Onex Corporation (ONEX) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Onex' 2021 Investor Day. I'm Jill Homenuk, Managing Director, Shareholder Relations and Communications. Thank you for joining us for today's virtual event. Before we start, I must first draw your attention to the usual disclaimer and cautionary factors relating to any forward-looking statements discussed in the presentation, whether as part of remarks or responses to questions and relating to any private offerings of securities. Actual results could differ materially from the conclusions, forecasts and projections discussed in the presentation and certain material factors and assumptions were applied in drawing conclusions. I also remind everyone that all references to dollar amounts are in U.S. unless otherwise stated. We have a full agenda today. Our Founder and CEO, Gerry Schwartz will begin our formal session before turning it over to our President and Head of Onex Partners, Bobby Le Blanc. Chris Govan, our CFO, will then provide a financial outlook followed by updates covering all of our businesses. There will be a 10-minute break approximately halfway through the program. At the conclusion of the presentations, we'll have a Q&A session led by Bobby and Chris, where we'll answer questions from prequalified analysts and shareholders. As a reminder, please e-mail your questions directly to [email protected]. With that, I'll now turn things over to Gerry.

Thanks, Jill, and good morning, everybody. Today's Investor Day is an important occasion for us. It allows us to speak directly with you, our shareholders, about the progress we're making across all our businesses and the strategy that will drive our growth. As you listen to each of our presentations today, we hope that you will feel equally excited as we do about what we've built and about what lies ahead. Indeed, growth has been a constant thread throughout our history, and I am proud that at the same time, we've maintained the principles on which we founded Onex in 1984. Among those principles was a commitment to finding great companies that we could grow over time. In going public in 1987, it seems like long time ago, we asked shareholders to join us in that journey. Similarly, when we started raising third-party capital in 1999, we knew clients would want to share in our ability to invest responsibly, generate performance and above all to create value. Of course, the markets in which we operate have grown along with us, and offer many attractive alternatives. And so we've diversified our business into new growth areas, and that includes private credit and private wealth. By remaining true to our principles and yet adapting to the new realities, I believe we have a clear path for continued growth. Today, Onex remains successful, by being a good investor and asset manager. Investing responsibly remains a core principle whether we're investing our own capital, shareholders or our clients' capital. We have the right structures and talent in place to accelerate our progress in ESG, and that includes diversity and inclusion. Though these considerations have always been inherent in our approach to responsible investing, we're now better able to seize these opportunities. As we look ahead to this next phase in our evolution, I'm confident, absolutely confident in the strategy you'll hear about today and in the people responsible for delivering it. We've invested significantly in building the right teams guided by highly experienced industry leaders and united under our One Onex vision. With my appointment of Bobby as President with wider ranging responsibilities and the support of the senior leaders across Onex, we have the expertise, focus and commitment above all the commitment to succeed. Our strategy reflects not only the value we see, but the growth we're committed to generating. I'll close now by noting another of our foundational principles, that being our alignment with stakeholders, including our clients and you, our shareholders. This has helped us to create and enjoy long-term relationships that remain the bedrock of our success. As many of you know, our team has significantly invested in Onex. All of us believe strongly in our investment and feel accountable for driving increased value for our shareholders. We will continue to work hard to keep earning your trust and support. I hope you enjoy today's sessions, and I'd now like to turn the day over to Bobby.

Thank you, Gerry, and good morning, everyone. Thanks for being with us today. As Gerry noted, we've been looking forward to this Investor Day as it gives us an opportunity to share the strong progress Onex is making. We've invested significantly in our businesses and are excited by the opportunities we see across our platforms to grow our AUM, increase earnings and compound NAV. Today, you'll meet several of our senior leaders. Along with their teams, they'll be delivering on the plans we'll be presenting today. We last met on Investor Day in October 2019. A lot has happened since then, not just in the world around us, but within Onex as well. The Onex you'll hear about today is a faster-growing organization defined by our long-term track record and values. Onex has been successfully investing capital for over 37 years. We'd like to refer to ourselves as investors, first and foremost. Being a good investor drives performance returns, which attracts capital. It's as simple as that. Since our founding, we sustained an entrepreneurial culture that's been guided by Gerry's vision. That spirit remains evident as we continue to evolve through our One Onex approach. This is a new way of working that's helping us compete in an ever-changing environment by fostering better collaboration and knowledge sharing across our businesses. I'm proud of what we've been building. But we also recognize there is more work for us to do. Our shares continue to trade at a significant discount to NAV with no value for the fee-related earnings potential of our asset manager or than $19 carry dollars at work attributable to each Onex share. This reality has prompted us to rethink our plans going forward. Today, I'm pleased to begin to lay out our strategy for how we'll grow our business and increase shareholder value. With the plans that we will present today, we expect to double our fee-generating AUM by 2026, which will substantially increase our fee-related earnings. Before getting into those details, I'll first recap what we've achieved since we last met. Look, no one can deny that the pandemic had a major impact on many businesses over the last 18 months. Throughout that time, our team did an excellent job, not just in managing and mitigating the impact, but also in strengthening our foundation and developing new strategies for growth. Having simplified our leadership structure, we've created more centralized oversight and discipline around resource allocations and P&L expectations. We've added talent across the organization and investment, operation and corporate roles, enhancing our ability to support business line growth. On the PE side, recent Onex Partners investment returns are proof that our strategic review of 2 years ago is paying off, particularly our emphasis on vertical specialization, thematic sourcing and operational expertise. At the end of 2018, Onex Partners IV had a gross IRR of only 2%. As of Q3, it had a gross IRR of 15% and had accrued significant carried interest with $165 million directly attributable to shareholders. As for Onex Partners V, it's off to a strong start with a gross IRR of 28% to date. ONCAP also continues to perform well with consolidated gross returns of 19% year-to-date. ONCAP's companies are well positioned. And I'm pleased to remind you that ONCAP has never had a capital impairment in its 22-year history. Recognizing the strong investment returns to track capital, we feel confident as we head into fundraising, for both ONCAP and Onex Partners next year. Turning to Onex Credit. We strengthened and diversified our credit offering with an emphasis on growing third-party fee-related earnings, or FRE. The profitability of our CLO business has enabled us to invest in a team with capabilities across the credit investing spectrum. In acquiring Onex Falcon, we added a tested, scalable platform with products attractive to build institutional and high net worth clients. We've also expanded our team to attract and grow client capital. Our acquisition of Gluskin in 2019 added a direct sales channel for Canadian high net worth clients. We believe that do as an appetite within this group for high-quality alternative assets. That's been proven with over CAD 1.4 billion in Gluskin client assets invested in Onex products today. We firmly believe that this is a differentiated offering within the Canadian market, which will continue to attract client capital, supported by Onex's strong brand and our ability to service these clients holistically. Speaking of growing client capital, our LPs have been a key driver of our success since we started raising third-party capital more than 2 decades ago. And while our strong track record has helped drive those relationships, we know that we need to expand our relationships to support our growth plans. To that point, we've bolstered our fundraising team by adding senior-level product and geographical expertise. With a team of 16 people, we have meaningfully expanded our coverage in Canada and the U.S. and now have dedicated investor coverage in Europe. We've set ourselves up to achieve growth. Our focus is now on execution. In private equity, as I mentioned earlier, our most immediate priority is on continuing to drive fund performance and launching fundraising next year for ONCAP V and Onex Partners VI. We're planning to increase the ratio of fee-generating AUM to Onex capital across our 2 private equity businesses. I will still be the largest investor of both of these funds, increasing the amount of fee-generating AUM will enhance future profitability. At Onex Credit, we plan to significantly increase our fee-related earnings by doubling fee-generating AUM by 2026. Fee-related earnings growth will accelerate throughout the period, given that in most of our credit products fees are not earned until the capital is invested. Across all of our businesses, we are looking for new ways to grow, both organically and inorganically. This could be within our core private equity and credit businesses or in new areas that leverage and expand on traditional Onex trends. We will share more details about these initiatives as they're rolled out. Turning to ESG. Onex has always had a commitment to responsible investing. Over the past year, we've accelerated our response to growing environmental and social issues. We recently recruited our first Head of ESG, Judy Cotte, who you'll hear from later in our program. ESG considerations are already embedded in the investment processes across the firm. But we believe that ESG can be additive to our returns when more thoughtfully integrated with our business units and operating companies. On diversity and inclusion, many of you have heard me talk about our expanded program. Not only do we believe it's the right thing to do, but it will also improve business outcomes. We're in the process of establishing targets for diversity representation across Onex and intend to report back to you on our progress. I'd now like to summarize what I believe are today's key takeaways. We plan to double Onex' fee generating AUM by 2026 from its current $32 billion. Onex Credit will continue to execute on this growth plan. We're also committed to growing the third-party AUM in our private equity business, thereby reducing its capital intensity and giving us more opportunity to earn carried interest. More AUM and better margins will lead to increasing fee-related earnings. We recognize the value that shareholders put on these earnings. We're committed to growing FRE and being transparent with you about our expectations and progress starting with Chris' presentation today, which will provide more details on our plans. We're confident we can deliver on all of this within our existing investment platforms. Any additional growth initiatives would be incremental to what we're presenting today. As Gerry noted, alignment with our shareholders, it's in our DNA, and we feel a strong accountability to grow shareholder value. Of course, we think you already own a great business at a very attractive valuation. As I alluded to earlier, we believe our momentum has not yet been fully recognized by the market. With that said, we know it's our job to ensure the market values what we consider to be Onex true potential. We're executing on a plan to deliver an exciting growth story for shareholders built on a scalable platform with an increasingly profitable asset manager, growing AUM and continued NAV growth. As you'll hear throughout the morning, we believe we have the people, strategy and culture in place to drive shareholder value. I hope you enjoy today's agenda. I'll be back later for Q&A. Thank you very much for your time.

Thanks, Bobby, and good morning, everyone. I'll spend my time focused on how we'll generate shareholder value over the next 5 years. To frame the discussion, we think about growing shareholder value in 3 ways: first, split by our 2 segments, investing in asset management and then further splitting asset management between our recurring stream of management fees and carried interest. Before I look forward to the next 5 years, let's look at where we are today. First, we've compounded investing capital per share at more than 16% since our 2019 Investor Day, bringing Onex's investing capital per share or hard NAV to just over $80 at the end of Q2. We're pleased with these results, particularly the strong performance at Onex Partners coming out of the strategic review spearheaded by Bobby. Onex's private equity portfolio, which represents a substantial majority of our investing capital, generated a 25% gross IRR over the last 2 years. You'll hear more about our private equity platform and its prospects for growth and continued strong returns from several of my partners later this morning. Looking at our recurring asset management earnings, we ended Q2 with run rate third-party management fees of $271 million, the byproduct of almost $32 billion of fee-generating AUM. Fee-generating AUM has grown at a 16% CAGR over the last 5 years. And importantly, we've made significant strategic investments that are not yet reflected in this run rate. These investments include the build-out of an Onex Credit team focused on enabling the launch of several new strategies, in particular, structured and opportunistic credit and the acquisition of Onex Falcon, a leading mezzanine platform that brought with it the talent, track record and originators to ramp up our direct lending strategy. And looking at the final component, we've made terrific progress building value through carried interest over the last 2 years. The turnaround in OP IV's performance and the very strong start at OP V have driven Onex's share of unrealized carried interest in our PE funds to $211 million as of Q2. More importantly, shareholders also benefit from a very meaningful go-forward carry opportunity. With about $23 billion of third-party capital subject to carry and Onex sharing in about 6% to 10% of gains on that capital, each Onex share stands to benefit from about $19 at work. In other words, given Onex's mix of AUM today, each Onex share includes the opportunity to benefit from the go-forward gains on $19 of LP capital, in addition to the returns on the $80 of underlying hard NAV. These dollars at work are extremely valuable, but they don't appear anywhere on our balance sheet. They will meaningfully amplify shareholder returns in the coming years, assuming we meet the relevant return thresholds. All of this provides Onex with a strong foundation on which to continue to build. Looking forward, we expect our asset management business to become a larger piece of the shareholder value equation. In addition to executing on our growth plans at PE and credit, we know it's our job to provide clear and transparent KPIs, so all of you can measure our progress. So I'll spend the rest of my time with you doing just that. First, by introducing metrics to measure our progress, in particular, fee-related earnings, or FRE and distributable earnings. And then by laying out the growth we expect in fee-related earnings over the next 5 years based solely on our current platforms and their in-flight initiatives. Let's get started with fee-related earnings. I suspect many of you follow and our shareholders and other alternative asset managers. So you'll be familiar with FRE. But in short, it's the commonly accepted measure of the profitability associated with our recurring revenue streams. We'll be providing this new measure of our Asset Management segment going forward. So I want to call out a few details relevant to computing Onex' FRE. FRE will include all of the typical management and advisory fees associated with our fee-generating AUM. It will also include performance fees from perpetual client capital, which today mainly sits in open-ended funds associated with Gluskin Sheff. But FRE will not include any pro forma fees associated with Onex's capital. It will only include the fees earned on third-party AUM. This presentation aligns with the underlying agreements we've negotiated with our LPs and more importantly, what we've heard in our discussions with shareholders. You want to know how recurring third-party fees translate into profitability. So that's what we'll measure and report. FRE will also exclude realization-driven carried interest, which today is primarily found in our PE business, but will increasingly come from our credit strategies as well. Although it won't be part of fee-related earnings, carried interest is a meaningful contributor to shareholder value and I'll come back to that later in my presentation. Measured this way, fee-related earnings is aligned with our plans to build a sustainably profitable asset management platform that delivers significant shareholder value. FRE provides a transparent KPI for the business moving forward and will allow for easy comparison to our peers across the alternative asset space. To better real estate fee-related earnings, let's take a look at our 2021 first half results on that basis. I'll break down our H1 2021 FRE into 3 pieces: PE, credit, and lastly, the direct costs associated with investing Onex's capital and maintaining the public company. Our PE platform contributed $4 million in the first 6 months of 2021. As discussed, this contribution excludes $128 million of carried interest accrued from our PE funds year-to-date. It's also important to remember that PE's contribution is burdened with 100% of the costs associated with managing the fund platforms despite the fact that Onex, which represents about 30% of fund commitments, contributes no revenue. As Bobby mentioned, to increase PE's contribution to FRE going forward, we need to grow our PE platforms and improve the ratio of fee-generating AUM to Onex commitments. At Credit, which now includes the results of what we previously described as Wealth Management, we saw a $7 million first half contribution to FRE. As discussed in our quarterly calls over the last year, this contribution is at a trough. As a result of the substantial OpEx we've invested in advance of new fee-generating AUM and associated management fees we expect to come online over the next 18 months. This final section of the schedule reflects the direct costs associated with investing Onex's capital and running the public company. Although these costs are not directly related to our fee revenue, we include them to provide a fully burdened bottom line measure of profitability. After deducting these costs, Onex had an FRE loss of $12 million in the first half of 2021. We are committed to building our fee-related earnings through growth, strategic capital allocation and margin improvement across each of our platforms. I'll take you through the 5-year outlook shortly. But first, I want to introduce a second new KPI, distributable earnings. Consistent with our peers, we will also be reporting distributable earnings, which starts with FRE and then adds both realized carried interest and the realized gains on Onex's capital. Distributable earnings is a useful measure of the cash flows and capital available to build value. In some ways, I think it illustrates the value of our permanent capital, which provides us with the resources and flexibility to reinvest in the business, whether organically like we've done at Onex Credit or through strategic acquisitions like Gluskin Sheff and Falcon, or strategically and opportunistically invest capital through our funds in OP originated co-investments and in proprietary opportunities like RSG, or as we've done regularly, return capital to shareholders through our active stock buyback program. And no doubt what we'll end up doing is a combination of all 3. As you can see on this slide, Onex generated $163 million of distributable earnings in H1 '21, a meaningful amount of capital available to support our strategy and drive growth. Now as I think about how to generate and build fee-related earnings, there are a few key and obvious drivers. The slide you see here, in my mind, is a useful dashboard for our current capacity to generate FRE. As you can see, given the current state of the dashboard, our business is generating a small loss at the FRE line. To grow fee-related earnings, we need to focus on 4 fundamental building blocks: one, grow fee-generating AUM; two, maintain attractive management fee rates such that the growth in AUM translates into growth in revenue; three, increase the ratio of fee-generating AUM to Onex Capital to allow for margin expansion on a fully burdened basis; and four, manage our cost base and benefit from the considerable operating leverage in our businesses so that revenue growth falls to the bottom line. Over the next handful of slides, I'm going to drill down on how we expect to change the FRE generating capacity of our business over the next 5 years. And remember, this outlook is based solely on our current platforms and their in-flight initiatives. But first, let's take a look at what we hope this dashboard is going to look like in 5 years' time. We expect to more than double our fee-generating AUM to approximately $65 billion. And with our weighted average fee rate remaining close to constant, our run rate fee-related revenue grows at a 15% CAGR to about $550 million. Although our ratio of fee-generating AUM to Onex Capital improves only slightly in the outlook, we expect the business to benefit from significant underlying operating leverage such that about 50% of the revenue growth falls to the bottom line. All of that leads to run rate FRE of $110 million to $130 million in 2026, up from a small loss this year. I expect I'll come back to this dashboard frequently over the coming years as we measure our progress. We're committed to getting value for our shareholders as we execute on this plan, and we know that requires transparent reporting on our progress along the way. I'll now spend a little bit of time on some of the details underpinning the outlook. First and foremost, to achieve the outlook, we need to raise significant amounts of new fee-generating AUM. In private equity, our outlook reflects the continuing build-out of our Onex Partners and ONCAP platforms with increases in fund size reflecting their performance and origination capabilities, combined with our increasing reach with institutional and high net worth investors. The outlook includes the fundraising cycles for each of OP and ONCAP next year and another fundraising cycle for Onex Partners in 2026. On this basis, we expect the run rate fees from our PE platform to just about double by the end of 2026. What this outlook does not include are several levers to grow PE in adjacent strategies and geographies. Anything we action in that regard would serve as upside to our outlook. On the credit side, a more than doubling of fee-generating AUM and revenue reflect the execution of fundraising initiatives already underway and the continued growth of our CLO and public strategies. With an experienced and deep team in place to support a full complement of credit strategies, we have a clear path forward to achieve this outlook. I'm going to leave it to Jason to provide more context and details around our plans for credit later in the agenda. The last piece of the puzzle I want to touch on is margin improvement, ensuring that our revenue growth drives disproportionate growth in fee-related earnings. We expect our asset management platforms to benefit from significant intrinsic operating leverage as we scale. Combining this with a slightly improved ratio of fee-generating AUM to Onex Capital, we see a path to a 25% to 30% contribution margin from our asset management business. This would result in about $150 million to $170 million of run rate contribution in 2026, up from about $14 million today. Comparing Onex's margins to its publicly traded peers will not be straightforward. In particular, our significantly higher mix of proprietary capital drives a lower fully burdened FRE margin. Our much larger peers tend to have FRE margins in the 35% to 50% range which provides comfort around the reasonableness of our outlook, where 50% of incremental fees fall to the bottom line. As we grow, we'll adjust our goals but we're comfortable the interim target of 25% to 30% contribution margins is achievable. After including Onex's direct investing and public company costs, we're executing on a plan to generate between $110 million and $130 million of run rate fee-related earnings in 2026. Moreover, there are several additional levers for growth that are not included in this outlook, an expansion of our PE platform into adjacent strategies and geographies, additional products and platforms within credit and buying or building new alternative asset management platforms. But even without these upsides, our managers should contribute meaningful value through its fee-related earnings. As you'd all know, analysts covering our peers tend to apply FRE multiples that range from 20 to 30 times. At the midpoint of our outlook, that translates into value creation of somewhere between $2 billion and $4 billion or about $25 to $40 per share. Now I don't do that math to argue over multiples. As far as I'm concerned, for now we can use a barometer rather than a thermometer. The point here is that we're on a path to drive meaningful shareholder value over and above the compounding of our $80-plus of hard NAV per share. Finally, let's turn our attention to the outlook for carried interest, the third component in the shareholder value equation. The timing and amount of realized carry is difficult to predict and depends on many variables, but most critical is putting capital to work in attractive opportunities and executing on our investment thesis. We obviously plan to hit threshold returns and earn carry whenever we raise capital. But more importantly, we have a track record of doing it, with OP IV now fully through the catch-up zone, we're 7 for 7 with our mature PE funds generating full carried interest for Onex. Overlaying our target go-forward returns and hold periods to the outlook, we expect Onex to realize carried interest in the $700 million to $800 million range over the next 5 years or an average of about $150 million per year. Moreover, we project about $600 million of accrued but unrealized carry at the end of 2026. Importantly, the vast majority of that carry would come from the existing AUM in our PE platform. So what's largely missing from this outlook is the carry potential associated with the capital we expect to raise and put to work over the next 5 years, particularly at credit. You'll recall earlier in the presentation, I described the current carry opportunity for shareholders as being represented by about $19 at work per share. The basis for that calculation is third-party AUM subject to carry, which is a majority of our fee-generating AUM, including for the new strategies at Onex Credit. As such, over the next 5 years, our outlook has total AUM subject to carry growing to about $50 billion. To compute dollars at work, you need to apply the carry points allocated to Onex from each strategy. On a weighted average basis, we expect that to be about 7.5 points of carry to Onex across the product shelf. On $50 billion of 2026 carry-paying AUM, that's about $3.8 billion at work or about $41 at work per share. Said differently, assuming we meet our fundraising goals and the invested capital meets the relevant hurdle returns, our outlook sees each Onex share, benefiting from the gains on $41 of LP capital in 2026 and that's completely separate from the return on Onex's underlying hard NAV. As I said earlier, although dollars at work won't appear on our balance sheet in 2026, we expect them to be tremendously valuable and meaningfully amplify shareholder returns. Look, I'm very excited about Onex's position today and more importantly, its ability to grow and drive shareholder value going forward. In addition to over $80 per share of hard NAV that we expect to compound at a mid-teens return, we expect to build meaningful fee-related earnings at our manager from our current platforms and their in-flight initiatives. And with the substantial majority of our fee-generating AUM projected to be carry paying, carried interest promises to be a significant third element of the shareholder value equation. Along the way, we're committed to providing you with new and relevant KPIs and updates to our dashboard that will allow you to track our progress. With the remainder of the day, a handful of my partners are going to provide you more insight into our underlying platforms. I'm confident you'll come away from these presentations impressed by the quality of the teams we have in place to both manage our capital, and execute on our plans to grow fee-related earnings in our asset management business. Up first is Tawfiq Popatia, who will update you on our Onex Partners platform and set the table for a few deep dives into our large-cap PE strategy.

Good morning. I'm Tawfiq Popatia. My goal this morning is to explain the Onex Partners asset management franchise and put it in context within Onex. In the shoes of an existing or prospective investor in Onex shares, I think I'd want to know a few things about Onex Partners. First, what is Onex Partners, why is it important, and how relevant is it to Onex? Second, what does it contribute to shareholder value? And finally, can I count on that contribution persisting and growing over time? So to begin with, Onex Partners is Onex's large-cap family of private equity funds focused on businesses headquartered in North America and Europe. We're currently investing Onex Partners V, a $7.2 billion fund that is about 70% invested in just under 3 years. You can think of Onex Partners investments in terms of size of company. We typically invest in businesses with $500 million to $5 billion of enterprise value, which means we're writing equity checks ranging from $200 million to $1 billion and possibly much higher after including the capital of our co-investment partners and direct investment from Onex itself. You've heard Bobby say already that performance drives growth in capital, which drives fee-related earnings. One proof point is that Onex Partners V fund is 25% larger than its IV fund, which in turn is 20% larger than its III fund. Of course, the driver of that is a 2.3x multiple of capital going back to 2003 when we raised our first Onex Partners fund. And notably, that return is about the same going all the way back to our founding in 1984. For context, as you think about relevance to shareholder value, consider that Onex Partners investments account for about half of Onex's net asset value. And since Onex trades at a discount to net asset value, Onex Partners fee-related earnings, earnings potential and carried interest arguably receives 0 credit in Onex's share price. This, despite Onex Partners over the last 10 years enjoying its first realizations at an average 7% premium to the prior quarter's value and a 16% premium to 2 quarters prior. We think our valuation is interesting from a NAV perspective already, but it's particularly interesting because we know Onex is in the early innings of rapid growth in fee-related earnings, and Onex Partners is going to continue to be a major driver of these fee-related earnings in the future, given the more than $100 million in gross management fee revenue it contributes to Onex annually today. And as Chris described, our expectation that number exceeds $200 million by 2026, excluding carried interest. On the subject of carried interest, notably, Onex Partners has contributed more than $600 million in carried interest to Onex shareholders since inception already net of management's participation. Now a critic might look at the picture on this slide and say strong historical performance driving AUM growth is really the story of private equity. What distinguishes Onex Partners on a relative basis. Well, the answer for us is sustainable competitive advantage through thematic origination in key verticals. We invest exclusively in a handful of core sectors we know extremely well. These are industrials, defined primarily as aerospace, transportation, building products and packaging, business services and software, health care, and finally, financial services, including insurance and asset management. We've invested in these sectors in every business cycle since our founding in 1984, and we're investing in them today. We think telling the soil in the same value chains and end markets with the same executives, Board relationships and intermediaries in our orbit leads to informational advantages and that, in turn, helps to spot trends, patterns and business models we like. Thematic investing in the same core verticals in this fashion also leads to proprietary access to investment opportunities. We think the result of thematic origination in key verticals is consistent performance. When we invest in the verticals we're focused on, we do well. There are no flukes here, no catching lightning in a bottle and riding multiple expansion. These are verticals in which we call our shot and drive outcomes with intention. Admittedly, this sort of investing isn't fashionable in a market environment in which throwing darts can work but through cycles, it tends to come back in style. Now thematic investing, of course, isn't a desktop exercise for a private equity firm, informational advantages actually have to be implemented. We have to be able to buy businesses and be good partners as we grow them. It may sound old-fashioned, but we think that comes down to a culture of ownership. Owners focus on alignment. They're prudent with leverage and lose money rarely and hates to do it. Owners pass along institutional knowledge and behavior through apprenticeship, and owners are informed and prepared. That culture of ownership paired with sector focus drives returns. Now I've already focused on Onex Partners' strong historical performance, so let's zoom in on the real-time Onex Partners results that Bobby foreshadowed earlier in his remarks. Since the end of 2018, Onex's investments in Onex Partners have increased about 90%. That's a 1.9x multiple of capital in 33 months. So why that period? Well, it's, of course, the most current and relevant example of the team's investment approach and philosophy. If you followed us closely, you know Onex was flat-footed for a short stretch in the 2016 to 2018 time period when a few of our investments came out of the gate slowly, but performance is now caught up, in part due to a self-aware and sharp course correction that included improvements in accountability, focus, investment process and operational capability. We've talked about this strategic review in the past, and it's been clear for some months now, the effort is producing the intended results, perhaps even more quickly than expected. One could also ask if a 1.9x multiple of capital is even remarkable on a relative basis in that time frame. The answer is, it's better than the S&P 500 and quite a bit better than the S&P 500, excluding technology. And of course, in our case, it's been achieved without a lot of exposure to high flying sectors. We're invested in a diversified set of verticals we know well. And for the record, that included pre-COVID investments in a holiday resort business, a trade show business, a venue and event management company and of course, an airline. Yet all of these businesses have navigated the crisis in a fashion that makes them as or more valuable today than before the pandemic. This shouldn't come as too much of a surprise to our long-time investors since the same was true during the financial crisis. we can outperform during difficult periods because our investment approach tends to be less reliant on macro and cyclical factors and much more interested in value creation strategies. Before leaving this slide, I also want to point out the average valuation multiple of trailing earnings for the S&P has expanded by 5 turns during this period compared to 3 turns for the Onex Partners company marks that inform our net asset value. Said differently, Onex Partners outperformance during this period has been relatively more reliant on value creation through earnings growth than multiple expansion. Turning to that value creation, when you rely on value creation strategies, there's not much of a dichotomy between growth versus value. Ultimately, we're looking for strong performing businesses with a defensible clear value proposition and a multi-lever value creation thesis. But less this all start to feel too conceptual, I wanted to include a focus on tools of the trade. How is culture and strategy physically operationalized in our halls and conference rooms day-to-day. Well, experience is everywhere inside Onex. I mentioned already our commitment to apprenticeship and institutional knowledge. The average partner at Onex has been with us for 18 years in the same verticals with the same personalities, customers, suppliers, products and even regulation. We couple that experience set with underwriting tools, including an exhaustive set of standardized metrics across which to compare investments. Every cash flow yield growth rate and earnings component is anchored to a standard definition, allowing metrics to be compared across time frames and investments. This reminds us what we've done well and also what our blind spots have been. Investment performance is also tracked with attribution to individuals with transparency across the firm using P&Ls, news travels fast, good and bad, though bad news travels fastest by design. Our investment committee receives inputs in a democratic firm-wide process, including digital tools for scoring investment attributes in real time, organizing the input of every investment professional, new and seasoned -- new and seasoned. We think this improves the quality of diligence and also of decision-making. We also rely on re-underwriting our investment thesis for every owned investment in an annual wholesale exercise. And of course, as has been our custom for many years, we rely on long-form investment memos in full pros to force the crystallization of our understanding of an investment thesis and its attendant risks. We think this leads to a healthier and more considered debate. So we've gone quickly, and I want to end by reminding investors what Onex Partners is, an established and high-performing private equity manager built on an ownership culture and a value creation strategy, premised on thematic investment in core verticals. We believe vertical expertise and relationships lead to informational advantages. Informational advantages lead to origination and conviction in controllable outcomes, which in turn lead to less dependence on macro factors. All of this results in a greater margin of safety, whether we're investing in a business at 8x or 18x. Above all, Onex Partners has performed, including through the toughest vintages and that attracts the capital that drives fee-related earnings. Now imagine at least some of our investors today are people asking themselves if ever lower interest costs and ever-expanding multiples can be relied on if they want to chase beta. Well, we've got a big tent for investors like that, that are looking to us for relative value in the current market, come for the margin of safety in our net asset value, but stay for the middle innings of fee-related earnings growth. Thanks for your attention. With that, I'll turn things over to Laurence Goldberg.

Thank you, Tawfiq. I'm Laurence Goldberg, and I joined Onex 40 years ago to formalize a software practice. As you know, software is a very large sector, arguably the largest in private equity, and it's also competitive given the attractive business model characteristics. As we began working with Bobby to develop a strategy for how Onex could be successful in this space, we quickly determined that we needed a highly focused, theme-oriented effort. With 25-plus years of advising technology companies, combined with the embedded knowledge in the vast Onex portfolio we knew we had the deep relationships and deep expertise to succeed if we could remain focused. With a strong bias towards being on the side of innovation, as opposed to legacy systems and processes that are fighting it, we methodically compiled the characteristics of the types of innovative companies we would target. We believe application software companies in specialized end markets with tailwinds are both attractive and provide opportunities to consolidate leadership positions organically and inorganically. We also believe that in these niche industries, the competitive environment typically does not include the very large software companies that tend to focus on much larger markets. The increasing use of technology in K-12 education was the first theme we identified. More than $700 billion is spent every year on K-12 education in the U.S. However, the technology portion is only 2%. Through our work, we developed strong conviction that this will grow meaningfully in the coming years as districts increasingly appreciate the power of technology to help improve student outcomes. When we started looking at this sector in 2017, less than half of the students in the U.S. had access to a device, broadband in schools was inconsistent and teachers had different levels of interest in the use of technology solutions. We believe this would evolve over time. We also believe K-12 funding would continue to be resilient as it was during the 2009 great financial crisis. While our thesis was proving to be true in 2018 and 2019, COVID has acted as a catalyst, accelerating digital infrastructure investment and also forcing teachers and students to utilize technology solutions. Funding has been more than resilient as education challenges have moved to the forefront of governmental discussion. This has resulted in an incremental $200 billion in K-12 funding in the past year alone from the federal government's recent stimulus packages. In addition to the education sector, we have developed thesis regarding increased software usage in the government and insurance end markets as well as for niche administrative solutions in enterprise settings. At a high level, we generally target verticals that fall into 2 categories. The first category includes markets that are slow to adopt technology due to fragmentation, bureaucracy or the need for purpose-built tech that has prevented horizontal providers from gaining share. This perfectly captures the education and government end markets. The second category includes verticals where Onex has historical track record, relationships and expertise. Insurtech is a great example given Onex's long history of investments in numerous facets of the insurance sector. While each market is slightly different, we have followed a similar plan of attack in determining the top opportunities in the sector. After identifying themes, we leverage Onex relationships to build sector knowledge. We do primary diligence on the end market, including engaging with former executives. We map the full range of potential investments in our size bracket, and then proactively meet as many management teams and owners as we can to build our network and identify our highest priority targets. For Tier 1 opportunities, we conduct most of our diligence in advance of processes. So our thesis and value creation plan are framed out before companies come to market. We believe that by the time an opportunity becomes actionable, we need to know the company and have strongly developed perspectives. While we see in excess of 100 actionable investment opportunities a year, we quickly pass on more than 90% of them as we won't spend time on companies we haven't met or studied. Our focus in EdTech resulted in our ability to invest in PowerSchool in 2018. Prior to making that investment, we had evaluated numerous EdTech companies and established a dialogue with PowerSchool's CEO far in advance of the process. This focus also resulted in Onex being one of a very small number of firms given the opportunity to consider an investment in Weld North. Our deep knowledge and understanding of K-12 education, potential partnership opportunities with PowerSchool and the multiyear relationship with management and ownership were cited by Weld North's Founder as to why they wanted to partner with us. We believe that our current ownership of 2 of the marquee education software companies has now positioned Onex as a uniquely insightful and value-added partner in this dynamic market. Our value creation efforts have helped with 5 tuck-in acquisitions and positioned PowerSchool to achieve a successful IPO less than 3 years after we acquired the company. In summary, we feel great about our differentiated knowledge, relationships and perspectives in our core focus areas. We have several on-theme opportunities that we expect to be actionable in the next 6 to 12 months and believe we are well positioned to continue to deploy capital in a patient, targeted fashion. I'll now hand it over to Nigel Wright, who will speak to our European efforts. Thank you.

Good morning. I'm delighted to have a few minutes today to speak about the European operations of Onex Partners. We are a team of 15 private equity investors located in London and encompassing 10 different nationalities or languages, and our mandate is to source and execute investments in companies whose central management team sit in Europe. We established the European office as a new growth vector for Onex to leverage our North American investment expertise in a market that we had not previously tapped in any meaningful way. For sure, we have made some isolated investments in Europe before opening the office. The first being one that I had handled back in 2004, but it was not feasible to be a serious participant in the market without being right in the middle of the deal and information flow. To put it in context, OP's Europe headquartered investments represented just 4% of our total equity capital deployed in the 10 years prior to 2014. In the 5.5 years since we started investing out of London, we have raised that 4% to 20%. And since the European LBO market represents about 40% of the relevant opportunity set, we have yet more room to grow. There are some obvious differences between investing in North America and investing in Europe. The key one is that although it's almost 30 years after the Maastricht treaty, many sectors of the European economy remain fragmented along national borders. So a service economy comparable in size of that of North America is, in many ways, several separate economies. This meant that we had to build a team of people with language skills and cultural links from across Central and Western Europe. Another difference is that ESG themes emerged earlier in Europe than in North America, and so became an investing in value creation focus for us a bit earlier. The major challenge for us was that although Onex had a multi-decade investing record in North America, we had little brand equity in Europe. So we started out by building relationships with a broad range of deal intermediaries, investment banks, consulting firms and key advisers in our focus sectors. And our focus sectors are industrials, business services and health care services. So we built the intermediary relationships. The more challenging task was to move beyond the intermediaries and build authentic and differentiated relationships with owners and senior managers of businesses in our core sectors. We considered our job to map out today the companies we would hope to acquire in those sectors over the next 5 years. And of course, we measure our progress on this, and it's good to say that in the last 12 months, about 2/3 of our serious deal flow has been in situations where we had a truly differentiated relationship or angle that gave us a last look on price or better access to people, information and expertise. And of course, asymmetric information is one route to top-tier returns in private equity. I'd like to emphasize just how important it has been for us to have the breadth and depth of Onex behind us as we establish the European private equity business. It was so helpful to draw on the sector expertise of our North American colleagues and Onex Partners and ONCAP and in credit and to leverage Onex connections at senior levels of the investment banks and lenders we deal with. The success we've built in Europe is based on the same fundamental approach that has driven our firm in North America, deep sector knowledge, concentration on our core industry verticals and deploying value creation strategies to accelerate growth, reduce costs, do accretive acquisitions and get innovation right. And of course, training our team to focus on deep analytics, commercial judgment and the instinct to be always looking over the horizon and around the corner for risks and opportunities. I'd like now to take 3 examples of how we deployed value creation plan successfully. With Parkdean Resorts, which is a U.K. holiday park business we acquired in 2017, we recruited a new management team and worked with them on a thorough going business upgrade with projects and cost reductions, particularly in back office functions and go-to-market improvements, particularly in digital marketing and sales force effectiveness and in dynamic pricing tools to improve yields from supply and demand conditions across the Park network. With Partou, which is a Dutch-U.K. child care business that we acquired at the end of 2018, we helped to strengthen the management team and worked with them on productivity, procurement and IT initiatives. But our main value creation there has been through accretive acquisitions from which we have realized significant synergies and gained operating leverage on central costs, with the result that Partou's pro forma EBITDA has more than tripled in the 3 years since acquisition. Net SIG, which is a Swiss-based packaging business we exited at the very end of last year, we initiated wide-ranging operational improvement projects that generated over EUR 65 million of cost reductions in 2 years. We prompted the company to expand into new markets, notably India, Japan and parts of Latin America and we sponsored significant improvements in sales force effectiveness, client account structures, a new CRM system and smarter sales incentive plans, all to drive revenue growth. This work enabled us to more than double our money and earn an almost mid-20s IRR on a very large equity check. So we're proud to have delivered a $2.5 billion net gain so far on our European investments since we started in 2015. This equates to about a 2x multiple of the $2.6 billion that we have invested and is despite a full loss in our first European investment, which was Survitec. As you would expect, we conducted a proper postmortem on Survitec to make sure that we learned every lesson we could from it. That fed into the broader Onex Partners strategic review in 2018 and 2019. The changes emanating from that review are now being reflected in improved private equity returns right across Onex Partners. So it feels good to be able to say that all of our European portfolio companies are performing very well this year. And we expect a further uplift in our valuations and returns going forward. So where do we go from here? Our most recent investment, to [ Carestream ] Group was completed a year ago and is off to a very strong start, with progress made on each of our value creation levers. Right now, our team is also working hard on near-term opportunities in health care, business services, education and tech-enabled industrial manufacturing for new investments. We welcome 3 new people to our team this month and are continuing to attract strong talent, in part because we're now recognized as a growth platform in Europe. As we grow, we will eventually add industry verticals in Europe that are already covered by our colleagues in North America, such as enterprise software and financial services. Overall, our goal is to be a growth accelerator for Onex Partners. For us, that goal means doubling the amount of OP capital that work in Europe over the coming few years and generating top-tier returns on that capital. I did mention some of our value creation work. Wes Pringle is now going to speak about what we are doing to raise our operational improvement, effectiveness at Onex Partners across the board. Thank you.

Hello. My name is Wes Pringle, and I'm excited to tell you about the operating capability we are building at Onex Partners, and how our team of seasoned executives is adding value to the investment process and ultimately to our operating companies. In my remarks today, I will cover the following: first, the team, who we are, and the experience that we bring. Second, how we're adding value throughout the entire deal life cycle process. And finally, how big that value contribution is expected to be. Let's start by talking about the team. We are a focused team of highly experienced senior executives from benchmarkable organizations, representing a broad range of industries that are relevant to Onex Partners. Currently, there are 5 of us on the team. Over time, we expect to add to additional capabilities to the team, but growth will be targeted and in line with overall portfolio growth. Already, we contribute well over half a century of experience leading businesses and major functions in industry-leading organizations, such as Danaher, Johnson & Johnson, Cummins, Colfax, Willis Towers Watson, Pfizer and Bain. Each of us has experience driving real business transformations, both organically and inorganically. This includes accelerating growth by entering new markets, launching digitally enabled business transformations, driving cost efficiencies by overhauling a company's physical footprint or reengineering a company's supply chain. Our team also has extensive experience in executing on M&A with dozens of deals under our belt, both from a diligence standpoint as well as from an integration standpoint. Our real-world experience is a difference maker in how we engage with our portfolio companies and what makes our model advantaged. As we add additional players, we will continue to focus on bringing on board similar best-in-class experiences. We have seen across other private equity firms that bringing on board the right kind of operating expertise can make a substantial difference in portfolio and fund performance. This can allow funds to pursue deals that would otherwise be out of reach and allows firms to ensure that they get the full value out of their investments. As you will see, this is very much how we are thinking about things here. Specifically, we're focused on a very simple mission, guide our operating companies to break out levels of value creation and strategic advantage in their respective markets. This accelerates EBITDA and delivers advantaged exit multiples as companies achieve superior strategic and operational performance. To ensure we are set up most effectively to deliver on that mission, we first assessed the largest opportunities for value acceleration through the portfolio. Based on this, we are building out our practice areas according to the highest potential impact in return. These practice areas are strategy and general management; talent and organizational strategy; supply chain and procurement; health and benefits; information technology; ESG, working closely with Onex's Head of ESG, Judy Cotte, who you'll hear from shortly; and then finally, lean or continuous improvement or said differently, getting the most performance at the best cost from company operations. Each area has a role to play in ensuring we accelerate revenue achieve our cost objectives and realize strategic market advantage. Our operating team is fully integrated into Onex Partners in a way that you don't always see with private equity firms, we are core members of the team in every sense of the word, in every key discussion contributing to every major decision. This allows us to add value throughout the entire ownership period. It starts with deal sourcing and diligence. Our operating partners are attractive to organizations looking to access a path to value acceleration. We help them grow, get stronger and most importantly, help them build the capabilities they need into their organization. This capability can be powerful from a deal cultivation standpoint as private company owners determine which private equity firm is best equipped to help them realize the ambition that they have for their company. Further, the real-world experience our team has in various industries is an asset to deal teams as they build out their vertical themes, as you heard about from Laurence. We work with these teams to flesh out these themes from the lens of experienced operators in those verticals. At diligence, our operators have a critical role to play in validating business transformation opportunities particularly revenue acceleration and cost out plans. As individual leaders, we've all done this work. We know what it takes for a plan to succeed. Leveraging our expertise means Onex Partners can see opportunities that otherwise may have been missed. And of course, it ultimately means OP can underwrite their business cases with more confidence. Most of our deal teams' work is focused on early on in the ownership period. Our goal is to get new acquisitions off on the right foot immediately within the first 6 months or less. Value creation plans are a key part of that. They identify the most important value creation initiatives in an organization, as well as problem-solving and mitigating strategies for the most likely barriers. This approach borrows heavily from policy deployment, a tool proven highly effective by organizations that excel at driving operating impact. We're also focused very heavily on talent planning. This involves ensuring upfront that every company we invest in has the capabilities and the setup to deliver on their ambitions and their expectations. Throughout the life of an investment, our team will continue to track performance of value creation initiatives every month, offering assistance as needed to ensure that the company and the management of that company stays on track. Finally, by ensuring that a company has the capabilities they need to succeed in their next phase of ownership will support successful exits. The obvious question is what's all this worth? Our operating team efforts will drive investment outperformance in a few ways. First, through an enhanced acceleration of revenue. A lot of the work I've spoken about today is focused on growth, ensuring that the companies we invest in have the talent, the right market strategy, the right plans and the right tracking to drive meaningful revenue acceleration. Second, through an acceleration of successful cost initiatives. Our team has experience identifying and executing cost initiatives. Further, we know how to deliver results from those initiatives while continuing to keep an organization focused on growth. We believe we can significantly increase our impact from both an acceleration of revenue and in terms of cost opportunities, leading to a demonstrable acceleration of IRR achievement and ultimately fund performance. Over time, we expect to achieve in the range of 250 basis points or more of incremental IRR from our operating work. To summarize, we are building a very focused yet experienced and accomplished team of operating professionals from benchmarkable organizations. We bring insight and value at every stage of the ownership cycle from deal sourcing to diligence, and most importantly, throughout the ownership period. Our knowledge of best practices and experiences from across a variety of disciplines is helping our companies set and achieve breakout value creation goals. We work closely with them and track their progress every month. Overall, we expect to deliver significant value creation for Onex Partners and ultimately for Onex shareholders. I'll now pass it over to my colleagues, ONCAP co-heads, Michael Lay and Greg Baylin, who provide an overview of ONCAP's successful investment approach. Thank you.

Good morning. My name is Michael Lay. I'm a managing partner and co-head of ONCAP Management Partners. I am joined by Greg Baylin, also a Managing Partner and Co-Head of the business. It is our pleasure today to provide an overview and update on the current activities at ONCAP. ONCAP is the exclusive mid-market private equity platform at Onex. The business was formed in early 2000 with a team of 4 investment professionals and an initial fund of CAD 400 million. I think it is noteworthy that those 4 individuals, which include Greg and me, are still active in ONCAP today. Now we have a team of 22 investment professionals based in Toronto and New York, and are currently investing capital from ONCAP IV, a USD 1.1 billion fund raised in 2016. In our 22 years of operation, ONCAP has deployed approximately $1.9 billion and acquired 30 businesses. Our track record of performance is very strong, generating a gross return of 48% and a multiple of invested capital of 4.4x on the 14 businesses that we have sold. Our team is proud of our long-term consistent performance, having not lost capital with any of the investments we have completed. We believe that ONCAP's record of performance is an important differentiator in the competitive mid-market private equity space. We have a strong and stable base of limited partners, many of whom have been invested with us since our first fund. The ONCAP team approaches private equity through the lens of business ownership, looking to invest in businesses with attractive shareholder value creation opportunities over a longer-term horizon. As business owners, each investment we make is an important one, and requires a full commitment from the entire ONCAP team. We are not portfolio managers who invest in a larger number of businesses with the intent that the stronger performers will make up for the underperformers and generate an acceptable return for the fund. Another important element of the business ownership focus at ONCAP is the partnership that we look to establish with the management teams at each of our operating companies. Each member of the investment team at ONCAP invests personal capital in every business we acquire. It is our expectation that the members of the senior management team at each business we have investments in, will also invest capital so that we can work together as owners to develop and implement a strategic plan with the primary objective of shareholder value creation. We look to partner with management teams that are excited to be owners of their businesses and are willing to embrace the change and effort required to be successful. There are several important criteria that we look for when considering investment opportunities, and I would like to touch on a few of them. First, an opportunity to invest between $40 million and $200 million in a North American headquartered business. The team, however, does not simply focus on the size of the investment check and ownership stake in the company. ONCAP is open to considering minority ownership investments. We will also consider making smaller initial investments as a first step in an investment thesis designed to build the business. Second, Historically, ONCAP has been flexible in evaluating opportunities in various industries or sectors. In the current market environment, we have refined this approach, and Greg will have more to say about this in his remarks. One of the most important elements of any business we consider is the cash flow characteristics. We are attracted to businesses that generate attractive free cash flow, taking into consideration operating cash flow and the investment in working capital and capital expenditures required to maintain steady state operations. We do not see ourselves as turnaround or early-stage growth investors. Third, we are attracted to businesses that are reasonably well diversified by customer, supplier and to end market that offer attractive organic growth opportunities. The potential to increase the scale and capabilities of the business through add-on acquisitions is also an important factor to consider. This has been an important driver of value creation for ONCAP businesses. We have completed approximately 160 add-on acquisitions with our 30 operating companies. And fourth, the opportunity to work with the senior management team to create a shareholder value creation plan that has multiple levers to pull. A typical value creation plan might include actions in the following areas: organic growth drivers, including product development and entering into new markets; add-on acquisitions; investment in organizational infrastructure, including IT operating systems, business process and financial reporting and analytical capabilities; operating cost and procurement efficiencies; improvements in working capital and capital spending efficiency; and upgrading the capabilities and skill set of the senior management team and Board of Directors. I would now like to pass the presentation to my partner, Greg who will comment on the current market environment and some of ONCAP's recent activities.

Thanks, Michael. There's been significant change in development in mid-market private equity. The market has seen a significant increase in capital under management, growth in the number of firms and an increased focus on differentiation and the resources required to add value at operating companies. Competitive auctions are still the norm, but the number of private equity buyers actively participating in these auctions is lower than several years ago. Buyers are more disciplined in the determination of where to spend time, opting to review fewer opportunities in depth where there is a higher chance of success. The response to these developments, ONCAP has recently completed a strategic review to identify opportunities for change and improve competitive differentiation. We believe this review will help us continue to be a top quartile mid-market firm delivering consistent performance to our investors. This review focused on several important topics. First, identify and define sectors of emphasis within the broader industrial, services and consumer verticals, where ONCAP can focus its deal sourcing activities and differentiate the firm. This differentiation is an important element in positioning ONCAP as a credible acquirer of businesses and as a preferred partner for management teams and founders. Second, identify efficiencies in our investment decision-making and due diligence process to allow the ONCAP team to focus our efforts on high-quality opportunities where we believe we have the best chance of success. Third, identify additional operating resources and talent to add to the ONCAP team that will assist in the development and execution of a successful value creation plan for each of our businesses. And fourth, identify opportunities to promote the well-being of the members of the ONCAP team so that our firm can continue to be a top destination for talent. Each member of the ONCAP team participated in this strategic review. We are pleased with the results of this process and are now commencing the work to develop and implement action plans to achieve our objectives. We expect to evaluate our progress against this plan on a regular basis over the next several years, making course corrections as required to remain a top-tier mid-market private equity firm. In addition to the work on the strategic review, 2021 has been a busy year for ONCAP. Our current fund ONCAP IV, is approximately 75% invested. The team is actively engaged on reviewing new opportunities in order to fully invest the fund in the 13 months remaining in the investment period. These efforts have been rewarded. In June, we completed our most recent investment with the acquisition of Komar Industries. Komar, based in Groveport, Ohio, is a leading designer and manufacturer of industrial waste and recycling systems. The company specializes in Auger processing technology and is seeing a strong growth opportunity with e-commerce, retail and industrial distribution and fulfillment centers. ONCAP's experience and knowledge of the machinery and equipment space positioned us very well as a preferred partner for the family ownership group Komar and is a good case study for our focus on sectors of emphasis. We are attracted to the company for several reasons, one of which was the compelling industry tailwinds driven by investments in e-commerce and ESG. We've also been working on the sale of several of our businesses held in earlier funds. In the first half of the year, we completed the sale of our interest in Pinnacle Renewable Energy for a total gross multiple of invested capital of approximately 3x. ONCAP also received final proceeds on Mavis Discount Tire, a very successful investment in the automotive aftermarket services sector we exited in 2018. In total, this investment generated a gross multiple invested capital of approximately 4.5x. While the current business environment is somewhat challenging due to the continued complexity driven by COVID and increasing cost pressures, labor shortages and disruptions in international supply chains, our operating companies are generally performing quite well. Specific initiatives have been developed to mitigate these challenges at each business. We are also taking advantage of a fluid market for talent by identifying opportunities to improve and expand the capability and skill set of senior management teams. Lastly, we continue to be active in reviewing attractive add-on acquisition opportunities with several of our operating companies. In 2021, our companies have completed 6 add-on acquisitions. Looking ahead, we believe that ONCAP is well positioned to continue to build on our success. As you heard from Bobby and Chris, we are now considering plans for our next fund ONCAP V, with an expectation that fundraising activities will commence in the first quarter of 2022. Our new fund will continue to benefit from the support of Onex capital, but we do anticipate third-party capital to represent a higher percentage of the fund. On behalf of Michael and myself, I would like to conclude our comments by thanking you for your interest and support. We are excited about the future of ONCAP. We have built a well-recognized brand, have substantial financial resources and most importantly, have a great team that is dedicated to build on our strong track record. I'll now turn it over to Judy Cotte, who will speak about ESG at Onex. Thank you.

I'm pleased to have the opportunity to speak with you, our shareholders at my first Onex Investor Day. I have been focused on environmental, social and governance or ESG issues and responsible investment more broadly for the last 13 years of my career. And I have joined Onex at a very exciting point in its ESG evolution. For the last several years, Onex has been steadily building ESG expertise and processes across all of our investment platforms to ensure that ESG factors are systematically considered as part of our investment decision-making. We now have an opportunity to build on that strength and take our approach to responsible investment to the next level, which I believe will help create real value in the companies we own and in which we invest. Our approach starts at the top. We continue to focus on the effective management of our own ESG issues, including diversity and inclusion, which, as you heard from Bobby, is a significant focus for us. We believe that the ESG and climate-related policies and programs we put in place at the Onex level will serve as a model for our companies. We're already making significant progress. Here's what's happening. As part of our ongoing commitment to ESG, we're in the process of signing the principles for responsible investment. We will release an updated responsible investment policy by year-end, providing more detail about how we think about ESG and climate, and how we will continue to embed it across all our investment platforms. We are also developing a climate strategy so that Onex, our investment teams and our portfolio companies can better understand the climate risks and opportunities they are facing, and we are committed to more public reporting. We're exploring a variety of tools that will help us measure ESG and climate-related risks and opportunities and better report to all of our stakeholders on how we are managing them. We will provide tools and insights to our investment teams to allow them to advance their analysis of how ESG factors can drive value within companies, either by reducing cost and risk or revealing avenues for revenue growth. We know that research shows a correlation between companies that manage their ESG issues well and lower risk, lower cost of capital, better operational performance over a variety of measures and better share price performance over the longer term. We will also consider macro level ESG themes, including climate change and the energy transition evolving consumer preferences and increasing ESG and climate related regulations to understand how they might impact existing or future investments. As you would expect, our progress will look slightly different in each of our platforms. In private equity, ESG factors are already embedded at every stage of the investment process, and we are developing ways to deepen that analysis. We're sharing best practices amongst our companies to encourage progress and innovation. I have had discussions with a significant number of our companies, and they already understand how strong ESG practices can help create a competitive advantage. And many of them have or are developing industry-leading sustainability programs. I'm looking forward to connecting with all of them in the near term. We are already reporting ESG key performance indicators to our LPs for every company in OP Fund V, and we expect to do the same for new funds going forward. In addition, we are assessing tools that will help us collect key ESG KPIs such as carbon emissions for all the companies in our portfolios and track progress over time. As you heard from Wes Pringle, I'm working closely with his team to ensure that ESG considerations are embedded into our value creation plans for all new investments. With our credit and public equity teams, we already use ESG factors to enhance our credit risk assessments and investment decision-making. In the near term, we're focused on improving our stewardship activities so that we can drive better ESG performance and encourage better ESG disclosure from the companies we lend to or invest in. For example, our direct lending team monitors company performance on key ESG factors identified during due diligence and uses its close relationship with the company and all of its stakeholders to improve the company's ESG performance. Through Gluskin Sheff, we know that clients are interested in knowing more about the benefits of responsible investing. We are leveraging these opportunities through education to help deepen our relationship with our clients and grow our share of wallet. In addition, given the significant interest in responsible investment, amongst the high net worth and ultra-high net worth client segments, we are exploring opportunities to launch thematic funds related to positive social or environmental impact. To summarize, we see great value potential from accelerating our ESG initiatives, particularly in our commitment to managing our own ESG issues, including our increased focus on diversity and inclusion, deepening our ESG analysis in deal sourcing and investment due diligence working with our companies to help them improve their ESG performance or promote what they are already doing well to drive growth and developing a climate strategy for the firm. While Onex has made great progress so far, there's a lot more to come. I look forward to providing you with updates as we continue to advance in this important and rapidly evolving area. We're now going to take a short 10-minute break. After that, Jason New will join us to provide an update on Onex Credit. Thanks very much. [Break]

Good morning. I'm Jason New, and I'm pleased to be here to talk about the credit business Onex has built and how the team will scale it over the next 5 years. As of today, Onex Credit fee-generating AUM is being reported as an integrated number, including the Gluskin Sheff client capital in private credit and public strategies. On that basis, as of Q2, fee-generating AUM was approximately $21 billion. Not that long ago, Onex Credit was principally a CLO bank loan business with strong leadership, an excellent research team and an ability to generate consistent, fee-related earnings. While it was a strong business, it did not have the breadth of product offerings that many investors in the credit space look for. The business needed to expand its products to provide investors with a full suite of offerings, liquid and private, high returning through more stable and lower returning. Accordingly, Onex leadership made a strategic decision to reinvest the profitability of the CLO business to build the credit team and diversify the platform. Today, Onex Credit is an integrated asset manager providing the full spectrum of private credit, public credit and public equity investing. This has been accomplished through the following: first, hiring the best talent, adding broad expertise across the team. This includes a new U.S. CLO portfolio manager, Head of High-yield, Head of European CLOs, Head of Structured Credit and Heads of Opportunistic Credit. This is the right team to execute on the strategy and grow the business. Second, adding a growth engine. In December last year, Onex Credit acquired Falcon, a leading private credit manager. This acquisition added a scalable and differentiated private credit business advancing Onex Credit's position as a multi-strategy asset manager. Third, integrating the Onex Credit business and Gluskin Sheff investment teams. The goal of combining the investment teams was to benefit from a holistic view across the public markets from investment grade to leverage loans and high-yield and through to equities. The integration has been very successful. The collaboration across the platform is driving synergies in idea generation, deal sourcing and trading. It also allows the team to face the Street as one firm and realize greater benefits from economies of scale. Onex Credit is now competitively positioned as a preferred partner for institutional investors looking for 1 or several credit products. This is also true for high net worth clients, and the team is an eye toward expanding retail client penetration and product offerings. We have recently won sizable mandates from global insurance companies, and we feel well positioned to provide further insurance solutions given Onex' long history in the insurance industry and the in-depth understanding of the unique regulatory and capital regimes insurance companies face. Most importantly, the team is focused on performance. As Bobby said, strong performance over time attracts capital. Historically, the CLO business has been a very good performer and that is expected to continue. Looking at some of the new strategies, which I'll talk more about shortly, although early, they're also showing strong performance. The goal across the platform is to provide clients with consistently strong performance with resiliency through all market environments. The team is excited about the business today and the opportunity ahead. Our objective is to at least double fee-generating AUM by 2026 while steadily increasing profitability to significantly grow fee-related earnings. I'll now go through that in more detail. Across the integrated platform, we have approximately $21 billion in fee-generating AUM. By 2026, that number is expected to double. The 5-year doubling target will be achieved by expanding and penetrating distribution channels, cross-selling throughout the platform and continuing to build a track record to enable larger fundraises. CLOs and direct lending are expected to be the biggest contributors to AUM growth as currently, they are the most immediately scalable strategies. Together, they are expected to contribute almost 40% of overall AUM growth. The team is confident in our ability to grow CLO and bank loan strategies in light of the very strong track record. And given that the bank loan business has one of the highest operating leverages in the credit space, its expected increased margins as revenue will grow against a more fixed cost base. The current expectation is that Onex Credit would issue approximately $2 billion in new CLOs a year covering both the U.S. and Europe. There have been strategic hires within the European team and the near-term focus there will continue to be on strong performance in growing the CLO platform. As the CLO business grows, the utilization of Onex' capital will continue to decrease. At the start of the year, Onex owned approximately 90% of our CLO equity. Today, that's at less than 75% against a target of 50% by 2026. Looking at direct lending, the Falcon team provides the opportunity to create real scale within the space. Onex Credit is leveraging Falcon's experience in specialized private credit with scale, global distribution, diverse investment and origination capabilities from our broader platform. Significant demand for this specialized product is expected from borrowers and clients as this is an area where the overall market is expanding quickly. Secular tailwinds behind private credit were strong through the pandemic, probably the strongest within any asset class in credit and will foster high growth in this segment. There is significant potential for private credit as an asset class consistent with what was seen with private equity 15 years ago. Onex Credit will capitalize on the white space in the middle market segment with a big opportunity to provide capital to middle market companies as more and more direct lenders are moving upmarket away from their middle market roots. Moreover, there are relatively far few unitranche and senior credit providers that provide solutions rather than more straightforward commoditized product. Jeff will share details on the Onex Falcon Direct Lending Fund that was recently announced. In addition, Onex Falcon will soon be launching an institutional direct lending vehicle with the benefit of already having a large anchor investor. By 2026, opportunistic and structured credit strategies could represent approximately 20% of our total fee-generating AUM. We have already launched flagship opportunistic and structured credit strategies. Our structured credit fund is approaching its target size and the opportunistic fundraise is accelerating. Once a track record is established, these strategies will be another very profitable business. Looking at public market strategies, which include Gluskin Sheff public credit and equity funds. You can expect to see continued sustainable growth supported by the Gluskin Sheff client wealth management team. The team feels confident in its ability to capture a larger share of wallet with existing investors and build relationships with new clients, leveraging the breadth and performance of our integrated portfolio. Jeff will speak more about this strategy shortly. It's also important to note that these products provide a complementary offering to other clients and investors who are seeking cross-asset class solutions. As you heard earlier from Bobby, the plan for Onex Credit is to execute on the platform already built with a focus on scaling existing businesses. Longer term, there will be other opportunities to expand and drive additional AUM growth, including the introduction of new strategies for Europe. Another focus will be on exploring ways to grow the permanent capital base. Excluding CLOs, none of our existing AUM is perpetual. Longer term, the plan would be to increase the percentage of perpetual capital through introducing additional retail and insurance-oriented products. Turning to target margin and fee-related earnings. AUM growth will drive management fee growth as assets are invested. As subscale strategies mature, earnings will benefit from the operating leverage that's been built, driving growth in fee-related earnings. The target margin which the team expects to achieve by 2025 is 35% to 40%. Although the timing and range is somewhat different than what was communicated previously, this margin now reflects full allocation of expenses, including Gluskin Sheff client wealth management team expenses as referenced by Chris earlier. Finally, with that expected AUM growth in margin, as Chris also mentioned, the 2026 fee-related earnings run rate is expected to be approximately $105 million to $120 million. In addition to the fee-related earnings we will generate, there is significant longer-term value in the carried interest earned for shareholders. Approximately 70% of new AUM in direct lending and opportunistic strategies will include a carried interest component. By 2026, approximately 65% of total fee-generating AUM will be eligible to earn carried interest. The majority of these funds will be closed-end funds, where a carry is only earned and recognized near the end of the fund's life. Therefore, it will be longer term before you see a significant impact from realizing the carry from new growth. It's important to note that performance fees are earned on certain public strategies, including Blair Franklin Global Credit and global special situations, which will be included in fee-related earnings. Performance fees related to open-ended funds are earned annually. To wrap up, let me reiterate the Onex Credit key takeaways. Over the last 18 months, Onex Credit has diversified and strengthened its platform, and the team has a strong strategy to drive future growth. Fee-generating AUM is expected to at least double by 2026 driving a significant increase in fee-related earnings. There is additional value being created through carried interest representing a growing asset for shareholders. Longer term, there is also potential for incremental growth through additional strategies and platform expansion. As you think about the Onex Credit business, feel confident in, number one, the growth prospects of the private credit asset class. Number two, the broad talent and expertise of the Onex Credit team; and number three, the power of the One Onex approach. I will now turn things over to Jeff Moody to discuss Gluskin Sheff. Thank you.

Thank you, Jason, and good morning, everyone. My name is Jeff Moody, and I am the CEO and President of Gluskin Sheff. I'm happy to be here today to provide an update on our business and how we are working with our partners across Onex to support growth objectives. As many of you know, Gluskin Sheff was formed in 1984 as an investment management firm focused on public market strategies, providing clients with an attractive, long-term investment performance and the highest standard of service. That approach has served us well for many years, evidenced by our long-term performance track record, demonstrated by our flagship Canadian equity portfolio which has generated an annualized net return of 12.5% over its 20-year history and our industry accolades like the Canadian hedge fund awards. In addition, our clients have also benefited from our flagship credit strategy, Blair Franklin. Which we acquired in 2014 and has generated an annualized net return 11.4% over its 15-year history. When Onex acquired Gluskin Sheff in 2019, we were at a critical juncture in our evolution. With the backing of the Onex brand and the reputation for alternative investment solutions, we've been able to proactively expand our product offering. Our new product lineup has been a key factor in attracting recent AUM, particularly in today's low yield environment. Today, we're one of the only investment management firms in Canada providing high net worth clients with access to a full spectrum of public and private wealth strategies. Strategic investments that we've made in talent, technology and wealth planning capabilities are now also contributing to a stronger, more holistic client offering. As Onex' direct channel for attracting high net worth client assets, we expect to be a meaningful contributor to their AUM growth target. With the platform we built, we feel confident we can deliver an annual growth rate of 10% in fee-generating client capital, made up of 5% market growth and 5% organic growth. With the merger now behind us, outflows have stabilized, with redemptions down approximately 35%, while inflows have increased by approximately 75% year-to-date when compared to the same period last year. We're confident that the positive direction we're heading confirms our business model as we continue to see steady growth in our sales pipeline. Markets will contribute to our growth, but our primary focus is on growing and adding fee generating AUM through new and existing client relationships. Let me now go through how we'll execute on this plan. Since the start of the year, we generated more than CAD 700 million in client inflows, the highest level we've seen in more than 5 years. Approximately 1/3 of the assets came from new client relationships, many of which we're able to capture through access to Onex private strategies as well as through building out our sales team with high-quality talent additions. Looking ahead, we are expecting a continued mix of capital inflows from both existing and new client relationships. Right now, our client base is largely made up of entrepreneurs and multigenerational families, endowments and foundations. We have proof of concept as we've attracted net new high net worth investors through our private market offering, expanding our reach outside our home market of Toronto. Over the next decade, we expect to benefit from the anticipated $1 trillion wealth transfer opportunity in Canada. As we think about sources of new clients, we see great opportunity in generating new relationships with the next generation of wealth creators, stewards and inheritors, deepening our focus on key Canadian markets and expanding internationally. The partnership with Onex Credit has been critical in our ability to focus on driving AUM growth. With the integration of Onex Credit and Gluskin Sheff investment management teams, the client team is now solely focused on identifying new client opportunities and growing client relationships. Furthermore, being so closely aligned to Onex Credit allows for direct collaboration in the product development process, which harnesses the best insight and expertise of both Gluskin Sheff and Onex, customizing portfolio strategies to meet our client needs. And as a result, Gluskin Sheff clients benefit from bespoke portfolio solutions, offering diversification, income and long-term capital appreciation that capitalized on the 35-plus year public track record of Gluskin Sheff and the almost 4 decades of private market expertise that Onex provides. Our ability with Onex as the portfolio manager to offer a competitive fee structure that emulates institutional pricing is a benefit to our clients that many of our competitors cannot provide. And as a result, higher margins for our business, given the ability to cocreate strategies without the need to outsource or form strategic third-party partnerships. Today, as Bobby said, Gluskin Sheff clients have more than $1.4 billion invested in Onex private strategies. Our clients have participated in 3 Onex credit alternative debt product launches this year. We also recently announced the Onex Falcon Direct Lending Fund for Gluskin Sheff's Canadian accredited investor clients. The approach we took here is exciting. Having worked side-by-side with the Onex-Falcon team to deliver to our clients a fixed income alternative product that has an 8% distribution yield and a 9% to 10% targeted net return. You can expect to see more of these types of launches in the future. Our objective is to make these products available not only to existing clients but to use them as an opportunity to attract other Canadian accredited investors looking for ways to enhance return through a diversification of strategies. There's a real opportunity in front of us as private client demand is expected to drive widespread adoption of liquid alternatives, forecasted to be a $100 billion market in Canada by 2025. Our clients have also benefited in participating in a private equity co-investment strategy. We see significantly greater opportunity in attracting client capital to Onex private equity products, particularly with our upcoming fundraises. As Gluskin Sheff clients who are qualified purchasers will have access to both ONCAP V and Onex Partners VI fundraisers. A diversified product offering, including access to private capital solutions is undoubtedly a differentiator. But today's high net worth investor is also demanding a better client experience, often technology-enabled as well as a fully integrated wealth planning offering. Done well, these can also be drivers of strengthening and growing AUM. Partnership with Onex also enabled us to invest more in technology. Over the past 2 years, we've made critical enhancements in process and system optimization, including our client onboarding and back office processes. We've also made significant investments in our digital strategy to directly support AUM growth. Our focus on digital marketing and analytics will also help diversify our geographic footprint. On the wealth planning side, we're proud of our offering. We have helped simplify the complex wealth needs of our clients by providing expertise in tax, business owner planning, financial planning, risk management, estate and trust planning and philanthropic giving. Through this integrated approach, we strengthened our relationships with clients and professional advisers, a key source of relationship building for Gluskin Sheff. Our wealth planning team working alongside our client team has helped acquire more than $250 million in investable assets and identified more than 3x that amount in additional investment opportunities. Most recently, we partnered with one of the Gluskin Sheff foundation for philanthropy to offer donor-advised funds to existing and new clients who are looking to build their legacy. By expanding our service offering, we continue to support our clients at a critical junctures in their personal and professional lives, which is at the core of our holistic wealth management philosophy. We're proud to be part of the Onex team, and we see strong growth ahead. We have a brand known for quality and an unwavering focus on client service, backed by the Onex reputation. We have the right infrastructure and team in place and an offering that I firmly believe is differentiated in the Canadian market. Just like my colleagues, you've heard from this morning, our focus is now on execution and delivering value for you, our shareholders. We look forward to providing updates on our progress in the quarters and years to come. That concludes our formal presentations. We hope you've enjoyed the sessions and found them informative. Now I'm going to pass it over to Bobby, Chris and Jill, for our Q&A session.

Hello, everyone, and welcome to our Q&A session. We hope you enjoyed the presentations today. I'm here with Bobby and Chris. Before we get started, I just want to remind, if you are a prequalified shareholder or analyst, to send your question to Investor Day 2021 at onex.com. Bobby, I'm going to ask you to get us started. This is a question from Scott Chan. You mentioned expanding private equity offerings to adjacent products and geographies. Could you expand on this? Is it demand you are seeing in the current marketplace? What type of incremental products you would see outside of OP and ONCAP?

Yes. Again, we're early in the thought process of things we could do. But certainly, over the next 5-year period, I could see us having a European fund for PE. The secondary part of the market has been really active. We could look at that a long-term fund. So things like that can easily see us growing our PE business over the next 5 years. And if you think about other expertise we developed at both OP and ONCAP, we could leverage our expertise in insurance, transportation, aerospace and other things. It wouldn't be PE funds, but they'd be funds that our institutional knowledge could take advantage of. And when I think about credit and how we've grown organically and inorganically there like by hiring talent and buying Falcon, I could see us doing that on the PE side as well. Some of it could be organic, some of it could be inorganic. Remember, we're investors first and foremost. So we'll be very thematic about how we approach this. But we're looking forward to explaining our progress to you over time. But there's many different ways we could grow the manager over time.

Yes. I just would jump in, maybe, Bobby, focusing specifically on growing fee-generating AUM. We talked a lot today about strategically allocating Onex's capital. And to the extent we find ways to invest Onex's capital in longer-term strategies, proprietary strategies that might put us in a position where we're crowding out LP fee-paying capital less often, which will also contribute to fee-generating AUM growth.

Yes. We would love to find more RSGs, as you mentioned in your remarks. Like that would be another great use of our capital.

Okay. Chris, a follow-up on the strategic capital allocation question, buybacks. You talked about that in your remarks, but is there any change in terms of how we're thinking about buybacks from a priority perspective.

Yes. I don't think there's no change in how we're thinking about it. And I think it's important to remember that with about $7 billion of proprietary capital that we think of as a real institutional asset, there's a lot of opportunity for us to invest going forward. I talked in my presentation about the new metric, distributable earnings. And it's really going to be an indicator of how much capital our business throws off, that puts us in a position to invest in our business going forward. And in addition to whatever we might want to do in terms of investing in our businesses organically and inorganically, I see plenty of room for us to continue to buyback our stock when we think it's undervalued meaningfully, relative to its full value as we did in spades last year. Ironically, I think part of our job as well, and we talked about our outlook today and our strategy today, is executing on a strategy that actually makes that stock buyback opportunity go away and get our stock fully valued.

I'd even take that to the next level. If we do our jobs right, we get proper value for our stock, we can use that currency to grow organically and inorganically. We can use that as a means to grow FRE to grow the different asset classes we want to be in. And that's the ultimate goal is to have that as a currency to use for those types of things.

Good point.

Bobby, why don't you get started on this one. The mix of Onex capital versus third-party capital, I think, in the PE business. Is there any directional guidance we can give in terms of what we would see that looking like from a numbers basis?

Again, I think we'll always be, I'm the largest investor in OP and ONCAP for the foreseeable future. I think the goal here is, again, as Chris pointed out, not to crowd-out fee-paying capital and to be able to welcome that in. And that in and of itself, if you even put the same amount of dollars in for the fund would help with the ratio of fee-paying capital, permanent capital. But again, if we're going to execute on some of these other strategies, I could see our absolute dollar commitment getting smaller over time, but it's too soon to predict how that might be -- how small that might be.

Okay. Chris, one for you. Can you describe your 2026 FRE target? Should we think about this traction as more back-end weighted as AUM scale is added?

Sure. I'll break that down, I think, into the same 3 buckets that I talked about in my presentation with respect to FRE. Private equity, as we've talked about over many years now, the private equity fundraising cycle and therefore, growth in fees is episodic. So you'll see step functions in terms of step-ups in new management fees as we collect fees on committed capital and then a slow decline between fund raises as we realize on investments in older funds where we're getting paid on invested capital. In terms of our outlook for our PE business, the good news is there should be a significant step-up next year. We expect 2 fundraises next year, both at OP and ONCAP, which should have a meaningful increase to the private equity business' contribution to FRE in 2022. And again, that slow decline as we move into the next fundraising cycle in our outlook, which is Onex Partners in 2026. At Credit, it's a different story. Credit, we expect a smoother growth in fee-generating AUM. It's sort of a constantly fundraising business for the most part. But fees in most credit products are based upon invested capital. So it does take a while for the fees to catch up with the fundraising. So for sure, that the growth in fees and FRE contribution at Credit, will be accelerating towards that 2026 run rate. And then lastly, the cost of investing Onex's capital, the cost of the public company, part of really operating leverage. We expect to increase our margins, our contribution margin overall as we grow, and that's going to take time. And I think that's going to add to that accelerating growth in FRE as we approach the end of 2026.

Okay. Chris, I'm going to direct this one to you, but Bobby may want to jump in as well. Is there an Onex medium-term cash target?

Less.

I agree with that, less. Yes, he's right. There's no specific target in the medium term. We've talked historically about a 25% target through cycle. I think really importantly, if we execute on the strategy and the outlook we put forward here and we become more strategic with the allocation of Onex's capital, looking for longer-term opportunities to put that capital to work, we will decrease that target over time. And so I think, for sure, as we execute, that 25% long-term allocation to cash, will come down. And I think we'll continue to measure it, as will you, and I think we'll be able to adjust our targets as we go.

Okay. Chris, just a quick one. Do your 2026 targets include one more fundraise for ONCAP and Onex Partners.

The 2026 target only includes a second fundraising cycle for Onex Partners. So we expect the second fundraising cycle kind of on a 5-year cycle for Onex Partners -- sorry, 4-year cycle for Onex Partners. ONCAP has traditionally had a 1-year longer investment period. And so we were not factoring that into the 2026 outlook.

Okay. Bobby, I've got a couple on the PE area. So I'll pass these over to you. So we mentioned in the ONCAP presentation, there are a few bidders at auctions versus several years ago. This is what we're seeing now. Why is that? Like that's in the ONCAP space. But why is that? And is that also something we're seeing in the OP space as well?

Yes. We're seeing it across private equity generally. Sellers are -- and this really comes back to why it's so important to be very thematic in terms of the areas that we're looking to invest in. Sellers are looking for buyers that can move quickly and are subject matter experts. And what that's allowing them to do is condense the time line upon which the business can be sold. But it's good in a lot of ways. It's less time for management distraction. Management gets a partner. Their next partner is somebody that really has a lot of value-add in terms of domain expertise. And look, the bankers love it as well because it just -- it's quicker time for them to earn their fees. So I actually don't see that going away in the near term. And I think, it's one of the big, big benefits of the strategic review we did a few -- 2, 2.5 years ago and that was just that. And we're actually benefiting from that trend more so than being a detriment.

Okay. And then here's another one. If you could highlight 2 or 3 areas where you see your approach to PE investing as unique or better than your typical competitors, what would those be?

Again, we have a couple of industries where we just have long-term success and domain expertise. Aerospace, industrials come to mind, insurance comes to mind. Those are -- that's really how you differentiate yourself in this market. There's a reason why we're down to 4 verticals in OP and 3 in ONCAP. We want to only look at situations where we think we can be true value-add to our partners. As well, we're building out our operations capability. So that is why -- I wouldn't say that we're unique in that sense. But the talent that we're adding on is really been additive in terms of diversity of thought around the table. And I think that's really going to benefit the rest of and OP V and OP VI and ONCAP V.

Okay. I've got a couple of Gluskin Sheff related questions. So from Nik Priebe, given your experience with the integration of Gluskin Sheff, how would you describe your appetite for further acquisitions in the high net worth asset management space?

So again, and we'll start with Canada, in particular. I don't see us -- we were really -- I love the platform we have with Gluskin Sheff. So we're not actively looking to add inorganically another wealth manager in Canada. It's just been fabulous how well the Gluskin customer base has embraced alternative products, Onex's alternative products, and we see that accelerating over time. So I'd more see us building that team organically rather than doing anything inorganically. As you probably saw on the OP side, we have made an acquisition with OP V in the wealth management space, very different business than Gluskin. But where our brand really resonates in Canada, so that's really where we'd love to really continue to build that out organically across the country.

Okay. I think we're getting close to the end here. Just to let you know everyone know that we did get a few questions come in that were very specific that shareholder relations will follow up on. But just for Bobby and Chris, I think the last one. Is there an opportunity for you to target high net worth clients that are not Gluskin clients, like not currently Gluskin clients?

So it's interesting, and this is not Canadian-specific, this is like, globally. Retail investors are really wanting to get into alternative assets and looking for easy ways to do it. I see that trend actually accelerating over the next 5 to 10 years. I think we need to figure out ways to give retail investors access to our products. And we're thinking about strategically how to do that real time. There's obviously traditional ways through the Morgan Stanley's or Goldmans of the world. But there's also new technology platforms that allow you to reach retail customers. And we're looking at that real time. I think that's going to be a big, big part of AUM growth for the industry over the next 5 years.

Okay. I spoke too soon. We just got another one in. Chris, why don't you start us off on this one? How would you approach servicing value on your carried interest potential with many moving parts amongst PE, Credit and GS.

Well, look, I think one way I think alternative asset managers like ourselves service value through their carried interest is by getting an appropriate and high multiple for their FRE. I do believe that getting actual value for carried interest in the stock has been difficult for most of our peers. It is sort of on the come. It's episodic, especially in the private equity business. And so I think that's been challenging. I do think where value gets surfaced though is in realizing that, call it, about 2/3 to 3/4 of our fee-generating AUM would also be carry-generating AUM, that type of underlying FRE deserves a higher multiple than a business that doesn't have that carry potential. We'll keep making sure that shareholders know what that carry potential is in and of itself, both in terms of accrued and realized. But I think a lot of the value will show up over time in the multiple of FRE.

And I always come back -- I come back to this $19 per share that is attributable to carried interest for Onex. And you put any MOIC you want on that, but that's additive to our enterprise value. And today, I just don't believe people view it that way. That $19 stat is one that I'm highly, highly focused on and communicating about.

Great. Okay. Just before I turn it over to Bobby to wrap this up, I just want to say thank you on behalf of the shareholder relations team. If you have any feedback, questions, comments, please feel free to reach out to us. We'd love to hear what you have to say. Bobby?

Well, thank you very much for the time and for allowing us to begin to roll out our strategy going forward. We look forward to reporting on our progress, on the KPIs that Chris laid out. And we'll be talking to you in a couple of weeks about Q3. Thanks for the time, and have a great day.