impacted. So that's the problem with all regulation.

Yes. Thank you. And on defined contribution, yes, the whole private wealth and retail space is increasingly -- and also opening up from a regulatory point of view to invest in private capital. Right now, it's still very much in liquid products and REITs and publicly traded private products, not so much direct investments in private capital firms like ourselves in the kind of products that we have. But it's certainly coming. And we've actually hired a great guy from BlackRock named Peter Nielsen who is going to be managing that sector and really making sure that we are attacking it in -- on all fronts.

And the next question comes from the line of Mike Werner from UBS.

Just a couple of questions on Exeter, if you don't mind. I know the GP investment is around 2% for EQT's PE, and then for funds, 35%, which comes from the corporation. How should we think about that with Exeter? What portion are they investing into their funds? And then I guess you showed the historical IRR and MOIC for Exeter. Going forward, just from a high-level perspective, in terms of real estate, what -- how do you think about the target MOIC for real estate versus Infra, which obviously is a little bit lower than what your target MOIC is for Private Equity? And then finally, just looking at Slide 20, the combination of EQT and Exeter. About 13% to 15% revenue, AUM and EBITDA, the combined entity will come from Exeter. But close to 25% of the headcount will come from Exeter. Is there any opportunity to cut headcount there in terms of any duplication from the combination?

Thanks for good questions. I suggest that, Kim, if you answer the GP co-invest question and Caspar, you attack MOIC and the employee structure.

Yes, on the 2%, it's not a fixed number for EQT. It's a range of 1% to 3%. And then like you said, we take the 35% of that. And it is a similar 2% average for them, and we will, in the future, then take 35% of that GP commit as well. So that's the question. And then -- yes.

Yes. I think on the target MOIC, if we talk about the value-add funds, we are talking about targets of 2x the money. That has been their target. They have consistently outperformed it, but I think that will continue to be their target. So it's similar to Infra, I would say. And in terms of FTEs or headcount, I don't foresee there is being efficiencies in headcount in Exeter. I think the combination is going to be positive, positive synergies, but not necessarily cost synergies in that sense. I think the number of headcount in Exeter will continue to grow as we expand that business model deeper into the existing markets but also into newer markets. I think it may be worth mentioning that the sort of -- since their business model is somewhat different, I think the average cost per head count is somewhat different in Exeter compared to EQT.

Yes, significantly, actually.

They are different because of their integrated business model where they do all the property management and leasing and all of that in-house, that means that they have a slightly different profile for the employee base.

And just as a quick follow-up, is their fundraising done in-house? Or do they also rely on third-party services there?

No, they have an in-house department doing that. So that will, together with our -- over time. But they have that in-house.

And the next question comes from the line of Magnus Andersson from ABG.

Yes, most of my questions on Exeter has been answered. But just 2 -- 1 more technical character, you said that you hope the transaction will be closed by the end of Q2 '21. Does it mean that we should expect it to be consolidated in your accounts in the H1 '21 report? Or do you expect to do it in the second half? And then the second question I have just on carried interest recognition then in Exeter. I guess it will take from what you said earlier, some 3 to 4 years before you see any contribution there. That's a start there.

I can take those. We said that closing is expected to take place in early Q2. So that's our current expectation so -- rather than late Q2. And we would then expect to consolidate the Exeter immediately from closing. So I say, for 9 months of the year, that's our best guess right now. What was the second question?

It was the carry question. I can take that...

Carry recognition.

So for Exeter, as you know, the carry that we will have, it's from the funds that are actually being raised now and in future funds. So that means that you should not expect EQT to have carrier from the Exeter funds for another, say, 3 to 4 years, as I think you were saying, Magnus.

And then you mentioned the EUR 5 billion plus for 2021. And then I think, Caspar, you mentioned some EUR 2 billion to EUR 3 billion in fundraising. Was that in addition to the EUR 5 billion or EUR 5 billion?

No, that's included in the EUR 5 billion. I think just to be clear, the difference between that EUR 2 billion to EUR 3 billion and EUR 5 billion is really that they have some strategies where in the core -- more core and managed account where it's charged on deployed. And as deployment goes on, that will build AUM without having any fundraising. So that's the diff sort of between the EUR 5 billion and the EUR 3 billion that I mentioned.

And then turning to EQT and the deployment on capital, obviously, it's been a very rapid deployment of EQT IX and Infra V so far. And it was the same for EQT VIII and Infra IV. So I was just thinking whether -- was there any -- it's been extremely fast. So was there any pent-up activity here after the COVID-19 crisis in the spring, so that we should expect this to slow down going forward? Or has anything structured in your model changed at all over time, which means that the 3-plus years, you've been showing us historically, is perhaps not relevant anymore? And also linked to that, since we are getting closer to the next-generation [ EQT X ] and Infra VI in a quite rapid pace, how we should think about the sizes of those funds if we should look at the recent increase in sizes or anything else.

Thanks. I'll start there. If you look at the deployment rate, we don't expect there to be a change versus our historical precedent of around 3 years. And I think 2020 is a -- maybe it's a strange year, but it's not that strange in terms of deal making. We made very few deals in the beginning of the year, a lot of deals in the end of the year, and that is private capital. We do about 15 deals in each of the key funds over that 3-year time period. So if you think about it, that's only 5 deals a year. And if those 5 deals -- sometimes it's -- it can be 7, sometimes it can be 2. So this is not like a liquid strategy where you can just kind of line up the transactions and invest them, at least not that's not how we work. We're really trying to find -- each company that we're investing in, we're trying to find -- sorry, I'm looking at the wrong place now. Trying to find where we can really add value and how we can really build upon the business. So I think one structural shift that's happened over the last 5, 7 years or so is that we have become present in all European countries, including France, last year, and we're building out our presence in North America. So we are truly local with locals across all the areas that we want to invest in, and we're building out Asia Pacific, as you know. So we actually are the only private capital firm in the world that has offices in every significant European country. And therefore, we have a lot of deal flow being produced from these 2 axes that I talked about earlier, the thematic investment side and also the local to local side. So all these investments we've made in our platform that we talked about are now providing us with this strong deal flow. But we have not made a shift to accelerate or anything like that. But it is hard for us to say at the beginning of a fund, assuming the markets are going to be pretty healthy, is it going to be exactly 3 years? Or is it going to be 2.5 or 3.5. That's not how we allocate capital. Like I said, we are -- we do specific deals and build up the portfolio construction over time. Did that help you?

Yes. Can I just follow up there? Has it ever, ever happened before that you have been 30% to 35% invested after 6 months and 20% to 25% invested after 2 months, respectively?

It wouldn't surprise me if we had. I think the deployment here is not that different than EQT VIII and Infra IV, actually. And looking back to EQT IV, for example, we invested EQT IV in 2 years that ended up being 2.8x the money. The generation before was a bit slower and not so successful. So like I said, this is not -- I wouldn't try to read deep trends into this. It's really built in the way that I described. And then the combination of the market and our teams and how we find those right companies is really what drives it. Another way to turn -- another way to answer the question, which we talk about with our LPs is we try to diversify in a multiple different ways. We try to diversify across sectors, across geographies, across themes, and currency, whatever you might say. It's a little bit more complicated for us to diversify a lot across time. And we think the 3-year cycle is something which is -- which suits our model in a good way. Maybe Caspar has something to add or Olof.

Yes, I think we also started on EQT VII at a very high deployment pace, if I recall it right. But I think -- I mean maybe to add to this, I don't think also the LPs, obviously, they like -- because from a fee perspective, it's good with quick deployment. But on the other hand, You want to have some clarity and some feeling for the fund, the existing fund, before you go out and raise the new one. So a very short deployment period might actually be tricky to raise the next fund because the visibility or the quality of that fund is more difficult. So I would just second what Chris is saying. I think sort of 3 year is what you should be expecting, but I also think it's sort of the optimal from many perspective.

May I, from a technical perspective, just to add that the fundraisings are still ongoing and the percentages you mentioned are based on target fund size until we've closed the funds.

Okay. And then the second one about how we should think about sizes for the successors for these 2.

Yes, I think it's -- I would say it's too early for us to comment on the size of the successor funds at this point in time. What we do is, when we -- we start about a year or so before fundraising. We start to gauge our deal flow, our performance, the market, the interest of LPs, et cetera. Then we lay out a strategic plan for the fund. Then we set the size in discussions with our LPs and our -- and of course, ourselves. So it's -- we haven't started that process yet. So I think it's too early to comment.

And the next question comes from the line of Hubert Lam from BFA Securities.

I've got 3 remaining questions. Firstly, on the current fundraising for EQT IV, Infrastructure V. So far you're targeting -- your target sizes are still below the hard cap. Do you expect both of them to reach the hard cap by the time you finish fundraising? That's the first question. Second question is on the fee margin for EQT. I think the fee margin fell incrementally in the second half versus this first -- versus the first half. Can you explain why this is the case? And whether or not you expect further fee margin pressure? And lastly, now that you've acquired Exeter, are there any other gaps in your business that you think you may have to look at to acquire in the future once Exeter is completed?

Thanks. I think I'll start with the last one, and then I'll let Kim take the first 2. Of course, this is a significant move for us with Exeter. We think it's a fantastic match culturally and with investment strategy as well. So I think we're going to spend our time here in the near future, making sure that we combine in a great way and work well together and really build one combined business with this great culture that we both have. If we are going to do more M&A in the future, I think it's too early to comment on that now. But of course, we do continuously have a map of white space geographically and also product-wise that we can start thinking about filling in at the right time. But right now, we're razor-focused on Exeter.

And on the ongoing fundraisings, as you know, we're restricted from commenting on those kinds of things. So I can't really comment on that. What I can say is that historically, we have been at hard cap levels for similar fundraises. On fee margins, I mean you are down to the second decimal if you say that our fee margins have incrementally gone down. We continue to state that our large flagship funds have substantially the same fee levels as their predecessor funds, and we expect the sort of blended fee margin to be in the range of 1.4%. And I think that's the case.

[Operator Instructions] Our next question comes from the line of Jens Ehrenberg from Citi.

Congrats on the transaction. Just a couple left over from me. On the Exeter and -- transaction -- and apologies if I've missed that. What are, in terms of performance fees, what are the sort of hurdle rates that you look at? And then secondly, just following on some of the previous performance fee questions. Is there any way you could give us sort of a split that shows us if we had a very strong performance [ to be ] this half? How much is driven by actual exits and how much is driven by improved valuations in the funds? And then secondly, somehow connected to that, looking at EQT VII, that's obviously recovered very well over the second half. I think we were standing at a more, I guess, 1.7 at the end of the first half, now at 2.3. And again, I appreciate you probably won't comment on individual investments. But is there any sort of color that you can give us on how that performance was so well? And the last point, I was just curious about speaking about the retail and kind of private wealth opportunity. I know a lot of focus is on the U.S. for their pension schemes. What's your view on that in Europe? Could you see yourself launching sort of like an LTF or master-feeder structure to provide some -- yes, any sort of private or capital product to retail in Europe? That's all for me.

So I'll start with the last 2, and then Caspar and Kim can take the first 2. Now when it comes to EQT VII performance, I think what we're saying is that the fund is performing quite well, as you've seen. So it's -- the uptick from 1.7 to 2.3 is a combination of both the portfolio performing well and exits. It's hard to give a detailed breakdown of exactly what drives what because the waterfall is like you fill up the bucket, both with valuations and with exits, and then when water kind of starts to run over, that's when we generate carry. First on accounting basis and then later in cash. So it's a little bit hard to say exactly what water fills up what. But maybe Kim can give a little bit more detail on that in a second, more philosophically. But it is a strong portfolio, and we continue to expect value creation from EQT VII. But what we've also said is that we're -- we don't -- we're not going to change the goal of the fund until it persistently and materially performs above the 2.5x. When it comes to retail in Europe, yes, it's an interesting opportunity, still early days. Like I said, we have hired a specialist to help us build a strategy there to -- across both Europe and the U.S. and probably also Asia over time. And how do we become -- how do we provide really interesting investment opportunities to the retail space? This is not the easiest question to answer. I think what we'll do is when we have a plan on how to attack that more structurally, we'll let you guys know. We do, today, have quite a significant private wealth channel that's investing with us in a lot of the private banks with -- in wealth management. But our own retail products, too early to comment, I guess. Thanks.

And on the hurdle rates for the value-add funds, it's in the region of 8% to 9% hurdle rates. And just adding to Chris' comments there, I absolutely agree that given it's kind of a whole fund carry, it's not really possible to disintegrate the exits and the value uptick. And furthermore, we have examples such as the Certara IPO just before Christmas, where we sold a small proportion. And obviously, from that proportion, we then -- we don't have any discount on that anymore, because it's sold and exited. But then we have a significant uptick in the aftermarket performance. So we also mark up the value of Certara thereafter. But on that value, again, we have the 30% to 50% discount in all our funds. So it's a mix effect. Yes.

And the next question comes from the line of Roberta De-Luca from Goldman Sachs.

Just a few questions for me. One on the step-downs. So you've communicated about EUR 7 billion of step-downs. But can you maybe remind us, a portion of this will be partly reversed, at least? Some of the deals announced will close? And if so, can you maybe remind us what's the total deployment rate for announced deals that had been closed on the 2 predecessor flagship funds? Then again, on carried interest, sorry, but obviously, you reported much better-than-expected results. So can you maybe just give us a split between carried interest and investment income? And I assume the carried interest will be mainly from EQT VII. Just wanted to double check that's correct. And then the final question, I appreciate there's been a lot to update on today, but is there any update you can give us also on the expansion in -- for each deal in APAC?

Yes, I'll take the last one, and then, Kim, of course, will take the first ones. No, it's a little bit too early for us to give you an update on Asia Pacific. What I can say is that the next market that we will be moving into with regards to employees and offices is Japan. I think we mentioned that before. We opened Australia last year, we have a team, both in Infrastructure and Private Equity there now, which is great. And we are building the strategy for the future across the region. I said, I think earlier in the presentation that we will come back to that in Asia Pacific as well as our views on potential long hold funds later this year.

And in terms of the step-downs, maybe the way to think about it, Roberta, is like this, that we've said that the fund should have 80% to 85% invested. So whatever is left of that will be, in the end, coming back to the fee-paying AUM. And over time, when we make add-on acquisitions or additional equity, it could go up to 100%. But sort of in the short -- in -- now in H1, you can think of it as sort of 80%, 85% approximately. On the second question, investment income in the period in 2020 was EUR 16 million. So the -- thus I think the EUR 153 million on that line item, so EUR 137 million was carry in total, of which the vast majority, more than 95% was -- or 95% was EQT VII.

And we have one more question from the line of Gurjit Kambo from JPMorgan.

Just a couple of questions. So on Exeter, what's the fund structure like? Is it still like an 8- to 10-year horizon on the fund structure for their funds? And then just on fees, I presume -- is it on invested capitals, that's just on the structure? And then given it feels like it's a much more intensive business in Exeter, I'm impressed by the margins are still 60%. Are they just really efficient in the business in how they run it? Just any sort of color on the, I guess, the efficiency of Exeter.

Caspar, do you want to take that?

Yes, I can start with the last one. I think yes, I mean they are running an efficient business for sure. And I think that the -- that's all right to continue to do that. So we will obviously integrate them, but they will also be independent within how they operate and what they do in a certain way because it's not -- it's a business that are -- is very close to what we do, but it's not exactly the same. So therefore, we think that it's better operated semi-independently, you can say. And when it comes to the investment or the fund length on the Exeter side, it's somewhat shorter. So the value-add funds are typically 3 plus 3. So 3 years deployment, 3 years holding, and then can be extended after that, whereas the -- you can say, on the other end of the spectrum, you have the managed accounts, which are typically indefinite, right? They go on until they don't anymore. So -- and so it's -- and core plus is typically longer. So you have the full spectrum there. But the value-add is somewhat shorter than what we are used to, typically, 8 years compared to the sort of 12 years on the PE fund.

And their business model is, as you mentioned, is quite intense in the sense that they do buy a number of these smaller assets. They improve them significantly with CapEx, with tenant improvements, with logistical improvements, et cetera. And then they pool the number of these assets together and then exit those to larger pension funds and other long-term investors in the world. So it's -- so in order to be able to do that in multiple locations across several different asset classes, you need a lot of competence. And that's why this is -- it's not an easy model to replicate, and that's also what we really like. It's the same with EQT. It's not that easy to replicate that we're local with locals in every single country. So we think that match is really good. But it is, of course, more work-intensive than other real estate funds, which outsource a lot of that. But in return, you also get the margin that you see, you get the full income of all the services that you are providing to generate the returns.

And as there are no further questions, I'll hand it back to the speakers for closing remarks.

Okay, thank you very much. It was a day of lots of announcements and lots of information. Thank you for great questions. Thanks for being with us today. Feel free to reach out for any reason. And we -- thanks again for -- thank you again for yes, joining us this morning and wish you a great remaining week. Thanks a lot.

Thanks, everyone.

Thank you.

Thank you.