ICG plc (ICG) Earnings Call Transcript & Summary

Good morning, and thank you for joining ICG's results for the 12 months ending 31st of March 2024. As a reminder, unless stated otherwise, all financial information discussed today is based on alternative performance measures, which exclude the consolidation of some of our fund structures required under IFRS. Today, I am joined by our CEO and CIO, Benoit Durteste; and our CFO, David Bicarregui, who will give an overview of our performance during the period, and we'll then take questions. The slides along with the accompanying results announcement are available on our website. [Operator Instructions] And at this point, I will hand over to our CEO and CIO, Benoit.

Thank you, Chris. Good morning, everyone. I'm delighted that in our 30th year of being listed, we are reporting such a universally strong set of results today. Strong, not just because of the performance we have recorded for the year, including our second highest ever year of fundraising, management fees of over GBP 0.5 billion and our 10th consecutive year of fund management company PBT growth, but strong also because of the clear trajectory we have for future success. Our continued leadership in direct lending and GP-led secondaries, the final close at $1 billion for LP secondaries, which opens up a potentially huge market for us, our proven ability to attract new clients and to raise funds through new channels and most importantly, our extended track record of delivering high-quality return to clients across multiple strategies and importantly, through cycles. In what remains a challenging environment, we are raising more from more clients across more products than ever before and are demonstrating growth across all key metrics. This long-term confidence is underlined by the revised guidance we are publishing today, which includes increasing our fundraising ambition to at least $55 billion in the coming 4 years, a deceptively ambitious target when you factor in the expected longer duration of funds and the associated increased fee generation in today's environment. But let's start with a near-term reality check. The last 2 years for the alternative asset management industry as a whole have been the most difficult since the GFC and in many ways, more challenging than through the GFC. Buyout activity, a key barometer for corporate private market activity has reduced globally for the second consecutive year. As a result, less capital is coming back to LPs. As a percentage of NAV, distributions are actually close to GFC levels. Many LPs are, therefore, temporarily capacity constrained and that, in turn, puts pressure on fundraising. The fundraising experience of private asset managers, however, very vastly and there is a clear bias towards the largest, most successful managers attracting the lion's share of client capital. This flight to scale and quality has accelerated in recent years as clients have become more liquidity constrained and have sought to consolidate the number of manager relationships they have. ICG is clearly benefiting from this trend as you can see from the right-hand side of this slide, and these numbers and the ICG rankings are global, they are not just for Europe. Importantly, as we will discuss later, scale and relevance in our flagships is helping us to launch new strategies. That's a real proof point of the benefits of the brand equity we have established. I do not expect this market environment to materially change in the short term. It is likely that the broad industry will continue to face headwinds for the next year or so. So what does that mean? The increasing consolidation of manager relationships by LPs means you need to be a manager of choice, a strategic partner to these clients. To that end, the playbook for success for an alternative asset manager is clear, strong investment track record through cycles, a broad waterfront of products to be relevant and a balance sheet as a powerful and necessary enabler of growth. From an investment perspective, specifically, it also places huge value on DPI, be distributed to paid-in capital ratio or returning capital to investors in a timely fashion. Fortunately, for us, we have been very vocal in the past in making disciplined return of capital, a key feature of our investment philosophy. Those of you who have been following us for some time will have heard me for years and repeatedly talk about crystallizing gains and anchoring fund performance. As a consequence, many of our vintages have excellent DPI metrics, which is a real competitive advantage in today's market. So ICG is emerging as one of the winners from this environment. We are continuing to grow our client base in absolute terms. And for full year '24, raised $13 billion, our second highest year ever. Looking ahead and against a slower industry-wide background, I see no reason why ICG should not continue to outperform and to deliver growth. This favorable market position and the results we are reporting today are the result of a deliberate approach to build ICG for the long term. We have developed a strong view of what is required to succeed in private markets across investment performance, product offering, distribution capability and the platform and financial resources needed to successfully execute on our growth strategy, all supported by the people we hire, retain, develop and the culture they embody. The fact that over the last decade, we have grown FMC PBT in every single year is impressive, but it is an output. Where we focus every day is on ensuring we have the right people managing products that are attractive to clients and that as a firm, we have the breadth, size and operational capability to invest that capital and meet our clients' objectives across cycles or in more familiar terms, scaling up, scaling out and investing in our platform. The results we are reporting speak for themselves. Our AUM is approaching $100 billion, and our fee earning AUM at $70 billion is up 11% year-on-year. Fundraising has been strong and more on that later, while deployment and realizations are lower, partly due to timing and cutoffs, but also against the backdrop of subdued market activity generally. Financially, we have grown on every key metric with management fees hitting GBP 0.5 billion for the first time, and David will talk about these later. We are maintaining our progressive dividend policy, announcing a total dividend of GBP 0.79 per share for full year '24, the 14th year of consecutive increase in the ordinary dividend. We want to gain market share in this cycle. And as such, we're continuing to invest in our global platform, opening an office in Toronto, that's focused on client marketing, building our presence in Warsaw, which is our data analytics Center of Excellence and in Pune in India, where we are building out our operations capabilities. So promising across the board from a strategic, operational and financial perspective. If I turn now to fundraising. As I mentioned, we raised $13 billion during the year, driven by our flagship strategies that combined raised $8 million. That's mainly SDP, senior direct lending and strategic equity, that's GP-led secondaries. Our scaling strategies raised a further $5 billion with notable successes for the second vintage of the Europe mid-market and the third vintage of North America Credit Partners, or NACP. In a fundraising world where it said that flat is the new up, the funds we are raising for, SDP, strategic equity, Europe mid-market and NACP are all already larger than their previous vintages and are continuing to raise. Launching first-time funds in this environment was brave, which is why I'm particularly proud that we have secured $1.5 billion of capital for first-time funds. I do not know of any other manager that has had that success this past year. As I said earlier, full year '24 was our second largest year ever for fundraising. And looking at the data, it is clear we are making progress against our stated objectives. 31% came from the U.S. and 11% came from the wealth channel, both areas we have flagged previously as areas of focus. Stepping back, in May 2021, we announced a fundraising target of $40 billion over 4 years. A year later, on the back of an exceptional fundraising year, we accelerated it by 1 year. And today, we are announcing that we have beaten that revised target by 15%, raising $46 billion over the last 3 years. Our breadth of product offering is a clear strength and our products appeal to a wide range of clients globally. Over the last 3 years, more than half the capital we raised came from America and the Asia-Pacific region. Our number of clients has grown by 43% over the period and today stands at over 680. Those new clients contributed 1/3 of our total fundraising. We have spent time over the last couple of years talking to you about how we are balancing increasing our share of wallet of existing clients with winning new clients. And looking at these figures, you can see that we are successfully executing on both fronts. More generally, what this means is that over the last 3 years, we have created incremental value in our platform, both from the fees we have locked in today and in terms of client reach and relevance, and therefore, our ability to raise new and larger funds in the coming years. Our brand equity has increased. I would like to spend a moment on LP Secondaries as I believe this is one of the defining successes of the year. This is a first-time fund in a strategy for which we are admittedly a latecomer. Significant changes in the competitive landscape had led us to conclude that there was a window for us to enter what is a very attractive and quite sizable market. We had a final close that was heavily oversubscribed and reached a hard cap of $1 billion. As you could see from the charts on the left, more than 1/3 of the AUM came from the wealth channel from a number of distributors, both in Europe and the U.S. The client base as a whole is geographically diversified and have the clients by number are new to ICG. So this is a powerful example of brand equity. LP Secondaries is a well-established asset class with a number of scaled players globally. And yet with our brand, the client franchise, balance sheet, along with obviously the right investment team on both sides of the Atlantic, we have raised a great first-time fund. And in doing so, we have opened up a new lever of potentially substantial growth in the coming years. There is no reason why this strategy couldn't reach $10 billion or more per vintage at some point. And so this could be or should be another meaningful growth engine for us for at least the next decade. And indeed, we're already looking to capitalize on this success and scale out in this asset class by launching an institutional quality evergreen product targeting the U.S. wealth market, which we're calling ICG core private equity, and we'll give clients differentiated access to private equity through the secondary market. As we look at our product line today, Core, which I've just mentioned, has appeared on the top left. Both it and Life Sciences will hopefully move across in the coming quarters, and the teams are continuing to work on Infrastructure Asia and Real Estate Asia. Today, we have a number of large globally relevant flagships on the right-hand side and an exciting set of scaling products in the center column that are increasingly relevant to ICG's financial performance and will be a source of meaningful profit growth for many years. Our waterfront of differentiated strategies enable us to be more relevant, meet the demands of our clients at different points in the cycle and provide us with multiple levers of growth for years to come. Looking ahead, we will continue to focus on investment excellence and on our people and our platform. Fundraising for the coming year will see the tail end of fundraising for SDP V, Strategic Equity 5, NACP3 and Infrastructure 2. We also anticipate launching a number of funds, including core private equity and Europe 9, although the timing of first closes for both are uncertain and could be in the next financial year. In the short term, I still believe the market will remain challenging in many respects. Industry-wide, I do not anticipate a rapid and sustained recovery in M&A volumes in 2024. And as a consequence, no meaningful change to the fundraising context. Credit strategies, niche optimistic strategies and more broadly, any strategy providing a liquidity solution at either the portfolio company, GP or LP level will continue to do well. So I think credit, structured financing, GP-led secondaries, LP Secondaries. Longer term, I remain highly confident in the private markets growth evolution and innovation. ICG is 35. And since we listed 30 years ago, we have been growing and investing successfully for the benefit of our clients and our shareholders. From our IPO in 1994 to the 31st of March 2024, we generated a total shareholder return of 85.8x, substantially more than both the FTSE and the S&P 500. Our total shareholder return has also outperformed both those indices in the last 5 and 10 years. Today, we have the market opportunity, combined with the strategic and financial resources that position us for decades of growth to come. And with that, I will pass to David to talk in more detail about our financial results.

Thank you, Benoit, and thank you all for joining us today. We are reporting strong results today, significant growth on all metrics. And before going into the details, I want to highlight a couple of points. Importantly, it's not just in-year growth. Our consistent delivery is demonstrating that we can generate through cycle growth. Fee earning AUM of $70 billion is up 11% compared to last year, 17% annualized over the last 5 years. Management fees are continuing to grow, exceeding GBP 0.5 billion for the first time. Our fund management company generated a PBT of GBP 375 million, up 21% compared to last year and recorded the 10th consecutive year of growth. Our NAV per share grew 15% to GBP 8.01. Our balance sheet has demonstrated long-term earnings power invested alongside our clients. It is also a strategic asset to power future business and growth opportunities. Moving to the top line of our business, fee earning AUM. Over the last 12 months, this has grown by $7 billion or 11%, driven by $6 billion of fundraising for strategies that charge fees on committed capital, predominantly strategic equity and LP Secondaries, almost $8 billion of deployment for strategies that charge fees on invested capital, largely senior debt partners, partially offset by realizations of $6 billion. Over the long term, fee earning AUM has grown at an annualized rate of 17%. And as we look over these 5-year periods also in the subsequent slides, it's worth keeping in mind that this period covers COVID, the war in Ukraine and the rise in interest rates. Fee earning AUM is a key driver of management fees, which this year were GBP 505 million, up 5% compared to last year. As you all know, catch-up fees, which are just a timing difference, can cause an element of lumpiness in reported management fees. And excluding these, the year-on-year growth was 11%. At the end of this financial year, we have $16 billion of AUM not yet earning fees, which have annual management fee potential of GBP 117 million were they to be deployed, all other things equal. The fact that we have grown management fees through a slower market impacting fundraising, deployment and realization pace underlines the value of this management fee stream. The pace of growth may slow down, but because investments are being realized less quickly, we are extending the duration of our management fees. This is very visible and not dependent on our ability to raise or deploy capital. One way of thinking about that dynamic is that our earnings quality goes up in a slower environment. The visibility of management fees and the sticky recurring nature is very powerful, both in delivering growth and in helping us manage the business and invest for the long term. Now turning to performance fees, which are notable, but relatively small proportion of our fee income. The notable year-on-year increase is largely due to the inaugural recognition of Europe VII, along with the performance fee in alternative credit that is tested every 3 years. Looking ahead, we are reiterating our guidance that over the long term, performance fees will be roughly 10% to 15% of our fee income. Turning now to the earnings of our balance sheet. Net investment returns this year were 13% or GBP 379 million, and PBT was GBP 223 million. The NIR was strong across our asset classes and included GBP 180 million benefit from 3 investments that were originally intended to seed investments that will now be sold to third parties. This included the Life Sciences investment in Amolyt that was recently acquired by AstraZeneca. From a cash perspective, we invested over GBP 320 million alongside clients. We also made seed investments totaling GBP 312 million, in particular for real assets, which included our infrastructure Asia team's partnership with an Indian renewables platform, AMP India. In aggregate, the balance sheet investment portfolio generated GBP 139 million of net cash proceeds. We experienced realizations, both from our investments alongside funds as well as from our seed investments. This latter is particularly important as our ability to recycle balance sheet capacity into new seed opportunities is an important component of our business model. As a general observation, we are generating attractive earnings and cash flow from our balance sheet as well as benefiting from the wider strategic relevance of the asset base I'll discuss later. So as we scale up and scale out, we are generating substantial operating leverage. Our FMC revenue has grown at 19% on an annualized basis over the last 5 years, while FMC expenses have grown at 12%. This translates into an annualized growth rate since FY '19 for our FMC PBT of 21%. Or put another way, FMC PBT has grown by more than 2.5x over the last 5 years. Today, our FMC PBT margin is 57% compared to 52% in FY '19. So another way to think about the growth in FMC PBT is at about 85% of it has come from our top line growth and the remaining 15% has come from margin expansion. In terms of managing our business, that clearly underlines the importance of investing appropriately to drive revenue. We need to have the right strategies to be able to raise and manage the capital and have the systems in place to effectively serve our clients. We have been making those investments, largely in our people over this 5-year period, during which our head count has almost doubled. In FY '24, FMC operating expenses increased by 21%, and our total operating expenses increased by 14%. We will continue to invest thoughtfully and strategically. For FY '25, I would expect the rate of growth in our operating expenses to be lower than we've experienced during the last 12 months. We are in the fortunate position of being able to grow our top line, invest in our platform and deliver increased profitability. We have delivered on all those things in the last 5 years, and we are also increasing our margin guidance to be in excess of 52%. Today, we are a global firm operating from 19 locations around the world. Our global footprint reflects our global client base and our increasingly global product set. It is also reflected in our financial profile with just over half of our fee income in euros and another 1/3 in dollars. As well as our recurring and visible fee income, our growth ambition is supported by a valuable capital base. We have GBP 4.2 billion gross balance sheet and an NAV per share of GBP 8.01. It's diversified with significant liquidity and well capitalized. This is a powerful asset, and we think of it as a source of significant future earnings potential. That may come from co-investing alongside our clients to support fundraisers and simultaneously benefiting from fund level returns. It may come through seeding new strategies which will generate incremental management fees as they scale. And looking to the years ahead, it provides us with significant flexibility to ensure our business composition is nimble and able to capture growth opportunities. LP Secondaries is a good example of how we efficiently use our balance sheet to scale the business and generate fee income. You'll recall we had a similar example for the real estate equity business in our shareholder seminar in February. For LP Secondaries, in aggregate, we have deployed GBP 144 million in seed investments with the team building a track record and also reducing the blind pool risk for clients in a first-time fund. A large amount was syndicated to LPs, building momentum for fundraising and recycling balance sheet capital. And we transferred a substantial portion to the fund, leaving the PLC with a residual exposure to those seed investments of about GBP 5 million of the initial GBP 144 million. Without this, we would not be able to get the LP Secondaries business off the ground in this market, and it underlines how the balance sheet drives growth in a capital-efficient way. As I said earlier, we are pleased to report growth across all key metrics, extending our track record of profitable growth, but it also is worth reminding that we're in a long-term business. Looking at the 5-year growth, you can clearly see the value created from scaling up, scaling out and investing in our platform. That long-term confidence is reflected in our updated guidance today. We now expect to raise at least $55 billion over the next 4 years, assuming that the fundraised environment normalizes in FY '26. As I referenced earlier, in a slower environment, funds are being deployed over a longer period. And therefore, as Benoit says, is an ambitious target. We are confident that our FMC operating margin is now structurally in excess of 52%, and our performance fee and NIR guidance remains consistent. We've achieved a lot over the last 30 years and are well positioned to keep being among the winners in the years to come. With that, I'll turn it to Chris, and we look forward to taking your questions.

Thank you very much, Benoit, David. [Operator Instructions] We have a couple of audio questions already. I'll start with Hubert Lam from Bank of America.

I've got 3 of them. Firstly, on the $55 billion target over the next 4 years, how should we think about the timing or the trajectory of it? I know you're saying that fundraising is challenging near term. So should we expect FY '25 to be lower than FY '24 of $13 billion? That's the first question. The second question is on the EBITDA margin. I know you're saying that you expected to be higher than 52%. You got 57% last year. So do you expect it to come down near term or I also know that you talked about the cost growth, and you said it's going to be lower than the 21%. But how should we think about it more specifically for this year in terms of mid-teens or high-teens growth for costs? And lastly, if you can talk also about the credit quality or the default environment on your credit and private debt portfolios, any changes or deterioration in credit quality, particularly in Europe?

Benoit, do you want to take the $55 billion in the credit quality and then David, on the margin.

Will do. So 2 aspects to your question on the fundraising guidance. Over the 4-year period, would you expect increasing fundraising numbers? Yes, if only because we're at a low point in the cycle in the fundraising context. So it would only be natural to see the market normalize. I'm not sure what normalized means or what the new normal would be, but certainly improve from where it is today, and therefore, see a growth path over that 4-year period. Now narrowing it to the 1-year outlook, that's much more difficult, as you know, because it could be pretty lumpy. I'll just give you one example. I've mentioned that we will be launching Europe 9, which is one of our flagship funds, as you know, during the course of this year. However, the timing of the first close is highly uncertain. We just don't know. It's partially dependent on when we finish investing the previous vintage. So there are elements of unknown. It could very well be at the very back end of this year. It could also be in the following year and suddenly that changes, your fundraising number for the year. It doesn't really change much in terms of fee generation, but just in terms of the cutoff, it would yield a very different result on the fundraising amount. So that's the way I would -- that's the way I position it. But I don't expect that we suddenly see a drop in the fundraising number this year, but you can easily have several billions that could flip from one fiscal year to another. On the -- your question on the default environment. It's -- I mean there's a reason that people have been saying that this is a very attractive time for credit strategies. It's not just because interest rates are higher and you're naturally just generating higher returns. It's also because we're not experiencing a severe recession, unlike if you think back GFC or even previous cycles. And as a result, portfolio company performance across the board, by the way, this is not just ICG. We could see this across the board. Petroleum company performance remains pretty good. I mean on average, there's still double-digit EBITDA growth. The real question in the market is more around the evolution of equity valuations. But the businesses are, by and large, doing well, particularly those businesses that the buyout industry tends to be exposed to which are the less cyclical, more cash flow-generative businesses. And so as a result, you're not seeing much default at all. And I don't really expect to see much of it, which is why I tell our clients that this period is not really a test for credit strategies because everything is going in the right direction for credit strategies. There's no reason why you should see much in the way of default, and you're going to be carried up by increased interest rates. So that's the environment for credit strategies. Do you want to take the...

Yes. An operating margin Hubert, I mean, a couple of things I'd say there. Firstly, our prior guidance was 50%, and we've increased that to 52% in excess of 52%, actually. I think that tells you that we now feel very confident that we've got a structural underpinning to that 52%, i.e., management fees. In my remarks, I called out the consistent and recurring nature of management fees, which drives us to that conclusion. Of course, there can be upside to the extent performance fees and other factors helps the upside. But I think at this point, I regard it as in excess of 52% underpinning informed by the management fee stream. On expenses directly, you observed, we were at 21% FMC expenses over the 1 year. If you look at our 5 year, which we put up on the slide, it's more like 12%. And so I'd expect in the period ahead, we be bringing our rate of growth down closer to where our 5-year average has been. And that reflects the fact that we've made a substantial investment in the platform already in the form of people, many of those people joined in FY '23 and FY '24. And so that cost base is in place, and we don't feel the need to materially increase expenses beyond the numbers I just gave you.

Can I add perhaps that we've made a strategic conscious decision to be on the front foot during this part of the cycle, and therefore, invest in the platform, invest in our teams, invest in our marketing teams, in particular. Because I am convinced and we're already seeing it, that was part of the presentation today that in this more difficult period, you're seeing greater bifurcation between those managers who are coming out on top and others. And so we -- clearly, we want to take advantage of this period to create further distance with some of our competitors.

We have some questions now from Nicholas Herman at Citi.

Yes. Also 3, please. On fundraising actually, there's a couple here. Could you please just talk about the outlook for credit? How much you expect that to contribute to fundraising over the next 4 years? And then a clarification as well. Thank you for providing the reconciliation fee paying AUM and AUM in the release. Just sort of [indiscernible], how much of your $46 billion raised over the last 3 years what’s the exempt, was there any? And I guess would you expect that to also comprising the $55 billion? And then finally on the fundraising. It looks like you're embedding approximately 20% upsizing between vintages. Just some color here, what kind of environment is your guidance basically assuming or embedding in order to reach these kinds of vintage. Just if you could provide some color around that, that would be very helpful. And then the other question [indiscernible] also on deployment, I appreciate that some of the -- it's a bit uncertain. But if I look at the deployment of some of your flagship strategies, European corporate Asia IV, deployment is pretty much flat on the year. Just how are you thinking about the investment period duration for these 2 strategies as well as Strategic Equity V and SDP V? So I think that was IV, not III.

There's quite a lot in there. So first of all, and I repeat. So Benoit, do you just want to talk briefly about the fundraising outlook for credit? I guess, both the credit asset class sellers and also the private debt asset class and ACP and direct lending?

Yes. I mean I mean, as we know, the environment has been quite favorable. I think this is -- it's not just temporary. I think it's a -- there's been a shift in the market. Private markets were generally not exposed or very little exposed to credit. And so there's been a significant shift that's not going away anytime soon. So the -- whether it's SDP, whether it's CLOs, whether it's NACP in the U.S. I mean we're just assuming that they are going to continue to raise subsequent vintages. The growth between vintages, you could take several views. It depends on market environment. It depends on many things. For these strategies, it's -- I mean, of course, it matters for the fundraising number, the headline number. But in the scheme of things, it doesn't matter all that much because these are fees on invested. What really matters is you have enough capacity to deploy and then how quickly you are deploying, that's what's generating your fee stream. So unlike strategies with fees on committed, where the size of the fund matters. In this case, it's more the velocity of deployment that really drives the -- really the profit growth. I think there was a question about a 20% upside between funds. I'm not sure with that --

Yes. So more broad than the question was around. We talked about a normalized fundraising from FY '26. Can you give us some more color around what you mean by that?

Well, I mean, listen, I mean, just I think ICG's numbers, because we have -- we're fortunate that we have a number of strategies in the market. We've diversified a lot in past years, and so we've curly benefited from that. But that's somewhat masking the -- how challenging the fundraising market is for the broader market. And so as I mentioned during the presentation, at least consultants or advisers are now saying that for strong teams, flat is the new up, if you just managed to raise the same amount as you did in previous vintages, you're doing pretty well. So it so happens that we've done better than that, but that's the experience in the market. That's not normal, right? I mean that is an abnormal situation. So when we're talking about the market generally normalizing, I would expect an environment where you're seeing growth again. You could even see a scenario, but I just don't want to paint too rosy a picture because I don't have a crystal ball, but you could absolutely see a scenario where the lack of capacity that LPs are struggling with today reverses at some point. Because what will happen is there is a lack of deal flow, particularly in private equity right now. And that's why LPs are capacity constrained. There's not enough capital coming back to them. But that will change at some point. And it -- there's just a backlog of transaction and of capital that is going to make its way back to LPs potentially quite quickly. When that happens, LPs are going to find themselves in the opposite situation where they're going to be struggling to deploy. So you could even see a scenario where there is a period, and I just can't tell you when that will be. But you could quite see where there's going to be a period where there is going to be a rush to deploy by LPs. And so you could almost have a period of time where there is disproportionate deployment and then it normalizes. So that's the -- if I try to gauge the fundraising environment, and that would flow to us at least in some form of fashion. You have to overlay on that our own fundraising cycle and which funds we have in market. But for sure, that overall environment would have an impact on us. Putting it differently, we're not immune to the general market environment. So yes, our numbers this year are pretty good. had the environment been more normal, if I can use that term or more in line with the historical levels. We would have raised even more, I mean, for sure. So that's -- I think that's a different way of putting it, which kind of ties into the previous question about do we see in that 4-year cycle, do we see almost a natural growth in the fundraising amount? Yes, just because of where the market is and the fact that at some point, it will normalize.

And there was other question on deployments. And if you've got any commentary on the deployments of maybe year SDP and --

Yes. So there are a number of factors there. So I mean, you're right to point out that the numbers for some of the funds, not all, but some of the funds, Asia, Europe, last year, the deployment was relatively low. But it's not -- I can't identify a trend in that because a lot of it is lumpy. And if I look at -- for instance, if I look at Europe, there are actually quite a few deals that were signed last year and that just happened to close after the financial year-end. So you can't really draw much -- which is why I could say with strong confidence that we're going to be going out raising Europe 9 is because I could see the deployment and the fact that we'll need another vintage in the not-too-distant future. So I wouldn't draw -- I wouldn't really draw conclusions from that. SDP is a bit different. It's a different dynamic because SDP, whereas Europe and Asia are not -- they're not directly correlated to the buyout market because a lot of the deals -- actually most of the deals, these strategies invest in are non-vanilla. They're not market deals. They tend to be backing family-owned or founder-owned businesses. So they have their own dynamics. SDP is directly correlated to the buyout activity because it mostly finances sponsored deals have equity sponsored deals. And what we've been observing there, but that's been the case for 2 years now, and it's continuing now and I don't see it changing in the near term is there isn't much primary deal flow. Because there is not much M&A, not many private equity transactions being closed. And so there isn't much primary activity. However, there's quite a lot of activity that is linked to the existing portfolio. So a lot of additional financing add-ons as private equity sponsors as they cannot find windows to exit their deals, they are not being idle. They're obviously trying to manage -- increase value in their portfolios. And so they're doing more work on their portfolio companies, which, in many instances, require more financing. And so that's what's been a key generator of the deployment for SDP, and I don't see that changing very much. Again, until you see the primary market reopening. I don't have a view as to when that is. I don't think it's going to be in the near term. I just don't see the catalyst for that. When it does, you could see a raft of transactions for SDP. But again, I wouldn't count on this for this year.

And before we go to the AUM question, we've actually had a question online which links to SDP question. So we're hearing a lot about increased leverage loan market activity, particularly in the U.S. since the start of 2024. Do you have any comments around how that's impacting the net deployments in SDP for the coming quarters?