HarbourVest Global Private Equity Ltd. (HVPE) Earnings Call Transcript & Summary

Good afternoon, and welcome to the HarbourVest Global Private Equity Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand it to Ed Warner, Chair. Good afternoon, sir.

Good afternoon. Thank you, and thank you, everybody, for attending this afternoon. Temperatures dropped a little bit. So you'd probably rather be outside than in front of your screen. So we very much appreciate your time today. We've had a number of these investor meet company presentations over the last few years. And those of you that have been on a number of them or through all of them will know that we have introduced a series of very investor-friendly measures to the governance of HVPE in recent years, culminating in our most recent announcements, which include a tender offer for 10% of the shares of the company that will be conducted this autumn at a discount of around 10%, which we think is market leading, certainly in our space within listed private equity and is part of a package of actions that we've taken to ensure that we are [indiscernible] focused on the interest of you as investors and shareholders, which I am myself to, to deliver returns, which beat the competition, beat the market and enable you to not only diversify our portfolios, but most importantly, to capture all that's great about private markets opportunities that exist across the world, which you may well not be able to do any other way. Richard is going to take you through a year in review. I would remind you, and I'll remind you again at the end that we have our AGM coming up on the 15th of July in Guernsey. I'm sure you won't all be jumping on a plane to fly out and see us, but we would encourage you to exercise your democratic right to vote in that AGM, including a resolution to continue the company in its current form, which we very much think is in your interest and my interest as an investor in HVPE. So more about that at the back end of the presentation, but for now, I'll hand over to Richard, and then we'll take your questions at the end. Thank you very much.

Okay. Thanks, Ed, and thanks, everyone, for joining. So I'll introduce HVPE for those who may not be familiar, and for those who are this does also give you a brief update. So we are a leading listed private equity investment company. We're the largest fund of funds in London on a listed market with assets of $4.3 billion. We are also the most diversified listed private equity fund with more than 1,000 private company exposures across the world. We're a truly global investor. We, as a listed company or a member of the FTSE 250 Index, climbing steadily up the rankings. As of the year-end, we were at 47th place with a market capitalization of GBP 2.3 billion. The shares trade predominantly in sterling. And so moving to the bottom half of the slide, the share price total return over the 10 years ending 31st of January this year, which is the financial year end of the company. The 10-year return was 260% in sterling. That represents a very strong return, particularly relative to the broader investment company universe where we ranked in the top decile by share price return over that period of time. So more than 250 companies, we're in the top decile. And that, of course, that share price performance is predicated on the performance of the portfolio itself, which compounded at 13.5% annually in U.S. dollars over that 10-year period. And as a reminder to shareholders, we produce our accounts in U.S. dollars. The majority of our assets are in U.S. dollars for the shares trade predominantly in sterling, hence, currency difference there. And the final box on the slide reminds you of the consistent uplift to carrying value that we've achieved on exits over a period of more than 13 years. So we began the analysis of exit uplifts in 2012. As a reminder, this measures the difference between the actual value achieved when a company is sold from within the portfolio versus the value of which we were holding that company before the announcement of the exit. So sort of capturing that difference in valuation for the exit. So the key highlights of the results for the year ended 31st of January 2026. The NAV per share return in dollars was 9.7%, so a little below the 10-year compound rate, but heading back towards that level after a couple of years of weakness. We saw strengthening liquidity in the portfolio with more than 537 companies exiting during the year. That was a significant gain on the prior year. And the share price total return in sterling, 13.6% in that 12 months ending 31st of January. We've seen a very strong performance since then, more than an 8% further gain since that financial year-end. The distribution pool allocation has also doubled. So 30% of our gross incoming cash from portfolio exits is now going into that distribution pool, which is deployed at the discretion of the independent Board up to now has been deployed solely into share buybacks. And so I'll give some updated figures on those later. We also announced the asset sale in December, $300 million of proceeds coming this year from a sale of 5 HarbourVest fund positions at a combined discount of 6% to NAV, which is very attractive for a secondary sale. That has contributed to the ample financial resources we have. So as of the end of January, $123 million of cash and GBP 630 million available on our revolving credit line. Both those figures have improved since January. As of that financial year-end, we committed $375 million to the new separate managed account, or SMA. So that's across 2 calendar years, 2025 and 2026 SMA tranches. That capital will be allocated and called down for investments a little bit more quickly than the traditional fund of funds commitments for those of you who may have been shareholders for a longer period. But essentially, the separate account gives us more control over the investment pacing and eventually more control over the liquidity in the portfolio as well. During the year, we bought back 2.4 million shares worth nearly $90 million. The total buybacks now conducted, if I bring it right up to date as of the end of May, we've bought back $327 million worth of shares. So a very substantial amount. That's added nearly 7% to NAV per share since the buyback program began in 2022. So very material benefits for continuing shareholders from those buybacks. And then as Ed mentioned, we've announced further shareholder initiatives post year-end, which I'll talk to shortly. So the discount at which the shares have traded in recent years has been a frustration for everybody, not least for shareholders, of course, but also for the Board and the manager. We have announced several very important initiatives over the last 2.5 years, starting in February of 2024, aimed at maximizing shareholder returns. So if I go back through these initiatives briefly to set the scene again from more recent shareholders, we set up our distribution pool in February of 2024, initially with 15% of gross cash coming into the portfolio, ring-fenced for predominantly share buybacks. We then in February of 2025 a year later, doubled the allocation to 30%. We simplified the investment structure by announcing and then implementing the SMA that year. And we announced the continuation though, which is happening in just over 2 weeks' time. In September of 2025, we finalized the SMA and made our first commitment, so $125 million of the $375 million I mentioned earlier, was committed in that calendar year. We then completed the secondary sale later that year, providing significant cash inflow. We then, as of April of this year, announced perhaps the most comprehensive package to date, which includes the tender that Ed mentioned, $400 million in cash to fund that tender in the autumn around a 10% discount to NAV in terms of pricing. But we will continue to buy back shares. We expect to buy back more than $100 million for this calendar year on top of that tender amount. So more than $500 million being returned to shareholders this calendar year. We also paused new commitments for the remainder of 2026, although we have committed $250 million already to the SMA, making up the balance of that $375 million from the earlier slide. We've committed to twice yearly reviews of the portfolio from a secondary sale perspective. So where we see an opportunity to realize assets, perhaps before the point at which those underlying businesses would be sold by the underlying managers, we can take action to optimize the NAV per share performance and to reshape the portfolio in line with our top-down allocation targets. So that is now embedded in our approach twice the year, there'll be a full review of the portfolio. And that, if needed, will help fund the commitment to further capital returns. So in addition to the tender this year, we plan to offer a tender every year up until the next continuation vote of between 5% and 10% of NAV, so very material further tenders in line for the next 2 to 3 years. Finally, the AGM, as we mentioned, will include the continuation of [indiscernible], we would clearly urge all shareholders to participate in the vote and we very much welcome your support on the 15th of July when we hold the AGM. So are these initiatives working? I think there is evidence that they have begun to work. We've seen a narrowing in the discount across the sector as a whole. So part of that is naturally the market rebounding from the sell-off we saw in public markets in 2022 and the subsequent widening in investment trust discounts. But also as these charts show, our own discount has narrowed considerably more than the narrowing of our peer group. So in June of 2023, before those initiatives like first stage was announced, we were trading at a 44% discount, which was the widest among our peers, which are anonymized here, but those to be familiar with the sector might be able to guess which companies we've included the listed fund of funds, the listed direct funds. In June of this year, so in bringing this right up to date, the discount to which our shares are trading is around 24%, which is second narrowest in the peer group and essentially, we've moved completely to the other end of the spectrum. So I think the relative discount really does indicate that perhaps these initiatives have been well received and are really starting to move the needle. Let's move to Slide 7. So we wanted to include this page as a reminder really of the benefits of the listed investment company structure. And we felt it was important to highlight the daily liquidity in the shares as mentioned here actually on a quarterly basis. And remind investors that actually, we are one of the more liquid funds in the sector with around 15% of our shares trading every quarter on average. Now there is some double counting in these volume numbers typically where brokers intermediate transactions. So effective the same trade can be counted twice. But even if we assume all of the trades are double counted, we're still looking at close around 7.5% of the shares trading per quarter. So very significant liquidity. And on top of that, we, of course, do have now the tender this year and the future tenders at between 5% and 10% of NAV. So quite significant liquidity not only in the shares, but also in terms of the company itself, providing that liquidity. So looking at the portfolio, how have we performed in the financial year ending 31st of January. Well, we saw consistent growth across all of the key subsegments in the portfolio. So these are the stage strategy and geography targets that we work to. And you'll see the size of each bubble corresponds to the percentage of NAV represented by that segment. And of course, the position of the bubble vertically corresponds to the performance delivered during the year in terms of the growth in value. So for example, the bio portfolio in orange on the left is the largest subsegment by stage and delivered an 8.8% growth figure. Venture and growth equity, a little bit smaller, but still significant at 30% of NAV delivered a growth of 11.5%. That's significant because venture on growth equity had been a drag in the prior 3 years and now has moved into a leadership position versus [indiscernible]. This is a fairly typical occurrence where [indiscernible] and ventures switch in terms of their contribution and a reminder of of why we think it's generally a good idea that both in a private market portfolio. But also perhaps surprisingly for many investors, the private credit and infrastructure category, which is the smallest in the portfolio was actually the strongest performer overall with 14.4% growth driven by the infrastructure side more than the private credit side, but nonetheless, a very, very creditable performance for the yielding element in the portfolio. By strategy, we saw primary move ahead. So primary, as a reminder, is where we're effectively committing to new partnerships as they're raised, so new funds raised by underlying general partners such as Bank Capital, Carlyle, EQT, Blackstone and others. And so we're committing to those funds to gain access to those very strongly performing general partners. And included in that, notably as much of the venture exposure, which predominantly does come from the primary side. So there's a correspondence here between that venture and growth performance and the primary performance being in the lead. Secondaries though, and Direct Co investments delivered creditable figures between 7% and 8% growth for each of those categories. And so a broad-based contribution to growth rate by strategy there. By geography, clearly, the headline here is Europe, which outperformed based predominantly on currency in the year. So converting back to U.S. dollars. The euro was strong although the dollar was weak, whichever way around, you prefer, but that is largely a currency effect. North America still strong at 8%, Asia a little bit weaker. Rest of World slightly negative, but a very small allocation. And actually, just a residual allocation, we have no new investments going into rest of the world. Looking at the 5-year figures, this gives a more representative view given the year is a short period of time for private market investing. 5 years the minimum hold period effectively that we would recommend for HVPE. And we see actually some quite surprising trends. So by stage private credit and infra again, is in the lead. So even over that 5-year period, measured by IRR, the internal rate of return on a net of fee basis, we see private credit and infra really be delivering very strong growth and that is actually across both the credit and the [indiscernible] side roughly equal contributions from each. So we benefited there. I think, from rising interest rates on the credit side and the inflation spike which fed through directly in the infrastructure assets as many have inflation-linked contracts. So that was a very useful hedge for other parts of the portfolio when we saw that spike in inflation. In terms of strategy, we saw secondaries over the 5 years being the leading strategy, benefiting to some degree from the volatility in markets, secondary investing creates opportunities around discounts in the private markets, which can be taken advantage of. But also very strong portfolios in their own right, purchased in the secondary funds. But as you can see, all 3 strategies performing well, primary, which is often underrepresented in many of our peer portfolios actually did deliver a very strong growth rate of 12%. By geography, Europe is genuinely in the lead over 5 years, and that -- the currency movement over 5 years was actually negligible. So that's a real kind of gain from Europe, outperforming North America, which makes surprise many public market investors has given the divergence in the public markets in the other direction. Asia, a little bit weaker, 7.3%, driven by some weakness predominantly in China as deal flow slowed and we saw the impact of some of the regulatory changes in that market. But overall, a 12.2% IRR, again, net of Harvest fund fees and costs in the portfolio. And how do we stack up versus the broader private equity market performance. That's an important question that many investors do ask. And here, we show there are quite a few details here, and I won't go through everything. But the key message is that 71% of our primary partnerships, i.e., the funds that HarbourVest is selecting for HVPE that go into our portfolio. 71% of those partnerships are in essentially the top half of the performance table by -- in industry terms. So the average private equity industry performance is measured by the [indiscernible] data set. If you look at the chart on the right, there are orange dots indicating where the average private equity performance would set. And if we look at the total on the left-hand side of the right-hand chart, you can see the blue dot is our own HVPE primary performance, which sits comfortably above that industry average. So if you look at the axis on the left, you'll see the industry is around 1.6x capital on average, whereas we are just on 2x on average. So 2x invested capital being the typical return in our primary portfolio. And then you'll see in Venture, which is in the middle of that chart, we're actually above the top quarter. We're inside the top quartile of the overall industry in our venture performance. So that's gives you some idea that clearly, we are not simply allocating across the industry. We are delivering a preferential selection of assets within the private market space. And returning to the topic of realized uplifts, which I touched on in the introduction, the average of 46% across all of these financial years that we show on the chart, you can see that it's varied considerably year-by-year. There has been a premium in every one of these financial years. That's the first important message. We have had a year where we sold assets below carrying value. We have seen spikes notably in the financial year ending January of 2021, which perhaps won't surprise many, many viewers. 153% is very unusual. That was driven by venture IPOs in that period. But clearly, it's come down to more normal levels between kind of 30% and 40%. More recently, the financial year ending January this year, we saw a 22% uplift which is lower than previous years, but still a material premium to the carrying value of which those assets were held. Now I'll touch on a few of these slides given we lost a little bit of time earlier. These are the allocations on a top-down basis by stage strategy and geography. So referring back to those performance figures, these are now the actual shares of the portfolio in each of these categories. You'll see that buyout investments make up 60% of NAV. So the largest single share in those buyout funds, which tend to invest in somewhat more mature businesses, where there's perhaps a more predictable outcome. Venture and growth equity, 32% of NAV. That is the more adventurous side where we're backing funds that invest in to earlier-stage companies and as feature some of those exciting names towards the end of the presentation, which is worth waiting for. We also have the private credit in Infra with a current allocation of 8% against the target of 12%. So we do plan to increase our allocation to those yielding assets in the years ahead. By strategy, we have just over half the portfolio in primary funds. So as a reminder, those are the funds through which we're accessing some of the top-performing general partners across buyouts and venture. Secondaries are nearly 30% of NAV. So that gives us the ability to deploy opportunistically into the market as assets become available. Those tend to be more mature assets. And then we have the direct co-investment funds with 20% of NAV making up the balance, as the name suggests, that allows HVPE to gain more direct exposure to the individual companies where the harbors team are investing alongside the sponsor GP, i.e. the lead manager. By geography, we are currently, and I'm surprised to say this underweight North America versus public markets, where North America is around 70% of the global index. We are 62% North America. It's still, by far, the largest market for private equity and venture capital. So it's always likely to be our largest share. But we do have substantial exposure to Europe at 22%. Our target is 24%. So we do intend, again, to slightly increase the weight into Europe over the next several years. We also do have a material allocation to Asia at 15% currently and a target of 16%, so a marginal increase planned there. By industry, this is more of an outcome of our top-down allocations by strategy stage and geography. So we don't have direct control over industry exposure. But as you may expect, with our venture and growth weighting, we do have the most significant sector in the portfolio as tech and software. I would like to reassure investors that is a very diverse sector. There are lots of different business models, including, of course, the new disruptive AI companies themselves, which are included within this exposure. So we feel that we're well positioned to really benefit from further development in that industry. Aside from that, we are very well balanced in terms of the more traditional segments across industry. So a good level of diversification across sector as well as by the other measures. And a further aspect of diversification is vintage. So just as the wine industry categorizes vintages as the year in which the wine was bottled and let pay down. Similarly, with private equity, we talk about vintages of investments. And so this chart is showing in the orange bars, the percentage of our total portfolio that was effectively deployed in that -- each of these vintages. So for example, in 2022, we have 14% of our NAV that was actually invested in that year. And one key point here is that we don't have a significant overweight to any given vintage year. So you might expect, for example, 2021 to be a year when investment was higher because the whole industry was investing more capital in that year than normal. But actually, we did not follow suit. We've been very steady in terms of deployment pacing, which has helped, I think, to achieve this good balance of vintages. So it's a natural curve, as you'll see with older vintages clearly being smaller exposures in the portfolio as many of the assets have already been sold. We do still have some tail-end vintages pre-2009, but as we've seen recently, we can see some surprising success stories occasionally coming out of those very old vintages. And the newer vintages slightly lower, perhaps in terms of allocation than we would normally see, but we do have the opportunity to buy those vintages on the secondary market as we go forward. So we tend to see a natural increase in those more recent vintages as we go through. Now a little bit on the company exposures. Clearly, we're a very diversified fund. We have 1,000 material private company exposures, but I think most newsworthy at the moment are the so-called unicorn companies. The phrase Unicorn is a trend we use in private equity and venture capital to refer to the $1 billion-plus venture-backed companies that are emerging from those funds. So when a company breaches that $1 billion valuation, it's categorized as a unicorn so to speak. And clearly, many of the names here, you'll see a way north of $1 billion valuation, 1 or 2 approaching the $1 trillion level. We have OpenAI, for example, just outside our top 25, we have Anthropic both of which are slated to IPO potentially this year at $1 trillion valuations. We also have Stripe, which is rumored to be IPO-ing, I think, has now registered. We have Revolut as well, which is the U.K.'s most successful venture capital-backed investment. So a good range of these unicorns. We actually have 16 of the top 20 globally in our portfolio and 38 of the top 50. So through our venture managers, we're gaining exposure to these real winners in the industry. And when we look at our top 25 companies on a look-through basis, we see similarly exciting names. So you'll see here at number 5, probably most notably at the moment, SpaceX, which was an investment that one of our underlying venture managers made back in 2009, would you believe? So that's 17 years in the portfolio, growing compounding capital, of course, and now recently IPO-ed a north of a $2 trillion valuation. The 0.7% of NAV figure we're showing here is pre-IPO. So this is based on the $800 billion valuation, which SpaceX most recently raised funds in the private market. We will update this valuation when we released the 30th of June NAV statement, which will be at around 3 weeks' time. But to give you the pro forma at today's SpaceX share price, that will be around 1.5% of NAV. So it will move to our #2 holding in this table. But other companies, SHEIN is currently the largest single company at 1.7%. Clearly, we do have, as I've stressed multiple times, a good level of diversification, very little concentration even at the top end of the portfolio, but still material. And so we should see SHEIN exit, hopefully, by IPO within the next year or so. Databricks, a more traditional software business that has embraced the AI agent model that is now generating real revenue from that offering has been through 2 funding rounds in the last 12 months and is now attracting even more capital in the private market. I'll touch on a couple of others, but conscious of time. Action is at 3i Group's largest portfolio company. Clearly, we're a co-investor in that business, and it's been very successful for us. Kioxia, I'm not sure I pronounced that right, is a Japanese business that has effectively come out of nowhere and become 1 of Japan's largest company. So that was a real successful story for the manager there as well. But overall, a message here in this top 25 that we have a good level of diversification. Again, very little correlation between these individual companies in terms of their business models, geographical location, sector, et cetera. So there's a good level of natural protection here, if any given sector or any given geography experiences challenges, there's a real chance that many of these come will be relatively lightly touched by any of those events. So a word on portfolio trading, and we show some metrics here based on a sample of just under 80% of NAV. So it's not the full portfolio. But where we have good data from the underlying companies, we do include it in our assessment. So in the year, calendar year 2025 now, we saw average revenue growth of 12.7%. This is all U.S. dollars and EBITDA growth of 13.3%. So a very solid double-digit growth across the vast majority of the portfolio. Debt multiple around 4.4x, which has been consistent over the last few years. There hasn't been any major change. And I would say that the part of the portfolio that's not captured in the sample tends to be weighted towards the venture side, which has limited debt. So this, if anything, might slightly overstate the debt multiple in the portfolio. The valuation multiple of 14.6x which compares very well with public markets. It's around 4x lower than a like-for-like public index valuation measure. And on this slide, I'll give you a little bit more detail there. So on the right-hand side of the page, you'll see the direct comparison between our own valuations in the dark blue and the S&P world mean adjusted for our sector exposure in orange. So as I said, around a 4x difference in the valuation at which we have marked our assets or our underlying GPs have marked their assets and the level at which the public market was trading at the end of 2025. So I will be very brief on the financials to allow more time for Q&A. A note here on the SMA, as I've stressed, we finalized that structure in 2025. We've committed $375 million in total. And we show here the allocation by those categories that I've been through already. The key message here is that with the SMA, we can flex the allocations much more than we did under the old fund to funds model. So we -- if we want to, we can dedicate an entire year's capital to 1 or 2 stages rather than all 3, we can focus on a certain strategy, for example, primary in 2025, where we have an underweight and so on. So we can tailor these commitments much more to see the portfolio requirements. And also the investment pacing will be slightly more rapid in the SMA. So from the 2025 allocation of $125 million, $97 million of that was either deployed or allocated for investments during the financial year ending January of this year. And to bring it up to date with the 2026 allocation of GBP 250 million, that's just under half either invested or allocated so far as you'd expect at this point in the year. Cash flows. Overall message, I don't labor too much on this point, but we've seen distributions from the portfolio generally weak over recent financial years. We have started to see a recovery, so the bars in dark blue above the horizontal line. Those are the distribution or the cash inflows into HVPE and the the boxes below the line -- the bars below the line in light blue are the capital call. So the capital that is leaving HVPE to going into the funds. You can see the net cash flow marked by the orange dot which was marginally negative in the financial year ending 2023, quite severely negative in the year ending 2024 and recovering in the most recent financial years, returning to positive cash flow in the year just ended. The distribution pool, which I mentioned, this shows the contributions and the utilization of the pool. So the orange blocks are the positive contributions and the dark blue blocks are other the utilization, i.e., the buybacks. So you can see significant activity from January 31, 2025, through to the financial year-end, and we bring it forward to April with a balance of $184 million remaining in the pool. That has since increased marginally to 187 million. The balance sheet is looking robust. Our financial ratios across the top of this slide are all within an acceptable range and have improved further since the financial year-end. So we have good coverage of our commitments, and we have a relatively conservative level of exposure to future investments. We also have seen the fund level borrowing plateau. So since the year-end, that has come down from the $559 million level. We do expect that to come down essentially to 0 by the end of this decade as the prior fund commitments run off, and we are not committing to any funds with fund-level borrowing. The separate account does not have its own borrowing facility. So this exposure to credit will decline over time. The total expense ratio has trended up, that is almost entirely due to the increased draw on the credit facility in recent years, which comes through the HVPE OpEx line, at the top line of this table, so you can see 1.51% OpEx for the financial year ended. If you look all the way back on the right-hand side of the table, 3 years ago, that was only 0.36% when the credit facility was not drawn. So that's really the primary variable in this table. We've also seen, if you look at the line, just second from bottom here, the row there, carried interest has increased marginally year-on-year. There was an anomaly in January of '23 that financial year because NAV growth was marginally negative. So we didn't see any significant performance fee charged as you'd expect that, that has started to recover with the NAV performance. So total expense ratio, 2.74% in the materials you may see online, we do quote the ongoing charges figure as defined by the AIC, which is purely the management fee and the OpEx, excluding financing costs, which totals around 1%. And this finally a trend over time in terms of the total expense ratio has come down fairly steadily in recent years, albeit there's been that rebound due to the credit facility draw. And so in conclusion, HVPE is well positioned. We have set up the SMA. We're deploying actively through that separate account into new investments. So we're continuing to invest into the private markets, as you'd expect us to do. But we're also allocating very significant cash to address the discount to which the shares are trading. So as a reminder, this chart shows on the bottom here, the progression in net assets per share in U.S. dollars indicated by the bars and the line tracks the share price in dollars. So you can see the discounts and how it's changed. But most importantly, how the share price has progressed over time. We've delivered very strong performance. We do see the outlook improving, distributions from the portfolio are picking up, and we have signature IPOs that are primed and ready to go in the second half of this year. So with that message. We have, I believe, 15 minutes for Q&A. So I will hand over to Stephanie if we have any questions.

[Operator Instructions] As Richard said, I'd like to now to hand over to Stephanie Hocking, Head of Investor Relations to host the Q&A. Stephanie, if I may just ask you to read out the question where appropriate to do so and direct to the team, and I'll pick up from you at the end.

Great. Thank you, Richard, and Ed. We've got a number of questions on the Q&A. So thank you to all of our attendees for those. The first one from Neil. "How will the outstanding commitment GBP 2.3 billion be funded?" Richard, I'll put that to you.

So that's a great question. It's funded essentially over a period of several years. So that $2.3 billion pipeline will not be called in the short term, it tends to be called at about 20% per year. So typically, over the last 5 years, capital calls, i.e. the actual amount we've invested in cash terms have been between $400 million and $600 million. So effectively, the capital calls are funded by the distributions that come off the more mature assets.

Richard. I've got another question here from Jim, which again, I'll put to you. "If direct investments are the companies you individually select, are you disappointed by their 5-year IRR versus primary or secondaries?"

That's -- I think over a 5-year period, the direct co-investment portfolio has performed well in terms of trading. It does tend to be skewed a little bit more to the buyouts than venture. There are actually not very many venture co-investments. So there is a bit of a link there between buyout performing a little bit less well than venture in the last year. But I don't think there's anything systemic in the direct investment portfolio. It's very well diversified. We're very disciplined in terms of how we select those investments and they tend to be effectively selected from a very wide pool of opportunities. We see more than 1,000 potential co-investments every year, and we invested typically 5% to 7% of those opportunities. So I would say the outlook is very bright for the co-investment side.

I've got a question here from Christopher. "Why has Europe outperformed North America? Is this good manager stock selection?" To you, again, Richard, thank you.

Yes. So we think it's partly due to the professionalization, frankly, and then the growth of the venture and growth industry in Europe, particularly. So we see consistently strong bio performance in Europe, but most notably in the last 5 years, there's been a real convergence in terms of the venture approach that formerly was effectively confined to the U.S. market being applied to Europe. So in contrast to the public markets where clearly, the U.S. has outperformed quite strongly. In Europe, the venture and growth ecosystem has really developed over the last few years. So I think that's a significant part of the reason. But also, I think Europe is underestimated in terms of the scale and breadth and diversification in the economy. And so private markets are perhaps better able to tap into the growth opportunities than the public markets, given there are fewer IPOs systematically than we might have seen 10 or 20 years ago, really private markets are gaining access to that growth rather than the public market investors.

A question here from James. I might put this to you, Richard, and Ed if you've got any comments to add afterwards. "With the target of returning substantial capital to investors, how confident are you of achieving this without compromising future half growth?"

Yes, that's a fair question. And clearly, something we spent a great deal of time planning and modeling for. The important point is we are going to continue to invest. We paused for the remainder of this year. If the balance sheet projections allow, we'd like to resume investing so that we don't miss vintages going forward. But also, I would say we have earmarked cash for this year. We have a good view in terms of the sourcing of that $400 million to fund the tender for this year. And as I said, we've already made that GBP 250 million commitment that is yet to be made. So that will be deployed along with capital calls from prior fund commitments being received and funded as well. So our pacing per our model should be -- should remain consistent in the years ahead.