Pantheon International PLC ($PIN)

Thank you, everybody, and good morning. Firstly, I would like to thank everyone for joining the webinar today, and thank you also for being a supporter of PIN. If we could move to the next slide, please. My name is Tony Morgan. I recently took over as Chair, having joined the Board just over a year ago. However, I admit I've known Pantheon for many years. In fact, when you spent over 25 years working in private equity, as I have, it's pretty much impossible not to [indiscernible] Pantheon. It's a firm life held in very high regard for many years, so I was delighted to take over as Chair in January. I'm joined today by Charlotte Morris, who is a senior partner of Pantheon and the lead manager of PIN. And Charles, perhaps you could introduce yourself.

So I've met many of you, I'm sure, I am Charlotte Morris, as Tony says, Lead Manager of PIN, a partner at Pantheon. I've been with the firm for 20 years now. Most of that time spent working on secondaries and took over from Helen Steers as lead manager of PIN at the beginning of this year. So we're hosting this webinar today. We're delighted that so many of you can join us. It's the first time that we've done were in this format. So we're really excited and look forward to sharing a lot of information with you today. [Operator Instructions] So maybe with that housekeeping out of the way, Tony will start us off today. I think you should off me.

I knew that would happen. Charlotte will do the vast majority of the talking today as the webinar mostly relates to what's going on in the underlying investment portfolio. But I thought it helpful to briefly set the scene on how the Board is thinking about things before I hand over to Charlotte. If you read our recent interim report, you would have picked up my commentary that the private equity market has had a challenging few years. This is after a period of several decades, really where private equity consistently outperformed the public markets. As a result of these challenges, the Board recently undertook a significant piece of strategic work looking at both -- our investment performance and investment strategy and a lot of the things Charlotte will talk about today highlights some of the key analysis and conclusions from that review. This review resulted in us making a number of important changes to our investment strategy that I will remind everyone off in a second. But before I do that, I want to highlight a few key things we are focused on. as a Board. I think most importantly, we continue to see strong underlying growth in our portfolio companies. There are many things outside of our control, multiples [indiscernible] rates. But what we always want to see is continued growth in revenue and earnings, and that's the ultimate driver of long-term value growth in a portfolio like ours. We also continue to see strong [indiscernible] showing embedded value in the portfolio. Our portfolio has a long track record of delivering exits at material uplifts to NAV. And again, this really speaks to underlying portfolio quality. I'm pleased to say our cash position and cash generation has been strong. And the Board has also been actively looking at actions that we can take to increase shareholder value outside of improving NAV. And I'm going to come back to that at the end of the presentation. So if we could go to the next slide, please. As a reminder, working with Pantheon, we've recently made the following key changes to our investment approach. Firstly, a significant refocusing of our investment strategy to a much narrower set of the private equity finances. We're targeting a core group of 25 best-in-class [indiscernible] that we believe can consistently generate first and second quartile performance. And this is down from around 90 relations we have today. Secondly, a move to invest more consistently through the cycle to diversify our investments by vintage and avoid some of the vintage challenges we've experienced in recent years, and Charlotte will talk about. And thirdly, becoming an active seller of assets by using the private equity secondaries market to generate incremental liquidity from our balance sheet when it makes sense to do so. This approach will introduce more cash flow volatility into the business. So you should expect to see cash and debt fluctuate through the cycle, but we expect this approach to improve performance over time. So with that as background, I'd like to hand over to Charlotte to take us through the presentation.

Thanks, Tony. So I'm first of all going to take a bit of a step back and look high level at private equity returns, what's happened in recent years in the market. [indiscernible] PIN's portfolio you've seen since 2022, in particular, what we've seen within the underlying assets. That will lead into why we feel good about where PIN is today. And as we look forward, including the strategy evolution that we're taking the company through at the moment. There is a lot going on in the world. So we'll just at the end, touch on some of the current market themes before wrapping up with our outlook for 2026. So here, just taking a bit of a step back. So private equity has consistently outperformed public equities over more than 30 years. We're showing here the median outperformance versus the MSCI in the sort of mid-green boxes and the dark green is the top quartile performance at the top. So you can see over time that there's been that consistent outperformance relative to public markets. What we're looking at here is Cambridge data. So one of the most used private equity data sets that is out there for benchmarking. So you can see that there is that outperformance over time. But when you look at prior peaks, like just before the global financial crisis and what you can see today in 2021, 2022 vintages now, there are some similarities in the sort of subdued performance that you see in those vintages before we get into a bit of a market reset. Now if we narrow in on the period since 2022, in particular the past few years have been characterized by macro themes that everyone's aware of. The rapid interest rate rises that we saw through 2022, 40-year inflation highs, a number of wars and conflicts globally leaving geopolitical tensions and wider sort of uncertainty, those themes have translated into the private markets in terms of a sharp decline in market activity, both new deals and exit activity that we've seen in recent years. Fewer funds being raised and really actually a bit of a reset of the private equity landscape and a difference in how managers can generate returns going forward and who the kind of winners and losers are going to be. If you look on the right-hand side of this page, across that phase since 2022, the beginning of '22 is what we're showing here in this line chart PIN's performance was in line with the wider private equity market. Again, we're showing Cambridge global private equity returns here. This is quarterly time-weighted returns. And in the green line, what you can see there is the MSCI or world. So private equity hasn't exhibited the kind of swings that you've seen in public equities. And in our view, the performance tracking the pooled benchmark over what's been quite a difficult period is reflecting some level of resilience in the portfolio. So here now, as we dig into PIN specifically, and we're looking at longer-term performance for PIN. What we're showing here is PIN's vintage IRRs compared again to the Cambridge or private equity median IRRs for each vintage. It's not a perfect comparison. So PIN has a mixture of funds and directs in each of these vintages. And what you see in the Cambridge data is the actual funds raised in each of those vintages. However, what you can see here is from 2010 to 2019, Pens performance has pretty much tracked the Cambridge benchmark. But since 2019, PIN's outperformed the Cambridge median or you can see across the board performance over this period of the last 5, 6 years has been weaker than what we've seen historically. Before we dive into the portfolio that I just wanted to recap where we are today, just to level set everyone on the composition of the portfolio. Just so of half of the portfolio is in directs with the remainder invested through funds. We're tilting towards the mid-market, half the portfolio, but growth at 18% and venture at 6% also represent another 1/4 of the portfolio that's important and a driver of growth. It's a global portfolio with most of the exposures in the key private equity markets of North America and Europe? And then finally, in terms of sector, tech and health care make up just over half of the company exposures in the portfolio. We'll come back to talk particularly about software later on. The funds part of the portfolio comprises primary blind pool commitments and fund secondaries while the directs -- a combination of co-investments and manager led secondaries. Now what we've presented on the page here, and I'm aware it's quite a lot of data here. So we will put these sites on our website after this webinar, to be able to kind of go and look at these data points in detail because there is quite a bit of data through the presentation. We've broken out here the multiple and IRR performance, so not horizon returns, but overall multiple and IRR of the investments within the portfolio, and we've split it into 2 key periods. The 2010 to 2020 phase, that represents more established returns in the kind of longer-term picture and then 2021 to 2025, the last 5 years or so, where we've seen the impact of those challenging macro conditions that I talked about and that we've seen through the recent years. You can see in the top boxes here, over that 2010 to 2020 period, the returns are really solid with primaries and co-investments achieving the type of returns that we underwrite for those investment types, so 2x and high teens for the primaries, it's right in line with that at above 2x and high teens to low 20s for the coinvestments on the right-hand side, we can see that 2.2x is certainly delivering on the multiple and the IRR a little bit below. Fund secondaries in the middle here isn't part of our active strategy at the moment, but it has been historically and was over this 10-year period. And the returns there are in line with the expectations of that part of the market where you typically see multiples of 1.5x and mid- to high teens on the IRRs. And over this phase, the manager-led secondaries that are in the portfolio are quite a different profile in terms of the underlying companies and the deals compared to what we see today in the sort of 2019, 2020 onwards, the profile of deals that you see in the management and secondary part of the market are what are commonly referred to in the market attenuation funds or continuation vehicles where a manager is keeping 1 of their assets and typically skew towards top-performing companies, star assets within a portfolio that we see in today's deal flow. So we turn to sort of today's deal flow, and what we've seen across 2021 to 2025 and the sort of second set of numbers here, you can see here the impact of the last few years. both in terms of on the primaries, the capital deployed has been slow. From those amounts committed as well as deploying into particularly peak valuations 2021, 2022 and seeing the moderation of those valuations in the following years. Our direct strategy, so [indiscernible] secondaries and co-investments deployed quite a lot of capital during the 2021 and 2022 vintages. I'll come back to talk a little bit more about that. And the IRR performance of those deals is likely to be somewhat challenged by the longer hold periods that are now anticipated, but we do still expect to generate good returns in multiple terms on those assets. And when we think about the portfolio today, whilst this performance that reflects the evolution over the last few years, is lower than what we have seen historically and lower than our overall expectations for the full hold of these assets. The holding multiples, the valuation multiples for companies in the portfolio today have largely reset to today's valuation environment. So we see a lot of the noise and the impact of the last few years already reflected in today's NAV. So if we dig into '21 to '22, in particular, a little bit further, of the unrealized portfolio, most 2021, 2022 vintages represent almost half of the paid-in capital on those deals or the cost of those deals. We've shown here the returns across each of the investment types for 2021 and 2022. And it's clear that the returns of these different cohorts overall are 1.3x and about a 10% IRR is lagging the overall return that we've seen across 2010 to 2020, that will sort of mature phase where the performance sits at around 1.8x and 16% overall. So as I said before, these vintages made investments into companies at what were higher valuation. So we've seen a negative impact coming through from the extended valuations reset over recent years, but also the expected extended holding periods for these assets. You might have expected in normal market conditions, 2021 assets to already be exited by now sort of 5 years into their hold. But as these assets mature from now, we expect that the performance going forward will be driven by the operational performance, the growth in earnings and top line now that the valuations have been reset. The bar chart at the bottom here sets out the NAV of the portfolio split out by vintage, and that gives you a sense of the amount of deployment that happened in 2021, 2022 compared to that of '23 to '25, for example. So our net cash position in '21 and '22 led to recycling that higher-than-usual distribution activity in the years into higher-than-usual deployment. And that profile of investing has hurt subsequent performance. If you take a step back, many of you will know that PIN has run a net cash position pretty much since inception up until 2024 when we first went into a geared position. So when we look back over the last few years -- and on the next slide, turn to think about what's happened in primaries over that period. We've seen a couple of cycles play out through the last few years. 2022 was characterized by the tech rerating that you started to see at the back end of 2021 and into '22, that clearly impacted venture and growth in particular, and you can see the falls both in 2022 and stabilizing, but also into 2023. While in 2023, the buyout returns were impacted by the rising rates and inflationary environment that came through in the second half of '22 in particular. And then 2024, you can see that there was a recovery across all of the stages, in particular, that bounce back that we saw in venture with a nearly 15% return over that year. In 2025, so far has shown us a bit of a pullback with events like the tariff announcements and FX headwinds flowing through into the valuations of the portfolio. So the past 3, nearly 4 years at this point have been difficult for the wider private equity market, and that's been reflected in our portfolio. The portfolio has reset in terms of valuation downdraft, some write-downs on a small number of assets that weren't able to withstand that rising rates environment. But the portfolio is high quality, and we believe it's in a good place today where the NAV now reflects the multiple contraction, the moderation of earnings, growth rates, the impact of the market factors that we've seen in the last few years is really embedded in PIN's NAV today. And we think that the portfolio has demonstrated in the last few years, resilience in the face of that quite challenging market environment, and we think that positions it well for recovery from here. So when we think about the composition of the portfolio, it is diversified. We have more than around 500 companies, representing 80% of the portfolio. No company is more than 2%. So that diversification has given us a bit more stability in the portfolio. When we dig into the operating performance of the companies, we do see continuing operational growth. So 12% weighted average EBITDA growth within our directs portfolio, we'll dig into that a bit more in a minute. And we've continued to see uplifts across the portfolio. And we see the companies exiting, that's often where we see this bumper exit that comes through from the managers really doing the best when it comes to exit to identify the type of buyer that is willing to pay up for their asset and see a surprise on the upside at the point where they finally sell a company. And then just in terms of some of the other metrics around the portfolio. And again, this is data focused on the directs in particular, where we have good coverage of all the data points within the portfolio, the portfolio is valued on average at 15x EBITDA for the companies that are valued on an EBITDA basis with net debt just under 5x at 4.8x net debt to EBITDA. So a reasonable position, and as I said before, reflecting the reset today. The average age of the portfolio has ticked up slightly with those longer holds to 5.7 years. And we've seen pretty limited write-downs over the last 3 years across the portfolio. And as I mentioned, we're first sort of a handful of companies where with rates rising quickly and having a little bit more debt on the balance sheet, they've struggled to afford that. And so we've seen a few write-downs in the portfolio. When we dig into the directs here and this is 53% of the portfolio, though. These are the companies, as I said before, that we have invested in through investments and manager-led secondaries. So we're selecting a company that we get through the deal [indiscernible] that we see from the manager relationships that we have, we're investing directly into a company always alongside a private equity manager, who is the one responsible for doing all of the day-to-day work, managing the strategy and growth of the business. These companies arrive new assets for the manager in the case of a co-investment or ones that they've already owned for a period of time and therefore, know really well in the case of a managed-led secondary. They have attractive growth characteristics. That's why we tend to see and why we target returns that are over 2x on these transactions and they've effectively passed through 2 layers of scrutiny. First of all, identifying the manager and the underwriting and diligence that we do on the managers' abilities. And then secondly, on the specific company opportunity where on these particular opportunities, we typically see lower fees than what we would do on a fund position. So co-investments are generally no fees and carry manage-led secondaries or a negotiated fees, so lower than what you would see in a fund. So this is a cost-effective way of capitalizing on the value add that we can see with the selected managers in the wider pin portfolio. Investments are also typically invitation-only, so they're not just accessible to any investor out there. When we look at that direct portfolio, and it's a good way of seeing the themes that are going on in the wider portfolio. We dig into this portfolio. We've got 86% coverage in these stats. Here, you've seen 12% EBITDA growth only for the companies that are being valued on EBITDA and just under 13% revenue growth. So still seeing strong operating performance within the portfolio. What we've done here on this page is to set out a value bridge. So we looked at this direct part of the portfolio where we had that 86% coverage end-to-end, looking at June of 2024 to June of 2025, linking the operational performance, so the actual top line and EBITDA growth at the company level to what translated into valuation movements at the PIN level. And that's why we've done this on this June to June period. we don't have any of the noise of adjusting to different periods. We can match the company performance with the valuations that we saw coming through to PIN's portfolio. So what you can see here is that the strong operating performance that 13% or so in revenue terms, 12% that's contributing to valuation from EBITDA valued companies is amplified because they are leveraged businesses, and that contributed 15.7% increase in value across this cohort. But you can see here in the gold bars, that, that strong operating performance has been offset by a number of negative value drivers, including increased net debt multiple contraction, some companies that were written down to below 0.5x. So those are those kind of write-downs to practically 0 or actually 0 and then a strong FX headwind of 4.8% over this period. When we then dug into these companies, understanding what has driven that increase in net debt, the majority of cases where debt was increased was where an increase in debt and more debt have been taken out to fund add-on opportunities. So buy-and-build strategies within the portfolio where the companies were acquiring businesses and yielding debt to fund those acquisitions. That also is part of the revenue contribution because this isn't just organic revenue, includes a component that comes from the add-ons. It also is part of the EBITDA margins being sort of flattish, where the companies are investing in integrating those businesses. And indeed also in part of the multiple contraction in some of those add-ons are just valued at the price of the add-on rather than rerating up to the platform multiple. So when we take a step back from that and think about what that means, we should start to see some of the benefit from that add-on activity coming through. If that then, in the future, translates into cross-selling opportunities and synergies and improvement in efficiency, this investment in add-on activity we hope will generate attractive growth from here going forward. There was also a small impact from some dividend recaps, so where businesses had repaid debt very quickly, and we're cash flow generative. Companies, the managers had recapitalize those businesses and given dividend recaps back to the equity investors. So when we think about what this means for the positioning of the portfolio, we've seen the impact of the valuation resets over recent years, and that is already embedded in the the portfolio valuation today. We've seen the impact of the companies that have struggled with that rising rate environment in '22, and we've seen that through into the portfolio in these limited write-downs and write-offs. So these aren't necessarily permanent write-offs, which is what we publish in the annual report and the interim report in terms of the write-offs data. This is a more cautious approach because it includes any companies that are still owned by the managers and where they're still working on returning value, and they haven't lost that business to the lenders. So we hope this gives a bit more sort of insight into what's going on in the underlying portfolio, particularly over this last year period, and this is something that we'll continue to provide in the annual report and interim reports going forward to keep giving that insight into the portfolio. So then when we look at the portfolio level over the last 3 years, this is across the entire portfolio. We've seen a similar picture in terms of multiple contraction, FX headwinds, some limited write-downs impacting the overall returns. So when we think about this, the subdued returns that we're seeing over recent years, in our view, coming more from macro or financing factors as opposed to a deterioration in the core business fundamentals where we still are seeing that earnings and top line growth within the portfolio. When we look at valuation, we can see that our portfolio companies and the data that we're showing here is again for that directs portfolio. So that throughout this presentation, it's on the same cohort of assets that you're seeing all of this data. The portfolio company valuations, we think are reasonable and they're lower compared to the MSCI. We've shown 2 different ways of presenting the MSCI here in the gray box, we've got the aggregate method, where you aggregate enterprise values and EBITDA. In the green boxes, we are computing the MSCI using each of the company's multiples and market cap weighting that to reflect that there is that concentration in the MSCI into the MAG 7 stocks. So you can see here, whichever way you look at it, and in particular, for the technology assets. We have a portfolio here that on a relative basis is pretty reasonably valued, and we think gives the reset that we've talked about has already been flowed through the portfolio. Overall, PIN's portfolio for this cohort is valued at 15x. So we ourselves have a higher weighting in technology and health care that as you can see here, it typically held higher multiples than the market average. And as I say, our exit data reinforces that valuation discipline, and we continue to see the uplifts that go through at the point of exiting the portfolio companies. So you can see here what we're showing on the right-hand side, and many of you will be familiar with this slide from our investor presentation. On the right-hand side here, you can see that over time, we can need to see those uplifts that exit the demonstrate the embedded value within the portfolio. Alongside that value of the portfolio, we've seen a pickup in cash generation and an improvement in liquidity. The distribution rate, which you saw on the slide before, has been increasing over time after the last few years where we sort of troughed at 8% to 10%. It's nearly doubled in the 18 months from the end of our '24 financial year, so May of 2024 through to November of 2025. over that 18-month period, it's doubled nearly from 8% to now at 15%. And the coverage ratios that you can see here in terms of financing, undrawn coverage are robust. So in this market, we've started to see improving liquidity conditions with that gradual recovery in the M&A market, IPO market starting to come through. So overall, when we think about the quality of the NAV where it's positioned today and how we see its positioned to grow going forward, having seen the impact of valuation reset and the changing environment flow through into the NAV of the portfolio. We think the portfolio is well positioned to start to see a recovery towards stronger enough performance coming through as we see a recovery start to come through in the market. So I'll turn now and talk a little bit about the strategy evolution. Tony sort of gave an introduction to this at the start of the call. We announced much of this at our Capital Markets Day last September and in an RNS that we published at the time. We've talked about what's happened in the portfolio in recent years. And as we dug into that performance with the Board last year, we considered how our performance improves from today, one part of that, as I say, is that wider market recovery. But we don't want to just be waiting for a recovery to come back. We looked at the factors that within our control and active capital management is a refinement of strategy that we believe, based on our modeling, can improve performance going forward by 2% to 3% better managing the vehicle, better managing the portfolio. And the key elements of that are consistent deployment, managing new investment activity as well as divestment activity, allowing gearing now that we have a geared position to oscillate and go out in the trough of the market, come into a cash position in the peak of the market and be much more actively managing the portfolio. So on the next page here, when we dig into what that means in practice a little bit more, on the left-hand side here, you can see a few of the themes that Tony touched on at the outset. So increasing the focus on core managers in the portfolio is an important one that we announced in our interim report and has been something that we have been moving towards over recent periods. So really thinking about in this new market environment, you may have read this in Bain's Global Private Equity report that they published last month, our conclusions were very similar last year. The landscape for private equity is changing going forward. The way that managers have generated returns in the past isn't necessarily going to be as straightforward going forward. The environment has changed. We're no longer in that kind of super cheap debt environment and the drivers of returns going forward may be different. So for us, backing the managers that have the ability to generate returns in the new market environment is really important. So digging into how they've generated returns historically, how much of their returns have been relying on use of leverage? How much have generally been driving growth in their companies, creating better companies, actually genuinely creating value in the assets and being differentiated in what they do. That's going to be important going forward and so we're focusing on those managers. We're continuing to execute on underwriting discipline within our portfolio. So not only in that fund selection and the managers that we choose, but when we review the asset opportunities that we receive from managers really kind of sticking to our underwriting discipline. You can see in the pie chart -- in the bar chart here at the bottom, how we've underwritten manager-led secondary deals -- and you can see in those first 2 bars that the majority of the return is what we're expecting from top line growth, improving the efficiency of the business with EBITDA margins not really relying on debt pay down and having a smaller component that could come from multiple expansion, especially if you're investing in a business that has a consolidation play, and you can benefit from multiple arbitrage on those add-ons, but also can create scale business that has the possibility of a rerating that can give us some sort of upside potential. On the next slide here, just to kind of dig into for the funds piece of what we invest in, how we think about that at Pantheon. We are looking for specialization. And as I mentioned before, a repeatable strategy that can give that manager and advantage in the new market environment and over the long term. So we look for specialists and what do we mean by that? Sector specialists. So when it comes to talk about software in a moment, we invest behind software specialists. It's incredibly important to have managers that live and breathe their part of the market and really understand it. Country or regional specialists is important within Europe and Asia in particular, where you're investing with managers that are well networked and understand the culture, speak the language, know how to invest and unlock value in those regions, operational specialists. So that could be something like a buy and build strategy where they have the expertise to identify add-ons to be able to truly integrate those businesses and not just end up with the sort of combination of different underlying assets where they haven't really consolidated the market and the ability to embed that skill set within a portfolio company and not just be doing it themselves in a way that isn't sustainable for the business, but allowing the business to take on that skill set and ability themselves so that they truly are building value into the company. And you can see here at the bottom some of the sector themes, health care spending, whether it's from an aging population or emerging economies, spending more on health care. Some of the evolution in telemedicine that has evolved through COVID-19 pandemic. In technology, notwithstanding the noise that we've seen around software valuations recently, there are these long-term tailwinds and trends that we expect to persist around digitalization, the AI revolution, advances in big data that will continue to drive opportunity within tech and then also evolving sort of consumer preferences. And within consumer discretionary, because of the way that sort of GICS codes work, you see things like education businesses that has been quite an interesting theme within consumer. And on the next page, we dig in a bit more in terms of the direct and some of the themes that we've seen there. So when we're looking at a specific company, we can dig into the really [indiscernible] how is the revenue? How is the financial profile of that business resilient? Is it investing in a sector that has attractive structural tailwinds? Does it have a recurring revenue model that creates customer stickiness? What is the kind of end market cyclicality like? And how can we invest in companies that have more defensive, resilient nature to them? We're looking at margins and how embedded and essential a particular product or service is and how enable is that business to then control the pricing and push through increases in costs and where the different macro cycles that you might see along the way, what does the deal structure look like? So when we're looking at a particular asset, we can look at the capital structure that is in place runs activities on what happens in different scenarios in terms of rates and cash flows. In some cases, negotiate downside protection or a preferred return and explore how resilient interest rate rises, a particular businesse is. And then really important because we are always investing alongside managers is coming back to selecting the managers in the first place and making sure that we're investing with groups that really understand the sector that they're investing in and really know what they're doing. So then maybe just to kind of dig into some of the market themes. And obviously, AI and software is something that's been really topical recently, a little bit overshadowed by what's been going on in the Middle East. But certainly, the beginning of this year, AI was dominating the headlines. And obviously, it was something that we have been thinking about across our portfolio. So our perspective on this, and as I said before, we invest with a lot of software specialist managers, the likes of HG, Toma Bravo, Francisco Partners, entered groups like Andrew and Harvest in the U.S. What we have been doing over recent weeks is speaking to our managers, understanding what's going on in the portfolio of companies and what they see and what their perspective on the market development is? What is really clear is that the -- what we call her software profit pool. So how software vendors get paid, what they're doing and how their businesses and the business models are set up is being reshaped. And there will be winners and losers. That is very clear. Not everybody is going to be benefiting from the rapid development of AI. Software is being repriced. But it's more around who owns the data, who owns the work, who's kind of dictating the outcomes and not necessarily the interface. So is it a software provider or the likes of that ChatGPT or it's not really about that sort of interface piece. And what's clear to us and our managers is that software isn't dead as a product type, it isn't going away, but there are considerations that you need to think about in terms of the challenges that may come to that part of the market and how that plays out specifically within the companies in the portfolio, but also the opportunities that it brings. And we've set out a couple of the thoughts here, in terms of the challenges that the market is dealing with coding itself isn't a competitive moat anymore. So the fact that you can create something in a piece of software that others have to try and do manually themselves. The fact that you've put all the effort and used the software engineers to create that isn't enough of a barrier and protection in itself. The pricing model around whether your chain based on the number of users and you've already seen that transition from a kind of license model through to SaaS. There is another kind of evolution from, as I said, sort of user-based pricing into what are users actually doing that piece of software and more of a kind of consumption model. And that's something that will change the way that software is priced and there'll be winners and losers. And obviously, there are some kind of categories in particular, if you're using public data, scraping that and reformatting it, that kind of software is not going to survive when AI for sure, is replacing the ability to just go and do that and ask [indiscernible] or ChatGPT to create that data and come up with some analysis. But there are parts of the market where software can have a competitive advantage and can see some resilience from what's happening with the development of AI. So being incumbent, having the data from your customers, being your own piece of software can still mean that you have a right to win. So the the ability to kind of keep those customers use their data that is private, proprietary to develop better software products to innovate within your own software product. And in the case of our software managers, be embedding your own AI tools and workflow into the software itself. So that your customers don't need to go and layer on anything else from a separate AI provider or an LLM, they're built into the software -- into piece of software itself. AI can offer the opportunity to expand the TAM. So if a software business is able to replace something that has been done historically by an individual into a tool within a piece of software that can increase the TAM for that particular piece of software. So there's a lot more nuance at the actual company level, and we'll start to see some of that coming through. When we think about how this relates to PINs portfolio, we see high-quality assets within our portfolio. They're alongside specialist managers. It's a little bit too early to say how this is going to play out in terms of valuations and we're keeping an eye on that, working closely with our managers. And in particular, at the moment, assessing the risk within our portfolio and going through with our managers, understanding company by company, how insulated from the AI developments or how much an opportunity there is within our portfolio. When we think about the valuation though, we see 19.9x to 20x is a reasonable valuation model [indiscernible]. I mean it's obviously higher than you see in other sectors, but we think it's reasonable for the portfolio. And within our 34% that we have in technology, about 1/4 of the portfolio is actually in software businesses specifically. And actually, within that, only 14% is in buyout software businesses and different parts of the market will be impacted in different ways. A lot of the discussion is in the press at the moment is around buyout software businesses. We have the other 12% that is in growth and venture managers where you would expect them to be investing more in the AI businesses themselves and in more sort of start-ups and AI-led businesses. There are 2 other things here just to touch on private credit. There's a lot going on here in the headlines. I think we are entering phase of recalibration within private credit, where when you think about targeted returns, the risk assessment, there's been a lot of capital raised in the sort of primary market for private credit over recent years. And as you've seen rates evolve in particular over the past 4 years with that rapid increase and then some rate cuts coming through, there is a recalibration going on there. And a natural adjustment to that moderating yield environment. We don't see this though as kind of structural weakness overall. And within PIN''s portfolio, there are no private credit assets -- so there's limited first order impact from what's going on in the market there. And then finally, the situation in the Middle East Obviously, the most immediate impact of that is the companies that have operations in the region, all firms that are really directly impacted by rising oil and gas prices. We have limited exposure to those sorts of businesses. But what is likely to play out is more the sort of broader dynamics and the second order effects that we'll start to see. So oil and gas price rises is one of those, whether that starts to lead to accelerating inflation. What does it mean for cybersecurity risks and broader sort of infrastructure vulnerability and leading into macro uncertainty and sort of wider geopolitical tension. So we're actively monitoring all of these factors. At the moment, we see limited direct impact in the portfolio, but it is a bit early to see how those broader impacts will evolve. And as I say, we keep our we keep looking at the situation and how that might play out in our portfolio. So then just looking forward from today, we think the market is starting to enter a bit of a cautious recovery. We saw volumes at the back end of 2025 in private equity really kind of recover in that Q3 and Q4 period in terms of new deal activity, but distributions remain below the long-term averages and we hope to see in 2026, a recovery coming through there, in particular, as we start to see corporate buyer is more active in the market. We talked quite a lot about valuations and the rates environment and how that has flowed through in the portfolio, and we feel like we are entering more appropriate environment going forward. And we hope that from today, the outlook for longer-term returns is remaining attractive and we expect that the public markets that have outperformed over recent is really been driven by those concentrated stocks, and that's very different from our portfolio that is diversified and less volatile over time. And we hope that the sort of changes that we've been making and continue to make around strategy will set us in the portfolio up well for the near term. So we've covered most of this, and maybe just in the interest of time just skip to the last slide here. As I say, over the past 3 years, the portfolio has stayed in line with the private equity benchmarks, we kept that diversification. We've seen more stable returns. We haven't seen negative returns in the way that you had in '22 in the public markets, and we are seeing over the past few years, that liquidity and distribution rate improving over time. The multiples in the portfolio have reset. We're still seeing strong operating growth in the portfolio. We're still seeing the bumps exit from the carrying value, so demonstrating our embedded value and distribution rates that are recovering. And then as we look forward, the direct still have quite a lot of younger assets there where they're in the middle of their value creation. We see growth to come there. We don't have that much reliance on multiple expansion or the use of debt and as we see the continuing recovery in exit markets, we believe the position is to -- the portfolio is positioned more like we've kind of got through that cyclical trough and starting to see a recovery. So with that, I might just hand back to Tony to wrap up from the Board's perspective.

Thank you, Charlotte, for the presentation. Before we start the Q&A, I wanted to just take a step back to the PIN board level and what we are focused on. I mentioned at the start of the presentation, the changes we've made to our investment approach, as you see on the left-hand side of this chart, our focus, I should say, is now shifted to to making sure these are effectively implemented by Pantheon. But in addition to investment and portfolio management strategy, we're also focused on ensuring we have the right capital allocation approach and that we're allocating the appropriate amount of capital to new investments versus share buybacks. We know that share buybacks can be an important source of value creation and is a key area of focus for a number of our shareholders, and that's why we've bought back over GBP 325 million of shares in the last 3 years, which is one of the largest, if not the largest amounts in our sector. We've also been very focused on managing our own cost base, and we're pleased to have recently lowered costs in 2 key areas: the interest costs on our debt facilities and also the fees payable to our manager, and we've seen substantial cost reductions in those areas. And last, but very much not least, we've continued to engage with our shareholders listen to their concerns and suggestions. One suggestion was for us to share more information on what's happening in the broader private equity market, what's happening in our portfolio. And also what the board is looking at, it's making its decisions. So I hope that you found this information we've presented today useful. Our hope is to continue to iterate this analysis and improve our reporting wherever we can going forward. And with that, I believe we're now ready to open the Q&A, so I'll hand back to Charlotte, I believe, who's managing that process.

Yes, that's right. So we've had quite a few questions come through. So we've got about 5 minutes or so. So I'll just run through a few of these questions. So one of the questions is, will the impact of private credit challenges inevitably impact private equity returns? I can take that one quickly. So far, we don't think that -- well, I mean, private credit has been a source of capital for the mid-market, which is a large part of our portfolio. I think there will continue to be private credit managers pursuing that part of the market. The moderation that we're seeing in private credit markets, I think, is more about the sort of spectrum of managers that are there and the different types of credit and lending that they have been offering. So within our subset of that in the mid-market, we see a bit less of that. We are at the kind of high quality end of that. And we don't think that the challenges in private credit are likely to impact what our managers are underwriting for private equity. There's another question that is around the relative returns of directs and co-investments made by PIN. So I think that might have been asked before we got to that part of the portfolio. So if you want more detail on that, then feel free to get in touch with us. There's another question here around the visibility that we have on gearing of the overall portfolio, do we keep it within limits. So the underlying portfolio within the directs has gearing net debt-to-EBITDA. And that's pretty similar to what we see across different Pantheon portfolios. And so it's similar to what you see in the wider portfolio. And that is deliberate both in terms of -- generally speaking, the mid-market tends to level the companies more modestly than we see at the larger end, and we have only about 1/4 of the portfolio that's in the large and mega assets that are the parts of the market that tend to use debt more aggressively. So it's sort of structural in terms of pursuing more in the mid-market. And obviously, the kind of quarter that we have in growth and venture doesn't really use gearing. And then it's also deliberate in terms of when we underwrite the directs that we pursue, we spend a lot of time looking at the capital structure because that is something that can really wipe out value and we saw that through the global financial crisis. So that is within Pantheon, we are relatively cautious in the use of debt, whether it's at the company level, when we do secondary transactions, we don't typically use debt on those. And when we structure our vehicles, we are relatively conservative in the additional debt. So at those different levels, we are relatively cautious and it's something that's actually very important for us and that we do review quite carefully. There's another question. Maybe, Tony, I'll give this to you, that is about how long will it take to reposition the portfolio into the top 25 managers?

Yes, sure. I mean, given the nature of the types of relationships that we have and as everyone knows, these are very long-term relationships to funds, under their own sort of timing would take quite a while to rebalance, but what we've talked about previously is looking at selectively selling assets in the secondary market to generate liquidity and to rebalance the portfolio. And certainly, one of the key considerations as we look at asset disposal options would be to accelerate the repositioning of that. So that's a key consideration. So I would expect that we could accelerate that repositioning by using that mechanism.

And then maybe just lastly, and there are a few other questions. We will get back to the people kind of directly if we weren't able to answer your question. There's another question here that's asking, looking forward, do you expect to reduce the pace of investment in new deals in the SaaS space. And that's a great question. I mean I think there is a lot going on within software and we've seen it just in terms of the pace of AI development really recently. It's -- the market landscape is changing dramatically. So we pick up exposure to SaaS deals in 2 different ways. And within the fund commitments that we've made, we will continue to see new deals coming into the portfolio from software fund commitments, primary commitments that we've already made as those managers deploy that capital. And as I mentioned before, they are software specialists and they will be taking all of the market environment. They know what's going on. They've been thinking about these themes and how they should embed that in what they're doing in their own strategies over many years, and none of this is new to them. So they will select the right places at the right time to be deploying their capital into the market. When it comes to newer deals, so in particular, I'm thinking about the directs, the co-investments and the management secondaries. We have seen deal flow in those assets coming through in the last couple of weeks, new deals being launched. I would say that the new deals that we're seeing in terms of coinvestor manager-lead activity has been lower in that part of the market. So there's naturally a little bit less deal for coming to us from that sector. We have a high bar for those assets. So that's not to say that we are pulling out of the sector altogether. But I think we do have a very high bar. And as we underwrite diligence and underwrite those assets and dig into what's going on with those companies and how they are positioned for what's happening in the market, there is a higher bar there. I think means that in this kind of near-term phase, I think it's likely that we see more limited deployment within the directs into SaaS in particular. So maybe with that, we're just coming up to the hour to say [indiscernible] I'd like to just extend my thanks to you all for joining today. I appreciate you taking the time, and we look forward to engaging further with all of you as investors do if there's something that we haven't covered today that you're interested in, please do you send us any questions over the pin.ir e-mail or if you know us directly. And we look forward to sharing more insight into the portfolio with you over the near term and speaking to you directly as well. Maybe with that, I'll just hand over to Tony for final comments.

To add from me, again, I'd like to thank everybody for joining us today. I'd like to thank everybody for their continued support of PIN. And as Charlotte mentioned, we have a number of open questions here that we didn't get time to answer today, but we will work through those and do our best to answer them as best we can in the coming days. So with that, I think we'll wrap up, and thanks very much.