ICG Enterprise Trust PLC (ICGT) Earnings Call Transcript & Summary

Good morning and thank you for joining the interim results presentation for ICG Enterprise Trust, covering the 6 months to 31st of July 2022. I'm joined by the portfolio managers, Oliver Gardey and Colm Walsh, who will give a run-through of the materials which are available on our website. And at the end, we'll be taking Q&A. [Operator Instructions] At which point, I'll pass it over to Oliver.

Thanks, Chris, and thank you all for your time today. I want to start by saying how proud we are of the resilience of our investments during the first half of fiscal year '23 against a macroeconomic backdrop that became increasingly challenging. The portfolio delivered an NAV per share total return of 10.9% for the period and 24.2% on an LTM basis. Continued strong revenue growth and EBITDA growth of our top 30 companies demonstrate the strength of our portfolio construction and our focus on defensive growth. We've seen continued realizations at uplifts to carrying value, demonstrating the strength of our underlying portfolio companies and indicating conservative valuations. Portfolio return on a local currency basis was 7.4% for the 6 months. And due to the geographic diversification of our portfolio, portfolio growth on a constant currency basis during the 6 months was 12.4%. We've seen such strong performance because of our focused strategy and dedicated team who have reacted effectively to evolving market dynamics. We allocated capital in a disciplined fashion to opportunities that we believe offer attractive risk-adjusted returns in this environment. We've been particularly successful in expanding our secondary exposure and invested in attractive secondary portfolios, which we'll talk about it -- in during the presentation. As part of our ongoing focus to optimize the return for our shareholders, the Board has resolved to commence a long-term program of share buybacks. This program will sit alongside the company's existing progressive dividend policy and will be executed at any discounts to NAV. On top of this, we have enhanced the disclosure on the portfolio. So more detailed disclosure on the financial and operating performance of the portfolio can be found in the appendix of this presentation and in the RNS. Now on to the half in review. The part that I would like to highlight here is the continued realizations and uplifts to carrying value of 25.2%. And we also saw a number of larger realizations in the second quarter, resulting in total proceeds of over GBP 106 -- over GBP 106 million. We believe that the ability to continue to sell assets at an uplift to NAV and it reflects the continuing demand for high-quality assets and underpins our confidence in the valuation of our portfolio. I also would like to note that we are continuing to see robust realization activity after the period and did and remain broadly in line with our historical average realization rate. We are fairly balanced between new investments and realizations. During the period, we increased the size of our revolving credit facility to EUR 240 million from EUR 200 million previously in keeping with the company's higher NAV. As you all know, we have a flexible mandate that enables us to deploy capital in primary, secondary and co-investments. And here, you can see the breakdown of performance between the three types of investments. All three areas grew well and saw positive growth, supported by a strong operational performance, which Colm will discuss in more detail later. But we're particularly pleased to see that discretionary investments, which include our secondary and co-investments grew particularly strongly, showing local currency returns of 9.3% and 9.9%, respectively. We've been -- as you can see, we've been increasing allocations to secondary deals as a proportion of the portfolio, and we have almost doubled our exposure to secondaries in the past 12 months from slightly above 10% to just short of 20%. And this has been supported by our manager, ICG, investing in resources, such as hiring more team members who specialize in secondaries and co-investments. The investments in the LP secondary portfolios have been particularly successful, generating a 1.5 multiple on invested cost within the last 12 months. And as a reminder, our third-party managers are a key source of origination for our discretionary investments. So primary commitments remain an important part of our portfolio construction. Effectively, we're planting seeds for the future here. And I'll now pass over to Colm, who will take in more detail about the activity within the portfolio during the period.

Thanks, Oliver. Now that you've seen the portfolio level performance, it's time to take a look at a bit more detail at the drivers of that performance and in particular, the underlying performance of our largest company exposures. We continue to disclose the metrics by top 30 companies. I've also started to disclose key metrics for a wider subset of our portfolio during the period. The top 30 companies continue to deliver strong performance during the half year -- during the year, reporting double-digit revenue growth for the year to July 2022 of 27.5% and EBITDA growth of 26.3% over the same period. And we also saw some EBITDA margin expansion in a number of these portfolio companies. The net leverage of the portfolio of companies has remained broadly in line with the level seen at the year-end. And the performance of both the top 30 companies and the wider sample showed consistent performance across the portfolio. A more detailed information on the performance and the wider sample can be found at the appendix. We've now also started to provide a richer analysis, which shows dispersion for all the key metrics. I'd now like to talk about our investment activity during the first half of the year. Our strategic focus on defensive growth, aiming to source investments, which have the ability to grow even in difficult economic environments, has remained at the forefront of our investment decisions during the period. That's the things we do, but it's also things we don't do. We've remained cautious and highly selective in our transactions. And as I said, what you don't see here are all the deals we declined -- over 90% of the discretionary opportunities received. We've also been highly selective in our selection of primary managers. We introduced one new manager in the period, Thoma Bravo, and we continue to back some of our long-standing top tier managers. As Oliver mentioned, we've been able to benefit from ICG's expertise and in particular, its expertise in structured transactions. During the period, we made two direct investments, both of which include some structural downside protection. These were Newton, a consulting firm and precisely which the client -- data verification software. Both are squarely defensive growth companies in any case, but the deal structures provide enhanced protection on the downside. And as you can see on the right-hand side of the slide, we've taken advantage of a buoyant fundraising market during the period to commit some attractive funds, which we'll be investing sowing the seeds, if you like, over the next few years and what we believe will be an attractive environment for new investments. This includes $85 million of commitment to ICG secondary funds as well as a number of commitments to long-standing third-party managers with whom we've built relationships with over many years. This includes managers like PAI and Gridiron. And I'm going to now just spend a little bit of time just discussing a little bit about our relationship with Gridiron. Now Gridiron, not a household name, but it's a market-leading buyout manager. And we introduced Gridiron to portfolio in 2016 as we embarked on our mission to expand our investment program to the U.S. But local presence from ICG meant that we already have strong institutional relationships. And Gridiron -- investments in Gridiron came from an introduction from colleagues in our debt teams in our New York office. And Gridiron has a thematic hands-on approach. It focused on three core sectors where it executes what it calls the Gridiron playbook. It's based in Connecticut, away from Midtown, Manhattan, where most of the tiers operate. And it sees itself very much as being a very different type of partner to the traditional approach. The culture of the firm strongly centers on partnership and its principles -- heritage entrepreneurship and running their own family businesses. It's very much an operational focus and not one that's reliant on financial engineering. We've now invested in three Gridiron funds, and one of them has been one of the best value generations in our portfolio. Indeed, it's the best performing fund of its vintage in the U.S. bid market. And currently, four companies managed by Gridiron are amongst our top 30 largest exposures, and they collectively account for 4.5% of our portfolio value. So by committing to its funds and building a strong relationship with Gridiron, we've seen attractive co-investment flow. And we've been able to co-invest alongside the team 3x in AML RightSource, class valuation and most recently, Vistage. And we believe that all of these deals are great exemplars of what we mean when we talk about intensive growth. The Gridiron story is a great example of how our primary program works. We benefit on the one hand, very strong primary returns, and that allows us to build up a strong relationship and that allows us then to be able to invest in some of the managers' best ideas. And it's also a relationship, which has very much come about from being part of the broader ICG platform. I'd now like to go on to talk about realizations. In the period and post period end, we've continued to see reasonable realization activity with continuing uplift to carrying value despite a fallen transaction volumes in the broader market. We saw 30 full exits at an average multiple to cost of just over 3x cost. And as you can see from the representative logos in the slide, it's not the full list, we made no realization from our top 30 companies in the period. The trade was therefore not skewed by any large realizations. It was broad-based, and we maintained a healthy uplift to carrying value of around 25%. It's worth noting too that after the period end, we received proceeds from the partial realization of IRI and another top 30 company, Doc Generici, is in the process of being fully realized. Moving on now to give you a snapshot of what our portfolio looks like today. And as you can see, the top 30 companies represent just over 40% of the total portfolio value. And we believe that this balance of concentration and diversification results in a differentiated portfolio, which has attractive growth characteristics. What it means is that our largest exposures make a meaningful difference to our overall NAV growth and NAV performance. But it also ensures that we're not taking significant single company or indeed single sector risk. As you can see from a geographical analysis, we've built up our U.S. exposure since 2016 through investing with managers like Gridiron you've just seen and other leading funds. And that's now a little under 50%, which gives us a balanced exposure geographically between U.S. and European markets. Our sector exposure is also well balanced. We're not heavily reliant on any one sector. And it's worth noting, too, that the active approach is portfolio construction means a lot of the weightings within these individual sectors are from our discretionary deals. So very much focus on defensive growth and very much focused on companies which have strong defensive characteristics. So when we look at our technology exposure, it's businesses like IRI, businesses that are profitable, fast-growing and also cash generative. So very much not the kind of technology investments you may see in other portfolios, which are based on revenue multiples and of highly variable outcomes. Moving on now to talk -- to give you a bit of an overview of what we mean when we talk about defensive growth, and it's something you'll hear from both myself and Oliver throughout this presentation. Our investment strategy is heavily focused on investing in buyouts of businesses that are profitable, cash generative and have themes -- defensive growth characteristics that we believe will deliver strong and resilient returns across economic cycles. We've identified a number of themes that contribute to a business having these characteristics. It includes market positioning, providing -- the provision of mission-critical services, the ability to pass on price increases and structurally high margins in their industry. And you'll see on this slide some examples from our top 30 companies, some of which you'll recognize from earlier in the presentation, such as Precisely and Newton, which are our two new direct investments in the period. Just like to highlight two travel notes across America. That's another Gridiron investment but one which is sourced exclusively from our primary fund investment. It performed so strongly that it's now in our top 30. And this is because Gridiron has taken historically analog business and through operational change, made it more effective and efficient through digitization. Now I'd like to move on just to give you to the next slide, which shows the performance of our top 30 companies compared to the public markets over time. The graph you can see here shows how our portfolio compares in terms of EBITDA growth compared to the FTSE All share. And of course, this is not like-for-like as the constituency of out top 30 changes over time. But what you can see is a pattern of strong, consistent growth over a period includes a number of difficult years, and in particular, the period during the COVID pandemic. It's another reflection of the defensive growth nature of our portfolio. You can see the listed markets are much more volatile performance, whereas that of ICG Enterprise is more consistent and resilient. And with that, I'm now going to pass back to Oliver to conclude and to discuss our approach to shareholder returns.

Thanks, Colm. Colm has talked you through the specifics of why we think our portfolio outperforms and how we're positioned to navigate these challenging markets. Most importantly, we have a strong and consistent track record of performing. And you see here that our 5-year annualized portfolio return is 20.6%. On the right-hand side, you can see our 5-year annualized NAV per share total return at 16.9%. A 16.9% return also means that our portfolio more than doubled in the space of 5 years. The graph shows just how consistent we have been each quarter with only 2 quarters where we have seen a down drift and one of those being COVID where we were only down about 4%. So we think this reflects very well comparatively to our peers. We're conscious that as our portfolio is performing consistently, we need to optimize the shareholder returns. And in line with our progressive dividend policy, the Board has declared a dividend of 7p per share in respect of the second quarter, and that takes us the total dividends for the period to 14p and for the first half to 12p. It remains the Board's intention in the absence of any unforeseen circumstances to declare total dividends of at least 30p per share for the financial year, implying an increase of 11.1% on the previous financial year. But let's talk about the buyback. As I mentioned earlier, the Board have established a structured buyback program. And we believe strongly that a well-executed long-term buyback program delivers the following shareholder benefits. Firstly, a buyback program demonstrates the manager's discipline around capital allocation. Secondly, it underlines the Board's confidence in the long-term prospects of the company, its cash flows and NAV. Thirdly, our buyback enhances the NAV per share. And lastly, over time, a buyback may positively influence the volatility of the company's discount and its trading liquidity. Therefore, the Board will review quarterly the size, the impact and the mandate of the buyback program in conjunction with its advisers, to help ensure it is working in the long-term interest of shareholders and is in line with the objectives outlined on the slide. I would now make some concluding remarks. As you know, our aim is to deliver attractive compounding returns across the cycle by identifying companies that have defensive growth characteristics. And our performance for the first 6 months of this financial year has delivered on that intention. And in the coming quarters, we'll continue to critically assess opportunities that we source, and we have a very high bar, as Colm mentioned before, for executing transaction in today's environment. However, we are particularly excited about the secondary market as many pension funds and other institutional investors are over allocated to private equity and are looking for liquidity solutions. But furthermore, we believe this is a great environment also to commit to third-party funds. Firstly, it allows us to deepen our strong partnerships with top tier funds in a difficult fundraising environment. And secondly, our third-party commitments allow us to plant seeds for investments in the next 2 to 3 years, which will be most likely an attractive environment to invest capital in market-leading defensive growth companies. So with our clear investment approach, flexible mandate, executed by a dedicated and experienced investment team, we believe that the trust remains well positioned to implement its strategy in these uncertain market conditions. And so we are very confident in our outlook for this year and beyond. So I would like to thank you very much for your time, and this concludes the results presentation. And Colm and I are ready to take questions.

Thank you very much. [Operator Instructions] We have a couple of questions on the underlying portfolio of companies. First, Colm, in your discussions with managers, how are your portfolio companies experiencing to the current macro and economic environment? And are you seeing any differences between those in U.K., Europe and the U.S.?

It's a great question. I would say is, it is clearly a difficult economic and a volatile economic environment. And of course, that impacts our company just like it does companies throughout the economy. But I think what we are seeing is that the kinds of themes that we backed, the kinds of companies we've backed are continuing to demonstrate resilience. When I look at our largest exposures, there are none that particularly worry me. I think they're all demonstrating an ability to cope very well. So for example, we look at companies like Endeavor, the private schools market, its biggest -- its biggest cost is labor, but it's been able to pass that through to its customers because of a strong market position. So I think if anything, it's reinforcing our belief in the strength of the strategy. I don't think -- look at the difference between Europe, U.S. and the U.K., and clearly, the U.S. market is -- has got greater protection from some of the energy worries that you have in Europe and perhaps there is a greater degree of consumer confidence. And that's helpful because a lot of our consumer businesses are either internationally focused or they're U.S. focused. I would say that many of our U.K. companies are very internationally focused. So the likes of Froneri U.K.-based company, it's captured as a U.K. company in our stats. But the reality is that it's a very globally diversified company. So -- and I think that's true of quite a lot of our U.K. exposure.

Thank you. Can we move on to higher interest rates at the moment? And specifically, the impacts that higher debt costs are having on pricing and on deal velocity generally.

In terms of transaction volumes. So clearly we track the buyout volumes and M&A volumes. And it's a matter of fact, the volumes have fallen quite significantly. I suppose we're seeing in our portfolio is the impact is a bit more muted because what we're focused is on the mid-market. And then a lot of the stats in recent years have been very skewed by big deals and particularly big deals in the tech sector. And those deals have just dried up and they're not part of our universe in the main. So therefore, what you see in our portfolio in terms of realization is a realization rate, which looks high as it's been in the last few years, but we still think it's at a very healthy level. And clearly, rising interest rates do impact leveraged by us, clearly. What I would say though is very much, again, as part of that defensive growth focus, our managers are very focused on stress tests. This is not a surprise to them. Rising interest rates is something they planned for. Even when you look at the maturity profile of our portfolio, the average maturity is about 3 years and that reduces the amount of refinancing risk that we have as well. So again, it's very similar to the broader macroeconomic pressures. It clearly is something which impacts companies. But we think that it's something that the kinds of companies we're investing in, the kinds of managers we're backing are very well placed to be able to deal with. And in fact, over time, it's this kind of volatility that can often create opportunity in our markets as well.

And I would like to add, when you think about where we have discretion in investments such as co-investments and secondaries, what we have done over the last couple of years already, in a more higher-priced environment, we already anticipated a drawdown in terms of valuation. So when we're doing in our modeling of our investments, we always consider -- or we've considered over the past 3 years that the exit multiples will be lower than the entry multiples, which means that the underlying growth of the companies has delivered the results rather than a multiple uplift. To the contrary, we're actually expecting a multiple contraction at exit. So that gives us that extra cushion and comfort, particularly around the discretionary investments we've done.

Could we pick up on that point on valuation multiple, please, Oliver? The average valuation multiple is virtually unchanged over the 6 months. Could you explain or could you give some color around what's driven that, please?

Yes. I think what drives that is that our overall multiple, if you compare that to the FTSE All share index or compared to some of our peers has been always quite conservative and is below certainly our peers and is currently roughly in line with the public markets. So therefore, that's why you don't have -- we have not seen a correction to that multiple because it has been always on the conservative side. And we get some extra comfort from that. But when you look at the exits we've seen coming from our portfolio, which have been at a substantial uplift at over -- around 25% to the holding value.

There are a couple of questions on secondaries, which I'll direct to you, Oliver. Could you elaborate somewhat on this opportunity? Are you seeing more activity than usual? And in that context, how do you ensure that the transactions you execute are consistent with the defensive growth strategy of the trust?

Yes. Great question. So when we think about secondaries, and the current market environment. So secondaries have been one of the fastest-growing sub-asset classes in private equity over the past decades. So there is an underlying secular growth. But what has happened over the last 12 months that on top of that, you've seen now that a lot of the institutional investors are over allocated to private equity because the denominator impact, which means the public market valuations in the portfolio have dropped, which means the -- and the private equity hasn't dropped to the same degree. So the contrary, private equity has really outperformed public markets over the last 2 years. Therefore, a lot of institutional investors, private equity allocation has shot up and are outside of the range typically, they would like to be in. And so that is driving a lot of secondary sales particularly since the pension funds and institutional investors want to continue to invest in third-party commitments going forward. And therefore, they need to release some cash and some commitments to reduce the allocation to continue to invest in private equity. So the result of that is that we're seeing an absolute record amount of secondaries in the pipeline. And we believe that, that will continue over the next 12 to 18 months. So every intermediary you talk to in the secondary market is inundated with deal flow. On top of that, the supply-demand balance is quite healthy or is very much a buyer's market because the supply has gone so up -- so much -- has increased so significantly but the actual capital coming into the secondary market has, because of the overall constraints in the capital markets, have been on a reduced level. And so therefore, it's really a nice -- it's a very good buyers market. Now how do we make sure it's a defensive growth or that fits within our portfolio. Overall, secondaries, as you know, is incredibly capital efficient -- and that allows us to -- and it's very much within our defensive growth sentiment or strategy because we can analyze the companies and therefore, it has that defensive character because we can analyze and understand the portfolio. And they are 4 to 5 years. Typically, our portfolio has already matured 4 to 6 years. And so we're much closer and have much better visibility on exits and performance. So that gives that kind of defensive nature. However, we only do secondaries where we see also some growth. So we don't buy tail end. We buy typically secondaries, which are a maturity between 4 to 6 years old. And I think that gives that defensive growth characteristic of our secondary transactions we bought. To give you an idea, as I mentioned before, we've -- over the last 12 months, we did a significant amount of transactions, particularly in the three portfolios, and that is already performing at a 1.5x multiple of invested cost.

And to follow up, I've you float we've had a couple more questions on the dynamics of the secondary markets at the moment, specifically on the discounts and what sort of discounts you're seeing in secondary transactions, whether there's a wide bid offer spread and people have been willing to accept reduced pricing to get transactions executed? If you could comment on that, please.

Great question. There's always a limit in terms of how much -- how big of a discount the sellers are willing to stomach, particularly when they're sitting on some very good assets and great managers and great portfolios. But it is within the healthy range, and we're seeing what used to be, let's say, around par. The new par is around 10% to 15% discount for quality managers. And we do see those transactions being transacted. When you get to the kind of, let's say, above 20%, 25% discounts, that's when it gets difficult for sellers to accept that. But we're seeing a very healthy acceptance right now by sellers to separate themselves from very good portfolios at those 10% to 15% numbers.

While we're on the topic of discount, we've had a couple of shareholders observe the wide discounts to the list of private equity sectors trading on at the moment. And specifically, could you perhaps run through and explain in your view the reasons that the sector is trading at relatively wide discounts to NAV at the moment?

Yes. I mean, we are -- we think the discount is very anomalous and we are firm believers that the discounts are way to way too large. One -- and here are the numbers, which gives us confidence. First of all, the portfolio has grown, as you've seen in the slide, Colm presented to you, our EBITDA and revenue growth in the kind of 25% and above. That's very strong growth rates for a portfolio, which is currently valued at 14x EBITDA. So if you assume -- currently, we're trading at a [ 40 ] -- that sector is trading at 40% to 50% discount, that puts you multiple levels down to high single digits, which we think for this quality of the portfolio is an incredible bargain. We think that the reason for those discounts and why the sector overall is trading at a big discount is that the investors have not quite gotten confidence in the portfolios because they think it's -- private equity should be riskier than public equities and therefore, should be trading at bigger discounts. As you can see in this portfolio, as you can see in the slide I presented in terms of our quarterly performance and if you look back at what happened during the GIC as well as sort of the global financial crisis as well as during COVID, you'll see that typically private equity is trading at somewhere around less or maximum half of the beta of public markets. So we think that the discounts you're currently experiencing in the market are way too big and create a great buying opportunity for the sector.

As you look at your -- the strategy of the investment of ICG Enterprise Trust, would you consider your mix between primary, secondary and co-investments as an advantage compared to co-investment only funds? Or perhaps to phrase that question slightly differently, could you talk a little bit about the benefits, as you said, of the flexible mandate that the ICG Enterprise trust has?

Yes. So we think this flexible mandate gives us a great opportunity to really actively construct the portfolio. And when you think about it -- and so let's think about -- compare this to a pure co-investment portfolio versus a pure fund to funds portfolio. Our ability -- and so what we're striving for is about a balance of 50-50 between third-party funds and discretionary investments. And the discretionary investments, which we call investing in the best ideas of our fund managers, allow us to be very flexible in constructing the portfolio and actively constructing the portfolio which is particularly importantly when you're navigating through challenging markets as we are experiencing. And that allows us to shift more from a co-investment investments, which can be or continue to be higher prices to opportunity where we see particular opportunities, for example, in the secondary. And so it gives us that flexibility to actively construct the portfolio as well as to actively construct a portfolio, which fits our defensive growth mandate. So we can pick specifically the best ideas from our managers in the defensive growth sector. Versus if you are building a fund -- if your portfolio is a pure fund to funds portfolio, you're very much dependent on what the funds you invested in are going to actually deliver. So it's a much more passive investment style. And it's very difficult to adjust those funds or fund strategies because they have 10-year lives to the current market environment. And on the co-investment side, you're also very dependent on what the managers provide you with. And so therefore, there's a limitation in terms of how much you can twist the portfolio. But at the same time, also what it is, it provides more risk because a pure co-investment portfolio is more -- has a higher single asset versus less, is more concentrated and less diversified versus we're providing a portfolio with -- were about the main value drivers or 80% -- 70% to 80% of the portfolio is driven by about 80 investments and 40% to 50% are driven by the top 30. So it gives you plenty of the diversification.

We have a couple of questions on the underlying portfolio, Colm. First of all, on leverage, while our shareholders observe that leverage multiple of 4.3x is -- and that'll be lower than the average. In your view, does that reflect conservative some of the underlying GPs or within asset manager? Or is it also something else?

I think it's two things. I think on the one hand, it's conservative structuring, so we don't tend to back managers and I talked about Gridiron. We like managers that are operationally focused, not focused on generating returns through financial engineering. I would also say it's a testament to the cash generation within our portfolio as well because what you see is the leverage multiple today. And in many -- in most cases, that's much lower than the leverage multiple at the inception of the deal. So what's happening is we're investing in cash-generative companies, their delivering and that cash generation results in the debt going down over time. So -- but overall, I think I agree with the premise that it is a reflection of the defensive and relatively conservative nature of the strategy.

Can you talk briefly about Chewy.

You know me talking briefly about Chewy...

How that is performing, why we don't consider EBITDA as a relevant metric for it? And just a quick update on Chewy, please.

Sure. So Chewy and for those on the uninitiated, and I'll keep this brief, Chewy is an online pet food retailer. So collectively with PetSmart. It's our largest single company exposure. PetSmart, the bricks and mortar pet retail business and Chewy is an exclusively online e-commerce retailer. PetSmart's private. Chewy's publicly listed. And for those of you who follow the Chewy share price, it is, as you might expect, given the sector it's in, pretty volatile. The reason we -- so it's volatile largely due to market sentiment. It's a very, very good company, though. It's a market leader in what it does. We don't use EBITDA as a metric here. It does have a very small EBITDA relative to its revenue. And the reason for that is that because it's so -- its revenues are growing so fast, it invests any excess cash in growing its customer base. And the return on capital it gets from that makes sense in the context of the overall investment. So Chewy could be much more EBITDA positive than it is. But because of where it is in its growth cycle, it's investing in the customer acquisition. We remain pretty excited by Chewy's future prospects. The underlying -- so every time we look at the defensive growth company, we identify an underlying trend. And Pet ownership is a trend we see quite a bit from many of our managers. It's -- there's been a significant increase in levels of pet ownership that got expedited during COVID, and Chewy also benefits from the shift to online retailing as well. So it's kind of that combination gives you very strong underlying growth. And whilst we appreciate from a shareholder perspective, it's very volatile, we do think that it's good prospects. And we'd also just note as well that the PetSmart, Chewy deal collectively is one of the best co-investments that we've ever invested in. So we're not allowed to publish the specific returns, but it is a very, very strong performer since we invested back in 2015.

We've had a question on the longer-term growth portfolio, noticing the NAV growth of the fund has grown from about GBP 11 or GBP 12 to GBP 18 over the last several years. Colm, you've been with the investment trust for a very long time. Over those 4, 5 years, could you perhaps talk briefly to the key drivers of the results in such a strong growth in the NAV and EBITDA pressure?

I'm feeling old now, but -- can be young man, by the way. I think over the last 4, 5 years, since -- and of course, that corresponds to a number of things happening, moving to ICG. Obviously, Oliver joined 3 years ago. So we have -- and we've had an expansion in the team as well. So I'd say that the main thing is we've become -- and we've also broadened our investment strategy to the U.S. And all of those things have contributed in some measure to the strong NAV growth that you see. I think we've become very disciplined, much better in executing discretionary investments, both co-investment and as Oliver noted secondaries. The expansion of the new base has given us just a bigger addressable market, access to some of the world's best managers. So I think all of those initiatives, it's not one thing, it's lots of little things added up that I think has contributed to the strong performance. And perhaps one other thing worth noting as well is shareholders have been this for a while will know that we've also become much more efficient in terms of how we manage our balance sheet. So we have a much more efficient balance sheet, much lower cash balances and that reduces the level of cash drag, especially in a -- what was there in a low interest rate environment by reducing that cash drag, that's also helped to fuel that growth.

So that's a brief price of the history. If we look forward, earnings growth has continued to be strong in this period. Are you anticipating any significant changes over the coming 6 to 12 months from -- in terms of the underlying -- of portfolio companies?

I mean it's a very -- obviously, a very difficult question to answer with any degree of precision. I think clearly, the economic environment in -- particularly in Europe is -- the outlook is not as positive as it was this time last year. But that will be set -- I can't -- so I think there's a possibility for a degree of softening perhaps because these numbers that we presented in the sort of mid-20s revenue and EBITDA growth are exceptionally strong. So I think it's difficult to suggest that we can keep at these levels forever. But I don't have any -- so I think it's possible that there's a little bit of softening, but I don't have any specific worries about material changes in the outlook for our companies.

I'm conscious of time here. Oliver perhaps, we'll finish with you. In what is undoubtedly a slightly more challenging macroeconomic environment, you've discussed the ability of the Trust Investment secretaries, co-investment funds. Which area of that investment program, and that strategy you made more concerned about? And which are you more excited about over the near and over the longer term?

Well, that's a great question. So I'm particularly excited about the secondary market in the next 12 to 18 months due to the dynamics we talked earlier. I am very excited about the third-party commitments we're doing because this is a great period to also continue to, I wouldn't call it, upgrade because we already have a great stall of fantastic fund managers, but it just allows us to be continuously consistent and provide capital for the absolute top tier funds in the market. And this market will show, obviously, and -- who has done -- who really knows how to operate their companies. So we think this is also from a providing third-party capital to third-party funds going to be very exciting because the next 2 to 3 years, 4 years, will undoubtedly present some really attractive opportunities for our managers. And the co-investments not -- I don't want to say that we're not excited about that, but this is an area where we are trading with extra caution right now. And that's why the investments you've seen over the last 12 months we've done, particularly in the last 9 months, we've done, all have an element of very good downside protection. And that is something we will continue to look for over the next 6 to 12 months as we think valuations are still going to come down a bit and therefore, presenting some interesting opportunities for us. So we're very disciplined and phasing very carefully new co-investments into the program.

Fabulous. Thank you ever so much. Oliver, Colm, thank you ever so much for joining us. And that comes to the end of the presentation. And a replay will be available on our website shortly. Thank you.

Bye-bye. Thank you.

Thanks so much.