ICG plc (ICG) Earnings Call Transcript & Summary

Good morning. Thank you for making the time, and welcome to the Results Presentation for ICG for the Financial Year ended 31st of March 2021. The slides for the presentation, along with the accompanying results announcement, are available on our website. [Operator Instructions] I am delighted to report another year of strong performance and progress on many fronts. Our business has grown both strategically and financially. And importantly, we have continued to invest in our people, our platform and in future growth. Structural industry tailwinds remain. We benefit from an exceptional historical track record, which has been further strengthened through the recent crisis, a now internationally established brand and an operating platform built for growth. As a result, long-term growth prospects are stronger than ever. As you will hear, we are raising our fundraising guidance. And near term, full year '22 is off to a very promising start. We have been enjoying meaningful growth for many years, and this year is certainly no exception. The facts on this slide, I think, speak for themselves. I would point to a few key areas. Firstly, fundraising. We came into this financial year expecting an off-cycle year from a fundraising perspective. Instead, the pandemic triggered a flight to quality and demand from our clients was incredibly strong. We have enjoyed our third largest annual fundraising on record, raising $10.6 billion and bringing our total third-party AUM to $56 billion as at 31st of March 2021. At this point, I should flag that we have moved our reporting of our AUM in U.S. dollar to align with how we report to our clients. All other financial reporting, of course, remains in sterling. Secondly, investment activity was very high, especially during the second half of the financial year both for deployment and importantly realization, which were up 70% on previous year as we crystallize gains and strong performance across our funds, and we'll continue to do so as the market remains favorable for exits. Thirdly, we haven't stood still. We've continued to invest in our people and our platform, hiring new teams, such as life sciences, European real estate equity or real estate debt in Australia more recently, seeding new funds and broadly strengthening our corporate functions. All of this has translated into record third-party fee income, up 20%; record profit before tax for the fund management company, up 10% at GBP 202 million; and record group profit before tax at just over GBP 500 million. As you know, our progressive dividend policy explicitly links our dividend to our fund management profits. And this year, we are declaring a total dividend of 56p per share, up 10% on prior year and making this the 11th consecutive year of dividend increases. As you know, we have a long-standing commitment to ESG. This was a strategic decision which has turned into a competitive advantage in recent years. We get very positive feedback from our LPs on our ESG approach and communication as well. And we intend to stay at the forefront of this topic within our industry. This year, we have continued to invest in our Responsible Investing team and have made further progress against our ESG objectives. In particular, I would highlight that the EU Sustainable Finance Disclosure Regulation or SFDR came into force towards the end into force towards the end of the financial year. And this requires categorizing funds according to the extent to which they incorporate environmental and social criteria in their decision-making. Almost all ICG's funds in the market are categorized as Article 8 compliant, and we are actively exploring strategies which align with Article 9. I'm hoping we can launch one in the next 18 months. At a group level, we issued an ESG-linked RCF during the year. The economic terms of this facility are linked to us achieving specific objectives relating to carbon emissions and climate change. And this includes our commitment to reduce our scope 1 and scope 2 carbon emissions by 80% by 2030. And from a diversity and inclusion perspective, we continued our program of Board-level engagement with employees. We brought together our various employee-led networks under a D&I hub and supported several initiatives aimed at enhancing inclusion within our industry. We will continue to progress and strive for excellence. It's fundamentally a matter of competitiveness. And I'm convinced it will be more and more a driver for performance and returns for our investment, and so it has to be at the core of what we do. Moving on to fundraising. Fundraising in this off-cycle year surpassed our expectations by some margin, raising $10.6 billion. We benefited from several factors: a flight to quality as LPs focused on well-established managers and strategies. For instance, our direct lending strategy, Senior Debt Partners IV, raised $3.9 billion in the year, taking the total amount raised to $8 billion. And if you take into account the evergreen mandates, it takes it to over $10 billion. That's finally a double-digit vintage. I've mentioned in the past that we were lacking very large funds to be relevant to some of our larger clients, well, we are becoming very relevant. The second factor is the strong deployment activity. This has meant that we've been able to bring forward some of our funds. This is the case for Strategic Equity IV, which was originally scheduled for 2022, '23, we had a first close on March 19. The same applies to our European Fund VIII, which we've also brought forward quite substantially, and I'm pleased to report we have already had a first close on April 29. The timing of this close is important as both funds charge fees on total committed capital from that date, and that's regardless of when commitments are subsequently signed. And that naturally will flow into FMC profit from full year '22. The third factor contributing to the fundraising performance is diversification. We are reaping the benefits of our long-term efforts to diversify our product base. Launching first-time funds is always incredibly difficult, but also incredibly powerful once they become established. During the year, in addition to SDP IV and Strategic Equity IV that I've mentioned, we raised for 2 different real estate products, 2 first time funds, same leaseback and infrastructure equity, as well as a number of other funds including the recovery fund and our capital markets products. It all adds up, and it's a real strength. Very few managers have the operational and marketing platform to be able to raise so many different strategies concurrently. On the back of this performance as well as what we've achieved these past few years, we are today upgrading our fundraising guidance. We expect to raise $40 billion cumulatively over the coming 4 years, so that's to the end of full year '25. A key component of our future success is our client franchise. And over the last 5 years, we have grown the number of clients by 14% per year. Given the obvious challenges in the last 12 months, I'm particularly proud of the fact that we still increased our client footprint by 8%. Both new and existing strategies are able to attract new clients. For instance, over 1/3 of the investors in the SDP IV main fund are entirely new clients to ICG. This is an example of how we are benefiting from the flight to quality managers that I have mentioned previously. Today, we have a diverse set of clients, both geographically and by investor type, as you can see on the pie charts on the right-hand side. Of note, we have made real headway in the U.S. The top 5 pension funds and 7 of the top 10 are now clients. And there is substantial runway to expand our client base as well as the share of wallet as we grow our fund sizes and our product breadth. One of our main assets is our track record and, in particular, the consistency of this track record through crises. The performance of our funds this year, which you can see on this slide, has been very strong and will further reinforce our track record. For our direct investment funds, the metric we are showing is total multiple on invested capital, which includes both realized and unrealized value. It's a snapshot of how well funds are doing. And what we've seen this year is that funds with an equity component have experienced a material uplift largely thanks to a SKU and portfolio composition towards industries such as health care, software and education. Funds with a pure debt focus, such as SDP, have shown stability, which is what you would expect with strong downside protection and minimal loss rates. For capital markets, we show a spread against the relevant benchmark. And as you can see, these strategies have demonstrated significant outperformance. All of this bodes well for the future. And this is a key takeaway. We're obviously very pleased with the performance of our funds this year. But of greater importance is that through another crisis, it further anchors our long-term track record, our brand. And this is very relevant for future growth potential. During the year, we also continued to execute on attractive investment opportunities. We've deployed $7.2 billion of third-party AUM from our direct investment funds. We've been able to navigate a volatile market environment very well. And this is where the seniority and experience of our investment teams, along with our strong local presence in all our markets, have played an instrumental part. As you could see from the chart on the right-hand side of the slide, our deployment is above an expected linear pace across nearly all our strategies, mainly -- many are meaningfully ahead of expectations. And this is a good indicator of fundraising timing as well as potentially the ability to upsize successor vintages. This is what we are experiencing now with both Strategic Equity IV and Europe VIII. With $60 billion of total AUM, we are a major player in Europe, and we are starting to become a meaningful participant on a global level. But there's substantially more growth to go for. We find ourselves in a highly favorable position to deliver strong organic growth. Our more mature established strategies, such as SDP and European corporate, you might even now include Strategic Equity in that group, are still experiencing meaningful growth from vintage to vintage. And if you consider the market environment and the existence of much larger funds, there's plenty of runway even for these more established strategies. We will also benefit from the natural ramp-up of more recent strategies, so think real estate funds, infrastructure equity, sale and leaseback. And of course, we're constantly launching new funds. We've built an operating and marketing platform for growth. We have a well-proven blueprint for onboarding new teams, seeding new strategies with our balance sheet and launching new funds. The compounding effect of all these strategies at various stages of maturity and all growing leads to a clear path and organic and, therefore, very profitable path to $100 billion of third-party AUM in the coming years. In the more immediate future, we have good visibility on our fundraising pipeline for full year '22, which I believe will be a high point of our fundraising cycle. Two key drivers for the year will be Europe VIII and Strategic Equity IV as we expect to meaningfully upsize both vintages. As I mentioned earlier, Strategic Equity IV launched during full year '21 and had its first close on March 19, and Europe VIII had its first close this past April 29. In addition, the number of funds that were in the market during full year '21 will continue fundraising, such as infrastructure, sale and leaseback, real estate and a number of new strategies we intend to launch. Overall, I expect a record year for fundraising. And with that, I'll pass over to Vijay.

Thank you. Thank you, Benoît, and thank you all for joining us today. I'm delighted to be presenting such a strong financial performance for ICG. A year ago, we were confident that our business model, locked in third-party fee income and resilient balance sheet would enable us to withstand the macroeconomic turbulence that we all faced. Today, it's very pleasing to see these qualities come through in the financial results we report. Indeed, we have grown and continue to invest in our business. As a reminder, all the financial information that I will present today is based on alternative performance measures, which exclude consolidation of some of our fund structures, which is required under IFRS. Looking at the growth trajectory of our Fund Management Company or FMC, the key driver of our growth is our third-party fee-earning AUM, which drives the third-party fee income and, therefore, our profits. As you can see on the left-hand side of this slide, the average third-party fee earning AUM grew by 18% during the financial year, driven both by fundraising and deployment that Benoît referred to earlier. This translated into a 20% increase in third-party fee income during the year. As at the year-end, we had $8.9 billion of committed third-party AUM that is not yet paying fees and will do so when the capital is invested. This provides clear visibility for future fee growth in addition to the fundraising we expect to undertake in the coming years. The last chart on this slide shows FMC's profit before tax. This increased 10% during the year to deliver a record profit before tax of GBP 202 million. Our operating margin of 52.1% remained in line with our guidance of being above 50%. The slight margin compression to last year was due to our ongoing investment in our platform, which I will touch upon later on. The growth we've experienced this year demonstrates the strength of our business model. And given that our progressive dividend policy is linked to our FMC profits, we're in a position to recommend a full year dividend of 56p per share, a 10% increase compared to last year and our 11th consecutive year of increasing our dividend. This demonstrates that as we have grown, we have continued to deliver growth in profits and, therefore, shareholder value. Benoît referenced the increasing breadth of our platform, and this slide shows how that translates into increasingly diverse streams of third-party fee income. Our third-party fee income has grown at a 25% compounded annual growth rate over the last 5 years, with strong growth across all of our strategic asset classes as can be seen on the right-hand side of this slide. The vast majority of our fees come from long-duration funds, and this provides us with substantial visibility and stability. And on top of that stability, we continue to grow our fee streams, adding additional layers of fee income from new vintages from existing strategies, which are usually larger than the previous ones as well as adding fee income from new strategies. We firmly believe that, that long-term stability of fee income, its growth and increasing diversification is a very powerful financial profile of our business. In this slide, we've tried to help quantify that, and you've seen variations of this before. If we maintain our third-party fee-earning AUM at a steady state for the next 10 years, we expect to earn GBP 3.1 billion in management fees, and this excludes performance fees. If we then assume a fee-earning AUM growth rate of 12% for the next 10 years, and this is roughly half of our 3-year CAGR growth over the last 3 years, this translates into GBP 5.6 billion of management fees, again, excluding performance fees. Clearly, this is highly indicative, but it demonstrates the fundamental strength of our business model and our confidence in our long-term growth prospects. Management fees constitute the vast majority of our third-party fee income. And within that free income, performance fees have always been an important but relatively small contributor. Over the last 5 years, they've constituted 11.6%, as you can see on this slide. We have -- we apply a conservative approach to recognizing these, which requires a high degree of confidence that they will not reverse in the future. This year was no exception, with the contribution being just above our medium-term guidance of 10% to 15% of total third-party fees. We expect performance fees in FY '22 to be in line with our medium-term guidance. Moving on to CLO dividend income. In FY '21, we've recorded dividend income of GBP 33.4 million. This was lower than last year, driven by the rating downgrades experienced during the first half of the year. The market recovered through the year, and we are continuing to see that positive trajectory. As shown by the graph at the bottom of this slide, the rating downgrades have started reversing. And as we flagged in our half year results, dividend income started recovering as credit ratings improved. We remain conservative in our outlook for dividend income, the trajectory of which will depend on the performance of the underlying collateral as well as the ratings. But we're very pleased with the performance of our portfolio over the past year. We have also remained conservative in the assumptions we have used to value our investments on our balance sheet and have kept the same default assumptions as at the half year. Our CLO portfolio continues to perform well with very few assets currently in default relative to our highly conservative assumptions. And stepping back for a moment, I think the last 18 months have shown that our CLO investments are much more robust than people may have expected. They're operating exactly as designed, and we've not seen a wave of defaults. And this is the second crisis that has demonstrated the resilience of these structures. Turning on to operating margin. I mentioned earlier that at 52.1%, our operating margin remains in line with our medium-term guidance. One of the benefits of a high absolute margin is that we can invest in the short term into developing our long-term growth. This dynamic is a primary driver of the slight compression we saw this year compared to the last, as we continue to invest in our talent. After scaling back our recruitment at the start of the year, like most businesses, we accelerated hiring in the second half as the levels of macro uncertainty reduced. And year-on-year, we've increased our headcount by 15% to ensure that the group is positioned for future growth. There is substantial long-term operating leverage in our business model, but our focus currently is on ensuring we have the people and the platform in place to continue to grow and diversify. We will continue to invest in our platform in the coming year and also expect to see some of the cost savings in T&E partially unwind as restrictions on travel are removed. We, of course, remain disciplined around costs and continue our guidance that our operating margin will be in excess of 50%. So in summary, on the FMC, we've had a year of record performance, generating significant growth and continuing to invest in our business to position us for future success. Now moving on to our balance sheet investment portfolio. As a reminder, this invests alongside our funds. And at last year's full year results, I underlined the resilience of our balance sheet, which is due in part to its substantial diversification. On the left-hand side of this slide, you can see that our funds, which constitute over 80% of the total value of our balance sheet, are very diversified with investments in around 300 companies across multiple geographies and industries. As Benoît mentioned earlier, our funds have performed particularly strongly this year given their exposure to a number of sectors that have performed strongly, notably health care and technology. And this has resulted in an exceptionally high net investment returns in our balance sheet portfolio this year. We do not expect this level to be recurring. And in the medium term, we expect a more normalized level of returns. More important from a balance sheet perspective is this slide. First of all, as we've shown on the left-hand side, we continue to have substantial liquidity, low gearing, a strong credit rating and a prudent debt maturity profile. This, combined with our diversified portfolio that I discussed earlier, underpins the resilience of our balance sheet. This can be seen in the historical progression of our net asset value per share, which has grown at a 9.3% CAGR over the last 5 years as shown on the right-hand side of this slide. Whilst only a relatively small proportion of ICG's value, given that majority of our value is in our FMC, you can see how resilient the value of our balance sheet has been over time. Our balance sheet has real strategic benefits to ICG in helping us seed and accelerate early-stage strategies as well as align our interest with our clients by investing alongside them in our more established funds. The foundation of being able to do this is ensuring that our balance sheet is resilient, robust and liquid. And I'm very pleased that the performance this year has demonstrated those characteristics beyond doubt. Following these record results, I will now turn to where next. We are mindful of the macro uncertainty that lies ahead of us, but the characteristics of our business model gives us confidence in the guidance we announced today. As Benoît has mentioned, our fundraising guidance has been materially increased, and we now expect to raise $40 billion cumulatively over 4 years with at least $7 billion in any single year. We expect FY '22 to be a high point in our fundraising cycle given the 2 flagship strategies we have fundraising in the market. Performance fee guidance remains unchanged, and in FY '22, we expect to be in line with our medium-term guidance. Our FMC operating margin guidance is also unchanged. We expect our net investment returns from our balance sheet investments to be in the low double-digit percentage points in the medium term. And on net gearing, we're now expecting this to be no higher than 1x. This is something we've become increasingly comfortable with given the asset mix and the role of our balance sheet. Finally, we remain committed to our progressive dividend policy of paying out between 80% and 100% of our FMC profits. So to conclude, we are very pleased with these results, and we look forward to the future with optimism. Thank you all, and I will now pass over to Benoît.

Thank you, Vijay. To conclude and summarize, we've had an impressive year, and the strength of our business model has been both demonstrated and, I believe, reinforced. Fundraising surpassed our expectations as we observed a flight to quality managers, and we have kept expanding our investor base. Funds delivered very strong performance across the board, enhancing our long-term track record. I'm incredibly proud of the results we achieved this year, and I would like to take this opportunity to thank the ICG team as well as the teams of our portfolio companies for their tireless efforts during this period. More important than the full year '21 number is the strong position we find ourselves in, coming out of the crisis with a clear path to further meaningful growth. We are entering full year '22 positively. It is likely to be a high point in our fundraising cycle, and we are off to a very promising start with the first close of Strategic Equity IV and the early first close of our flagship Europe Fund VIII. This concludes this full year results presentation. Vijay and I will now take your questions. [Operator Instructions] Any questions?

Thank you. And the first question, Benoît, is around inflation and what impact inflation might have both on ICG and also our portfolio companies. And the second element of that is what impact would a sustained inflationary environment have on our returns or fundraising plans?

I mean judging by past experience, which may or may not be the right thing to do, we've done well in higher inflationary environments. There are a number of reasons for that. One is strong companies tend to do well in an inflationary environment because they tend to be able to pass on all of the increased cost and sometimes more. So strong companies tend to do well and actually better. There's greater differentiation in an inflationary environment. Two, the one thing that you have to look at is, typically, that is accompanied by an increase in interest rates. I don't know if that's behind the question as well. This is also an environment we've lived in with much higher interest rates. And as I've pointed to before, the -- an increase in interest rates certainly has, in the near term, a very positive impact on our business because all of our debt products are on a floating rate basis and the underlying companies are all hedged, and so any increase in interest rates directly benefits the performance of our funds without increasing the risk profile of the underlying portfolios. So it would actually materially help if there was an increase in interest rate. Then you can ask -- you can pull that thread even further and ask the question, "What if inflation, increase in interest rates and at some point, this has an impact on the economy?" Well, of course, if we get into a recessionary environment, it would impact everyone. But there's a long way to go before that. I mean we've -- you may or may not remember, but we've lived in an environment with much higher interest rates and our strategies were functioning very well. And the performance, there was a -- part of the question was on performance. The performance was actually quite consistent. It's the point I was making earlier during the presentation. One of the things the -- our LPs value a lot is the consistency of our performance over decades. And that means not only through downturns, but also through various cycles of higher and lower interest rates.

Moving on to deployment. Could you talk about what you're seeing in the market at the moment, particularly given the strong backdrop and any competition you're seeing for new deals?

It's a very interesting market environment because it's a complex market environment. The -- this crisis has had an unusual impact on the market because it's stretched out the spectrum of outcomes for companies. So we have companies that are doing incredibly well. That's one of the reasons we've seen our portfolio is doing so well this year is because we had very significant exposure to health care companies, software companies, education, businesses that have done very well through the crisis. And at the same time, you have companies that have been struggling. And so because you have this breadth of situations that translates into, as well, a breadth of very different types of opportunities. So you're seeing more opportunities. We've never had as deep of a pipeline as we do now. It will vary dramatically country by country. It may -- it changes over time as well. So it is -- as I said, it's a complex environment. We quite like complex environments. I mean we do much better in a complex environment than when the market is just uniformly buoyant. In terms of competition, I mean, it's hard to keep it simple because we're operating many funds in many different countries. And so the competitive environment will be very different. If you take strategic equity, for instance, this is a market that we've essentially started. And so there's competition, but we are first mover, and we're clearly benefiting from a position of first mover in what is an emerging part of the market. If you take senior debt partners, for instance, that is a much more standardized market, so that's direct lending, senior debt. But there, we benefit from our size. There are very, very few players of our size in Europe, and size is a huge differentiator. We're able to play in size and underwrite very significant transactions. So we find our pocket of lower competition because of the size and the success of that strategy. So it's a different situation to strategic equity. I could take all of the strategies. Many -- we've mentioned Fund VIII a number of times during the presentation because we've just had a first close. That is a strategy that is very flexible, and that tends to look at very ad hoc type of situations. As a result, it's not faced with huge direct competition because it's going for off-market transactions. So I think you can't -- there's no uniform answer. But I think the bottom line is, provided you are well positioned in a segment of the market, provided you have the origination capability, and often that means having that local presence that we've always insisted on, you can always deploy well and particularly in this complex environment.

And moving on to fundraising. What can you say around the potential sizes of Strategic Equity IV and the European -- Europe VIII that you're raising? And what are the limiting factors for the size of those funds?

So I can't because we do not comment on funds that are currently in fundraising. If you want, you can look back at what we've done in previous vintages, growing from vintage to vintage. And in terms of limiting factor, I think the key limiting factor is us really. I mean it's clearly -- we've been very, very successful at fundraising. There is significant demand from our clients from LPs. And so the question is more for us is how do we estimate the market opportunity at any given point in time? How much do we think we can invest? If you want to put it differently, how much do we think we can invest over a 3- to 5-year period? And that determines how much we think is reasonable to fund raise. You have to be careful. There's always a balance. It's always tempting, particularly when there's so much demand, to raise more. But you have to be careful that you're progressively growing the strategies so that you never negatively impact the performance of these funds. So we're very mindful of that.

And staying on fundraising. Outside of Europe VIII and Strategic Equity, which other strategies do you think have the greatest scope to increase in scale in the medium term if client demand is there?

I mean there are many. And one of -- that is one of the criteria for us launching a new strategy and bringing on new teams. So I mean I could take sale and leaseback. I could take infrastructure equity. I mean as you're probably aware, there are very, very large infrastructure funds out there in the market. So there's no reason why we couldn't reach these levels over time. So there's a very significant potential there. I still think we could do a lot more in direct lending. We are one of the largest players in Europe. And we started to make some reasonable headwind in the U.S., but there's much more we can do there to leverage off the strong competitive position that we have. So we have many significant potential growth trends. And that's by design. That's because the new strategies we launched, one of the criteria is can we scale them?

You mentioned the very buoyant market, do you also see -- are you also seeing significant increase in repayments of deployed capital given that strong market environment?

Yes and no. So that's a good question. Yes, there is some tension because at least for the strong portfolio companies, again, it's not a uniform situation. But for very strong portfolio companies, there are significant capital available, significant debt available and it makes it tempting for sponsors to refinance when they can. However, what's been happening in the market is because valuations are high, the one way to create value for a private equity sponsor is to make acquisitions. It's to make add-ons. And to do that, you need more financing. And so what we tend to see more of is rather than a sudden wave of refinancing, where we tend to see more of sponsors coming back, to see to what extent we can now increase the amount of capital available because they want to grow the business through acquisition in order to drive value creation. So that's more what we tend to see both actually across geographies. It's true in the U.S., in Europe and in Asia as well.

And final one on fundraising, at least for the moment. You mentioned that FY '22 is likely to be a peak in your fundraising cycle. Can you outline which strategies might be driving fundraising in FY '23? And should we interpret your comments to say that FY '23 is likely to be a trough in the fundraising cycle?

It's too early to call. So not necessarily. It's certainly very unlikely to be as high as full year '22. That's just because of the cycle of fundraising of our various funds. But it's too early to call because it very much depends on the timing of fundraise of some large strategies, and that depends on their deployment in the next 12 months or so. So it's -- we don't have that level of visibility. That's one of the reasons when we're giving guidance, we're giving guidance over a several year period because on a year-by-year, one, it's hard to predict; two, it doesn't really make that much sense.

Thank you. Vijay, turning to costs. Could you provide some details on the cost outlook for FY '22? And are there any significant investments required?

Thank you. Thank you for that question. As I mentioned in my presentation, we continue to invest in our platform, both in terms of people, talent and our technology and our systems. And as we continue to grow, we have a number of strategies in the pipeline that we need to continue to support. So we expect to continue to invest in the people as well as our platform in the near term. But I expect our operating margin to still remain above our guidance, above 50%.

And is there any medium-term guidance we should think of? How should we think about the run rate of that cost growth in the coming years?

Now this -- I think I would recommend to continue to sort of stick to the medium-term guidance we have given. We very firmly believe that we will be very meaningfully above that 50% guidance. So that's the one that I would expect people to continue to follow.

And moving on to the balance sheet. You have a credit rating of BBB, BBB-, how do you think about that rating? And are you anticipating it changing in the near future?

So we're rated by S&P and Fitch, and both have put us on a stable outlook. We continue to have dialogues with them in terms of where we are in terms of our liquidity. We expect to have further dialogues after this year's results announcement, and we'll continue to monitor that. But they have continued to put up on a positive outlook over the years.

I have a question here about Greensill and whether we've had any exposure to Greensill in our operations?

No exposure in Greensill, within the firm or even at the portfolio level. Yes.

And then, Benoît, another one, back to you. You mentioned a medium-term target of $100 billion AUM. How much balance sheet would you -- would be required as co-investment to support growth to that level?

Well, I think as we've said before, we think we can keep growing the business very significantly without growing the balance sheet. Because essentially, as you may have seen, the balance sheet has become more and more efficient. We're able to seed more funds and co-invest alongside more funds with essentially the same balance sheet. So this growth potential can be attained with the balance sheet we have today.

Yes. Maybe if I can add to that actually. So currently, our balance sheet is, [ what ], GBP 2.5 billion, which is just above 5% of our AUM. We've said this in the past as well, we expect our balance sheet on an absolute basis to be in that region, anywhere between GBP 2.5 billion to up to GBP 3 billion. But on a relative basis to our AUM, we expect our balance sheet to continue to reduce as we continue to grow our third-party AUM.

Thank you. And there are no more questions. So this concludes today's presentation. Thank you all very much for attending.

Thank you all. Thank you.