Patria Private Equity Trust plc ($PPET)

Good afternoon. Welcome. I'm Alan Gauld. I'm the lead manager of Patria Private Equity Trust or PPET for short. Very delighted to to host you here. And on PPET's 25th year anniversary. We've got a nice agenda ahead of us. So if this clicker moves, there we go. So we'll hear from Marco D’Ippolito, who is the Head of Patria Global Private Markets Solutions about Patria. And then our CIO, Colin Borough, will take us through the current state of the private equity market and talk us through our views there. I have the pleasure of double-clicking on the PPET investment strategy that I'm sure most of you know very well. So we'll go into a bit more detail on that. Before breaking out into the different component parts of our portfolio, primaries, secondaries and direct, which my colleagues will cover. And we have the pleasure of welcoming [indiscernible] Capital and PAI partners, 2 of our long-standing private equity manager relationships that will talk through our partnership with them. We'll have a little bit of time for Q&A at the end. So please save up your questions and those online have the ability to submit your questions, and we'll get run to them subject to time because we have to close the London Stock Exchange today. So we are restricted on time. So it'll been 90 minutes in total. From an admin perspective, there are no fire alarms planned. So please if the alarm goes, follow the London Stock Exchange staff to the nearest exit. I think that's it. I'm looking to Rebecca in case there's anything I've missed, if not, I'll introduce Marco, who will talk to you about Patria. Thank you, and hope you enjoy the day.

Thank you, Alan, and good afternoon, everyone. And on behalf of everyone at Patria, thank you for joining us. It's been over 2 years since Patria acquired Aberdeen's Private Markets business and with it, became the investment manager of PPET as a FTSE250 company. For Patria, this represented a transformational international expansion in our private equity business. and a scale-up of our operations here in the U.K. for investment opportunities across Europe. And of course, an integration of a very well respected team that is here with me today. I want to thank Paperboard for giving us the opportunity to manage PPET, and thank you, as shareholders, for supporting the Board's stewardship with Patria as a manager. For Patria, for over 37 years, we have invested across very different environments, interest rate regimes, investment cycles and geopolitical changes and have been trusted by garments, sovereign wealth funds and large expansion providers in the world. Through this time and with all of the macro volatility, our core principles has remained constant. We believe that disciplined local execution is the foundation of long-term value creation. We also pride ourselves of being long-term partners and platform builders. Patria's strategy is very deliberate and differentiated: our focus on highly tailored investment opportunities in the market we know best. We started in Latin America, which for this type of private equity investing in the middle market, the backbone of the real economy businesses, large enough to scale, yet, mostly founder-driven and founder operator, and is very similar to the investment opportunities, operational challenges and company profiles here in Europe. We made the strategic decision to expand and build locally in 2023 and join with this team, mostly based in Adinbrah that you're going to hear from today. The team are deeply experienced in private markets with proven track record, long-standing relationship across the European landscape, and the depth with excellent GPs, partners that is needed. The mid-market opportunity set in Europe is enormous with more than 4,000 investable mid-market companies. The region, as you know well, is operationally complex with multiple legal systems and regimes. The variation creates an efficiency, but also opportunities as capital alone is not sufficient. We believe that investment success depends on local knowledge, trusted relationships and the ground of execution, really knowing how regulation -- how regulators think, how contracts are enforced and how management teams operate day-to-day, it makes a defined difference. No two countries are the same, and no two companies are the same, so one size fits all investing doesn't work here. Today, you're going to hear from my colleagues reflect meaningfully on the opportunity set for mid-market private equity investing across all types of investments, primaries, secondaries and co-investments, and how they select partners and investments to drive performance and returns. And this all delivers value to you as investors. Now I'd like to introduce you to the team. Colin Borough is our Chief Investment Officer in GPMS, and will provide insight on the state of play in private markets and supporting macro teams. Alan, People's Lead Investment Director, is going to spend time talking about deep strategy, its investment thesis, convention and emphasis on the middle market and European investment with the right GPs, partners and funds. And we all follow with spotlight from the senior investment team: Mark, Karen and Patrick explain our approach to primaries, co-investments and secondaries. Finally, we'll hear from our GP partners, and thank you so much for being here today, Jean-Francois Baudin and Camil Defefrom from [indiscernible] Capital in conversation with Alastair Watson. Shane O'Driscoll, thank you so much again for being here from PAI Partners and in conversation with Cameron [indiscernible]. And we'll have time for Q&A. [indiscernible], will be hosting us for the market closed ceremony and 25th celebration later this afternoon. So thank you again. I hope you enjoy. And with that, I pass on to Colin.

Thank you, Marco. Yes. So just to introduce myself in Colin borough, I'm the CIO of Patria GMS. So today, I'm going to try and sort of explain what's going on in the market just now and you think having worked for 30 -- well, this is my 30th year in private equity. So by now, I should know what I'm talking about, but is we all know markets are tickle and so are we. But hopefully, some of what we show you will give you an idea of how we see it. So this first slide is really just trying to show the long-term trends in the industry. And to me, they show a very [indiscernible] picture. 11% growth in assets under management over the periods and frankly, pretty outstanding returns versus comparable indices. But to me, this is really looking backwards and what we're seeing is that probably these trends are beginning to change really. These 2 charts just show how important private equity has become in the capital markets world. The fact that we're in the LSE is slightly ironic given how dominant private markets have become. And really the change in more recent years has become -- it's not been a platform to public -- to going public, it's more it's become the norm and staying private has become much more feasible for these companies as private markets find different ways to maintain ownership, be that through continuation vehicles or front to fund transfers or many other similar mechanisms that keep them in private ownership and well funded, frankly. This next graph is trying to illustrate the capital cycle of private markets. And really, what it shows is that almost all years have been positive cash flow perspective. If you look right back to the very start of the graph in 2000, that was actually a negative year, and that was the dot-com bubble, which I remember very well, I thought it was the end of days, but surprisingly enough, it wasn't. We then had the GFC, which was really quite a marked negative cycle, but it's interesting to compare that, which definitely felt like the end of days with the the current rate cycle that you see in the far right-hand side, which was certainly more negative on a net basis, but that's partly because the capital work was much higher. So what we've seen in more recent years is a stabilization of that back to net distributions. So I guess the question is, is that business as usual? Or is it really just part of a much more volatile market that we're in just now? These 2 graphs just try and break it down by geography, to the left being North America, which unsurprisingly has higher highs and lower lows, and the right one being Europe. We quite like the stability of Europe and the fact that it's not quite as volatile many of our clients like the sort of persistent performance even if it doesn't have some of the highs of North America. I mean, probably one thing that drives this difference is the amount of technology investing in the U.S. and the amount of venture investing, which has obviously had a much harder drought in terms of realizations pending the hopefully IPO tsunami that's about to happen starting with SpaceX. Probably this graph is more how we think about the market, and really what these lines are showing you here is what the net distribution activity was as a percentage of the opening NAV. So in this sort of period leading up to sort of interest rate rises, it was pretty consistently in the mid-20s. So that's painting a very healthy picture for investors. And I suspect it was a large tailwind for the growth in assets in the industry because if you're getting sort of 20%, 25% of your opening NAV back every year, you could see why you would want to keep that capital invested, particularly when rates were low. That's sort of meaningfully rebased here down into the sort of low to mid-teens, which does create a much different environment for us as investors and for the market as a whole. And what we found is that the market is very much prioritizing DPI now very much at the -- it used to be IRR multiple all the way, but that's definitely changed. This really shows the similar sort of information, but on a different basis. In the first half of this graph, you can see that the distributions and the NAV are reasonably in sync. Maybe we'll be slightly diverging, but then in more recent 5, 6 years, one, from a lot of capital coming into the industry pre-COVID and during COVID when rates were low. And then secondly, that's continued to build in the post-COVID era. But fundamentally, it's going to be a finite amount of capital in the industry, I think. So we would expect that exit conditions will normalize at some point. The question that I think everybody is asking us what does normal look like. Is it going to be a tsunami of exits possibly led by some of the more hypo-profile IPOs that are being muted just now? Or is it just going to be a slight increase? I mean, many of the GPs we partner with have very clear exit plans for the coming months and years. Really the question is whether that -- their expectations on price will be hit for these businesses. The stories we're hearing now is that good businesses are being sold in much narrower processes than -- and before you'd have 10, 15 bids for every business. This next chart just tries to show the exit types. So probably the most interesting bars, the very top one, which is IPOs. So in this period, there's really only 1 bump per year for IPOs, which was 2021. So that's sort of pre-COVID is the aperture opening for an IPO boom and then it was pretty firmly shut thereafter. The names down the bottom are some of the companies -- some of the bigger IPOs of those years and many of those were investments for PPET. Probably the one thing this chart doesn't really illustrate very well is, it's got secondary buyout as a category there that's pretty stable in the sort of second darkest blue. But in reality, that's 2 types of transactions. It's sponsor-to-sponsor transactions and continuation vehicles. And what we've seen, and I'll show in the next slide is that really that mix has changed markedly in the last 5 years from sponsor-to-sponsor deals being 80%, 90% of that market to now being a much smaller proportion. So this just shows how important the secondary market is and what we do in 2 ways really. So the left is the GP-led deals or continuation vehicles as they're often called, which are showing very, very strong growth of 30%. I'd say the sponsors we work with, probably 80%, 90% of Dena CV in the last 2 or 3 years, of it's the best assets, and they're generally being welcomed by the market. But the other side of the secondaries market really is the GP-led and LP-led on the right-hand side are roughly 50-50. And the important point for that is that, that, therefore, implies -- sorry, as that stayed the same since 2021, implicitly, the LP-led market is growing very strongly as well and that's being used heavily as a liquidity vehicle for overallocated investors. A lot of the U.S. state plans and foundations will find themselves over allocated in this market cycle. This -- we often get questions about valuations from all of our stakeholders, and we welcome them. And so we try and find ways to measure the valuations and really the only way to consistently measure them is whether the price is achieved on exit are at, above or below the NAV. So this is the sort of generally market-accepted measure, which is we measure what the NAV was 2 quarters prior to the sale. And so the bottom graph is PPET and the top graph is the market. So obviously, we're quite pleased that we're beating the market in that regard, which is probably a function of being mid-market focused and following quality GPs. Why is the trend down in both graphs? I think probably my answer would be, in the most buoyant years, you'd expect that premium to be higher because it's a feeding frenzy for buying businesses. And in more muted times like today, they will be lower. And then I think the other factor is that continuation vehicles, which are generally done at or very near NAV, they are suppressing that because it's likely that the NAV, which the continuation vehicle is sold at is probably only 5% or 10% above the NAV 2 quarters prior, where we measure this. Final couple of slides. We're not -- well, certainly, I'm not a macro specialist. We have them in the shop. But what's affecting transactions just now, and what are we thinking about? I think the geopolitical instability, oil price shock is having a marked effect. Defense has gone from being nowhere in our industry to being sort of front and center. AI developments, it's on the tip of everybody's tongue. I think we're very clear that there's a lot of work to be done to understand the effect on our investment portfolio. We've done a lot of work around that, but it's very hard to draw firm conclusions at this time, and therefore, take clear actions, but it's certainly front and center. And then rates definitely affect both the transactions and valuations. Just 2 comments on this slide. It's looking at the sector mix of exits or transactions, frankly, within our -- within private equity and it's actually pretty stable really over the period. There's a little bit of a health care hangover in 2024 because we feel demand was brought forward by COVID in that sector. And then sort of post that transaction volume fell off. But really, the big one is on the final column, where industrials and technology have inverted, which I don't think many people predicted, but we're seeing a lot of transactions in industrials and business services. Business services has always been there, but industrial is really coming to the fore as people are more interested in hard assets. So just to conclude, we see the market as hard to read, but we're really sort of micro investors, not macro investor suite. So we do take account of the macro, but we don't let it sort of dictate our investment strategy. We are more focused on finding niches that are under competed through sector specialists, people who can do significant value creation mainly in the lower middle market. And then we find that there's more liquidity in that part of the market. because it's greater ex optionality. So that was it for me. I think I'm going to pass over to Alan. I want to try your point [indiscernible]. Thank you.

okay, PPET, so yes, it's an evolving market. The market in motion as the title said. So PPET has been nice, stable, consistently growing for a long period of time, now 25 years and counting. Where European mid-market focus will come to performance, but performance has been good, 10 years annualized NAV, total return 14%, where net assets of GBP 1.3 billion, pay a quarterly dividend, and we charge a flat management fee on this trust, which is pretty much unique in this sector. So over that 25 years, so 2 lines there are pretty similar color, but the bottom one is the FTSI oil share, our comparator index. The upper one is our NAV total return. You can see the clear difference. Middle one is the share price. There's a share price discount there. But even taking that into account, the annualized share price total return since inception is 10%. If you invested back in 2001, you made around 10x your money if you reinvested your dividend. So not too shabby. 16 consecutive years of NAV total return growth now. So we're really proud of that as a manager. So I'm going to talk a little bit about how we do this, what we focus on and why. Now for some of you, this is stuff you may know. But -- and hopefully, because I've been mentioning mid-market for about 7 years leading this trust, but we are mid-market-focused. We define mid-market as businesses between GBP 100 million enterprise value and GBP 1 billion at entry. We're in European focused since the beginning, 25 years ago, this has been majority European. We're 75% in portfolio companies that are headquartered in Europe, and we'll come to reasons why we think that's compelling. We're conviction led. As mentioned, you'll hear from PI and Latur, we only partner with 15 to 20 core manager relationships at any given time. And all of this produces an underlying portfolio that has good diversification by manager, by geography, by sector by maturity as well. So firstly, with mid-market, why mid-market? Well, it's an easy one, could just finish with this slide, it outperforms. It performs the larger cap space, and it outperforms on a risk-adjusted basis the venture capital space. You can see on the left-hand side here, the sort of scale of this outperformance. So top quartiles in funds under GBP 2 billion outperformed by 7.5%. And even on a median basis, it's around about 5% outperformance. Now why is that? The underlying growth tends to be stronger. Smaller companies deliver faster growth, and you can see that on the right-hand side, both at the top line level and an earnings level. So that underpins that investment performance. And it's a deep opportunity set. There are literally thousands of mid-market companies out there that are owned by families, by founders that are carve-out opportunities. You can see here deal sizes under GBP 500 million enterprise value, the majority of the market. But importantly, on the right-hand side, you can see the difference by primary buyout and second you buyout. Primary buyout means buying from families, from founders, carve-outs, secondaries is buying from another private equity firm. There's nothing wrong with secondaries, but often secondary buyouts, the first private equity owner has captured a lot of value. If you're buying from families, you're buying from founders, if you're carving out from a corporate, there's usually more value creation levers you can pull. And the scarcity of capital, most of the rate -- the fundraising in private equity is at the larger end. And that stands to reason. If you're like a 2-person team covering the whole private equity market for a pension fund or endowment, you're probably going to go with one of the larger names, you're not going to get fired for back in KKR. But the opportunity in terms of the number of companies is in the mid-market. You can see on the right-hand side there that the segment that we look at, there are around 200,000 companies in that segment, sort of $150 million to $1 billion enterprise value. That's versus the 10,000 that all that money is chasing has been raised in the large-cap space. And that's probably why the mid-market is cheaper. On the right-hand side here, you can see we're 3 turns cheaper deals under GBP 1 billion versus deals over GBP 1 billion. And smaller businesses have typically less leverage as well. So there's less risk there from a capital structure point of view. So maybe turning to how our portfolio has evolved over the last 10 years. And you can see on the right -- on the left-hand side even, these are some of the core managers that we backed 10 years ago. Fantastic names like CVC, Advent, Premera, Cinven, some of the best performers, but large cap names. And we have really transitioned away from that over the last decade into smaller, more mid-market managers. You have some managers that we backed continually through the cycle that have a bit of a mix, but really some of these lower mid-market managers now, I mean, that's the core of our book today. So we've got the tech specialists like Expedition and [indiscernible], we've got health care specialists like [indiscernible] and [indiscernible as well as other sector specialisms there like [indiscernible] with industrials and business services as well, and you'll hear from [indiscernible] shortly. It's not just the managers we partner with. It's also the investments that we've made. So this is the investments we've made over the last 18 months. Really have to turn your attention to the direct investments, on the right-hand side, there's really only 1 name there that's sort of a larger business, and that's Froneri with PAI that we've partnered with them on for over a decade. We took some money off the table and then reinvested half of our money for the -- to capture future upside in that business for [indiscernible] an ice cream -- a global ice cream manufacturer distributor. So why Europe? Especially when the returns between North America and Europe are pretty much the same. Well, if you compare them to the respective public markets, European private equity really adds value versus European public equity, whereas North America public equity and private equity, there is not much difference in terms of returns. Some of that is obviously the AI super cycle in North America, the MAG 7 top 10 businesses that are driving a lot of performance in the public markets. But in Europe, private equity really adds something different from a returns perspective, from a portfolio diversification perspective. And it's less correlated as well. So we've got 0.6 correlation coefficient between European private equity and European public markets, which is lower than the equivalent in the U.S. European private equity returns more money and returns money more quickly. Its cash yield has been better than the North American equivalents for some time now, and it's cheaper. And that creates an opportunity. Again, if you can buy a country-specific European business or a regional European business, and you can make that global or you can sell it into a North American strategic buyer, there is an opportunity for multiple arbitrage to get more upon exit than you paid on the way in. But everyone says Europe is complex, and it is. It's a heterogeneous market. You can see on the left-hand side, the number of languages, tax systems, legal jurisdictions, all of that stuff, that's good for private equity, to be clear. It creates barriers to entry, you need boots on the ground, complexity creates opportunities at a less intermediated market. And coming back to that point I made earlier about mid-market. Europe has a very high share of founder and family-owned businesses. So those primary buyout opportunities that are particularly compelling. And Mark Nicholson will talk later about kind of how we cover the market from a primary fund perspective, but we've got the team that covers the market geographically and in terms of sector coverage as well. So apologies for this first slide, I insisted on putting this in. But there are, according to [indiscernible] that is, more private equity managers on this planet than there are McDonald's restaurants in the United States. And you can see the little dots there, quite a few. So 18,000 versus 13,000. So there's a lot to choose from. There's a lot of good private equity managers, a lot of bad private equity managers I'm sure as well. We never back any of them though. So yes, we're partnering with -- at any given time, 15 to 20 core manager relationships, sector specialist managers, managers that can really create value. That's what we're looking for in 3 quarters, of our NAV is the -- with 17 core managers, the logos that you see on the right-hand side. And you might say, well, so what? Well, it translates into better returns. Our track record shows that over the last 10 years, but also since inception, 25 years ago, when we select a fund sort of 70% of the time it's top or second quartile or more than 70% of the time. So we're really proud of that. Again, Mark will talk about our primary approach. So I'll just move on to the underlying diversification of our portfolio. So all of that, the mid-market European conviction-led produces an underlying portfolio of over 600 companies. But I think why do we bother with doing fund investments as well as directs and secondaries? Some people just do directs, like surely, that's a better way from a cost perspective, et cetera, et cetera. But we think these are complementary. Primary funds creates the bedrock for the rest of our business. It's access to the best managers, which are inaccessible otherwise. You can't get direct deal flow without being in their equivalent fund. But also what I think is really interesting and compelling about primaries is that diversification is that exposure through the cycle, I'm going to quote Mark Nicolson again, he loves me doing this, that money tends to flow into private equity at the wrong time at the height of the market and then flow out as soon as the cycle turns it. At the wrong time, when the best deals are done, primaries give you that exposure through the cycle to the deals, no matter of good times, bad times. It creates that bedrock, as I said. But opportunistic strategies like secondaries and directs give you that extra alpha the return potential. Secondaries, Patrick will speak about secondaries in more detail later, from a risk-adjusted point of view, really attractive. You get your money back more quickly. It's good diversification. Our team has been doing this a long time, and they'll talk about it shortly. And directs and most of our directs are co-investments. Karen will talk about that, but there are less costs associated with directs. So if you get it right, the return potential is higher. So this is how our portfolio in PPET has evolved. We used to be a pure fund-to-fund looking back 20 years. What we're trying to achieve is on the right-hand side, we're not far from it. So we have around 30% to 35% indirect capturing that additional investment performance, 10% to 15% in secondary. So just a slight uptick from where we are at 10% today and having just over half of the book in primaries. That's where our short- to medium-term goal is. From a geographic point of view, as I mentioned, 75% European, mostly Northwestern Europe with our largest exposure in the Nordic region, very little actually to the U.K. given it's our home market, but around 12% there, and we've already talked about why we think Europe is attractive. But importantly, in terms of our manager exposure, our top 5 managers are just shy of 30%, top 10, just over half of the book. We don't take large manager risk. We're looking for diversification there. From a sector point of view, well balanced. We're trying to back strategies in kind of more secular growth areas, so tech, health care, business services, consumer staples. We've got very little in commodity-linked sectors. So that's what we're looking for. But obviously, there's a lot of noise around one sector in particular, which would be software. We've got about 21% of our book in software. The vast majority of that is B2B vertical software. And you can see our largest company exposures on the right-hand side. So those top exposures -- 7 or 8 exposures there, that's around 8%, 8.5% of our NAV. So our software exposure is well diversified, but really focusing on B2B. My personal view on software is that if you have a moat, whether be it data, be it needs to be determinist, it needs to be right, which most of our businesses, that's certainly the case, the AI opportunity is theirs to lose if they're leaning in hard right now as a lot of our managers are. So there'll be winners and losers in this space, but I'd like to think that we've backed a number of winners here, not at least if you look at some of those names there. Amelia is a conversational AI business, which is growing incredibly strongly right now. Value as a supply chain software business that has incorporated AI early and is growing north of 40% top line at the moment. So we think we've backed some of the winners in this space. Time will tell them. Lastly, I want to leave you on this point here before we sum up. When we manage this portfolio, we're trying to generally manage it 50-50, 50% companies that are in the value creation phase. So under 4 years old, 50% over 4 years old in approaching or in the exit lounge, so to speak. But that latter category, the mature assets now is 63% of portfolio value just with the sort of relative lack of exits that we've seen in private equity over the last 3 or 4 years. There's actually 22 of our direct investments, either the roughly 40 direct investments that we have that have been held for 4 years or more. So when this market does come back, as Colin alluded to, when we finally get to see that exit tsunami. I don't think it will be a tsunami. But hopefully, a large wave, we can capture a lot of these exits, we can capture a lot of these distributions, and that acts as a tailwind to NAV because we've seen even through the bad times, exits, on average, tend to be at an uplift to NAV. So we're mid-market focused, businesses between GBP 100 million enterprise value and GBP 1 billion. We're European focus and has been for 25 years, conviction led, will always partner with a group of managers, which numbering between 15 and 20. And we produce this underlying diversification. I sleep well at night private equity portfolio that tends to grow and has been growing for the last 16 consecutive years. That's all I had to say. So I'll hopefully see you all at the break and pass over to Marc Nicholson to talk about primary funds. Thank you.

Thanks, Alan. I'm Marc Nicholson. I'll start with an apology about my voice. I'm recovering from a cold, definitely not contagious. So over the next few sections, you're going to hopefully understand why we do primaries, we do directs and we do secondaries. I'm just going to take 5 minutes of your time to run through why we do primaries. I'm going to touch on 3 key areas here. One, the primaries deliver consistent exposure through market cycles. Secondly, the attractive risk return profile. And thirdly, they definitely drive ongoing attractive opportunistic deal flow. And the consistent exposure, Alan, thanks for the quote, but the the [indiscernible] a number of years ago that capital flows into the market at the wrong time and out of the market at the wrong time. And what I mean by that, everybody jumps on the market when returns are high. But by that time, it's too late to really capture those returns. And then when they don't get the returns, the capital flows out of the market, and again, they don't capture the returns. So with a fund like PPET, as I call it, our trust, we have a portfolio that can deliver through the cycle through primary investments. And if we dig in a bit deeper why is that? Each fund will deliver 10 to 15 portfolio companies over a 3- to 5-year investment period. And so whenever or whatever stage of the cycle the market is at, you're deploying capital through a trust like ours. In terms of the attractive risk profile, you'll see here the 3 components. And as Alan said, these are complementary and each are attractive in their own right. But I've put on here the slides directional arrows across key categories. And you'll see that from primaries, this is actually quite a low-risk investment. Past performance doesn't guarantee future returns, of course, but it's quite difficult to actually lose money with a private equity fund. It's not impossible. Some have done it, but most private equity funds, you get at least your money back. So it's a relatively low-risk investment. They are diversified, as I've said, 10 to 15 portfolio companies per fund. The one drawback versus the others is the duration. And if we think about that, if we're investing across a 3- to 5-year investment period and the average hold period for an investment is 5 years, you're going to have a 10-year fund. And so the overall duration of a primary commitment is longer than a direct or a secondary investment. While the returns are good, returns are high, tend to be very nice IRRs and multiples, and you'll see the target returns of each asset class on the right here. And the question that's often posed is, well, if directs have the best returns, why don't you just do directs? And if you look in the second column, it's because of the diversification reason. These are single asset bets. The more direct investments you have in our portfolio, the higher the risk. So we think we've got a very nice balance here within the trust portfolio. And Patria, we are a platform. The trust is invested by our investment team and it benefits from all of the experience that we have. We have invested in over 750 funds since our inception. We have over 380 GP relationships and we sit on 300 advisory boards. So we are influential investors in the funds that we invest with. We deploy over $1 billion a year, and that constitutes about 60 to 80 investments. and the trust benefits from that deal flow and that we match it with the best opportunities that we see that match the trust's investment criteria. And probably the most important statistic on the left here is the DPI. Colin touched on earlier, there's been a dearth of DPI in the market over the last cycle. But we've been able to continue to distribute across our vehicles. and that's because of our focus on the mid-market and managers with a natural level of distributions. And we're pleased that over 80% of the funds that we've invested in have top or second quartile DPI. If we look on the right-hand side of this slide here, you'll also hopefully gain a view on why primaries are important in driving deal flow. Over 95% of our direct deal flow has come from managers where we're in their primary funds. Those are close GP relationships with the top managers in Europe. And on the secondary side, over 85% of our deal flow comes from our managers that we're with, and that provides a great deal of advantageous insight into where those portfolios are going and so we can price those returns effectively. And how do we do it? So this is how we split up Europe. We have one of the largest teams in theater in Europe. And each country or region has 2 or 3 investment professionals, which has the task of knowing every manager in that country, identifying who the best ones are, getting to know them and making sure that we have access to their next fundraising. And we look at this on many planes geographically, obviously, but from a sector perspective as well. Europe has been behind the U.S. in terms of sector focus, but we're a great believer in sector focus driving better returns, and we're pleased to see a large number of new managers in Europe having a specific sector focus or focusing in on 2 or 3. And this is the result of all that hard work. It's the 17 core managers that we have within your portfolio within the trust. And across the horizontal lines here, you see that point about the primary fund commitments driving the direct and the secondary deal flow, with many of our managers delivering on all 3 types of investment. And finally, our performance here. Throughout the history, the 25 years of the trust, we've invested in over 130 funds on your behalf, committed over GBP 2.5 billion of capital to those funds. And we -- today, we have 17 core managers as we've talked about. And our investment selection is very strong. 79% of our funds that we've selected have top or second quartile performance. And why do we -- the graph that Alan showed, why do we have a bar at 70%? Well, the reason for that is many consultants use 70% top and second quartile as the measure of investment selection excellence. So we're very pleased to have that selection at 79%, well above that mark. And you'll see the logos of our 17 core managers in the bottom there. They form 80% of our portfolio, and we're delighted to have 2 of them here with us today. I'm going to hand over to Al and Jean-Francois from Latur. Thank you again for being here. But before that, we're going to have some anecdotes from some of our GPs on why they like to partner with us. [Presentation]

Good afternoon, everyone. I'm Alastair Watson. I'm one of the partners here at Patria, I'm the [indiscernible] Head of Private Equity. It's a great pleasure to have here with me Jean-Francois from [indiscernible] Capital. So Jean-Francois, perhaps you could start by making an introduction to yourself and to later that would be great.

Thank you very much, Alistair, and thanks, everybody, for welcoming us today. I'm Jean-Francois. I'm an engineer and PhD. I started my car in the automotive industry. I spent the more than 15 years in the railway sector as a senior executive at Alstom, a global leader in the railway industry. And I've been a senior partner at Later for the last 2.5 years. So I'm a pretty unusual animal in the private equity investment environment, as you can notice, and that's probably what makes Late special. Half of the partnership is actually made of people with pet profit mine, former executives, former business leaders. And we were funded by 2 guys who had an [indiscernible] life before coming into the private equity place 15 years ago. What Lature does is investing in the primary private equity market, mostly in France now more and more across Europe. And we tend to believe that value creation should come primarily from operational transformation. So there is a lot of operational intensity in the investment thesis we put forward. And I'd say that we're trying to create a special relationship with the CEOs of the target company, speaking the same business language and basically looking at investment opportunities with the eyes of business leaders and purely financial experts.

We worked obviously very closely together on Systra. So maybe that's a good example of how [indiscernible] source of transactions and then also creates value through the life cycle.

Yes. So maybe a word about [indiscernible], it's one of the permanent investment in [indiscernible], our current flagship vehicle, which is a global leader in transport system engineering. So I had a lot of familiarity with that sector, as you can understand. For us, it was a very significant partnership with Patria because one of the key dimension of the deal was a significant co-investment that we needed to be underwritten prior to submitting a binding offer to be able to go to that level of equity ticket size. And I thank you, again, Alistair and Karen, for having supported us. It's typically a primary investment of a company that is already very well established globally, but can unleash more potential if it's properly supported by a GP who understand their business and who can bring experience, capital and transformational dimension to push the boundaries further. And so far, so good, I would say. So far, so very good, actually.

I'd be very interested to hear about some of the current themes you're exploring because obviously, Latour has a lot of expertise in corporate carve-outs in industrials areas that were less in vogue a few years ago, but you've remained very consistent to your strategy.

Yes, absolutely. I think -- I mean we like doing what some people could qualify as boring businesses. We have a lot of our investments that are either in the industrial sector are in business services, but with a very broad definition of business services connected to real life, I would say. And we have now established a track record of being carved out specialists. Each of our vintages are at least 1 or 2 of corporate carve-outs of much bigger corporation. It's true in our flagship fund today. And [indiscernible], I can comment in a second, is the latest example. This is also true in the recent small cap vehicle, where 2 carve-outs are going -- were signed in the last couple of months and are going to close during the summertime. Carve-out is something that not all of the GPs are appetite for because the level of in-depth knowledge and understanding of how a corporate governance work, so a seller is going to need to think. And how the risk balance of executing a carve out properly and unleashing the potential of this business, it requires a lot of experienced -- business operational experience, and I think that's what we can put on the table probably more convincingly than some other GPs.

Excellent. And [indiscernible] has been a very long-term relation for Patria, one of our closest relationships, but great to hear from your perspective. What are you looking for in partners like us and how is it working with Patria?

I think what we've liked and keep liking with the relationship with Patria is both support and consistency. You and every other deal, every other funds. And the nature of the relationship comes up with so many different facets, I would say. It starts with capital formation. One you are an important LP for us, but you also help us creating connections with other LPs with now Patria opening doors in Latin America, we had less exposure, but also a number of prospects, they like giving calls to historical LPs and saying, "Hey, is it -- how is it to work with [indiscernible] and the way you ports because you know us with a high level of [indiscernible], is always a good reference. The other thing like Cedric said in the short video is that sometimes we use your network and your connections to help reacting relationship with other target companies, all CEOs of target companies who like to understand how is it to work with [indiscernible]? The other thing I mentioned, you're a very important partner in the co-investment program. I consider it a win-win approach. For you, it's an opportunity to have more exposure, direct exposure to companies you like more. And for us, the example is a good one. It was true for [indiscernible], the carat of [indiscernible]. It helps us having the firepower that we need when we want to have flexibility on the equity ticket size. Without you, [indiscernible], we could not have even bid. Now we -- it's a very successful investment. So again, thank you for that.

Probably the last question, just given your focus on industrials, how are you applying artificial intelligence to the portfolio companies. Is that an opportunity for you? Or is that a challenge?

Yes. So we have some experience in that space, like I said, I have a scientific background and I've built the AI and data science team at Alstom in my previous position. So it's a topic that we have familiarity with particularly apply to the industrial and business services. So less of the, I would say, classic software environment. Our portfolio is constructed in such a way historically, not by decision to stay away from that exposure. But because we invest in companies, we understand well, and we know how to transform. So pretty far from the pure software environment. We believe that, of course, AI is going to transform the way business is done, regardless of the sector, more or less. But if dealt with properly and put high enough in the transformation agenda of the portfolio companies is as much an opportunity as it could be perceived as a risk.

And 2 short questions. Of the companies on the Board, which is the company that you think has most potential for the portfolio...

I cannot put anything else I mean all of those are very relevant. [indiscernible] is a very interesting company because it's first of the small cap fund that we raised last year. And being small doesn't mean not needing a transformation and not having potential is actually quite the opposite. So it's one that I think performs very well so far, and I think it's going to perform more. And again, here, you've been supportive enough to help us raising that farm to get the first closing so that we can close the deal at the [indiscernible] closed the fund because we are pretty quick. Of course, my heart was with [indiscernible], and like I said, it's one of the most prominent deals in [indiscernible], and I'm sure it's going to be a good year for everybody.

And what will be the next subsector that you think [indiscernible] will back in the coming months?

Look, there's a number of opportunities we're looking at in industrial sector again and business services. Some of them are in the small cap fund, in particular, where, like I said, 2 carve-outs are coming into play, 1 which is a little bit of similar than the 1 we had very successful 1 in [indiscernible], 1 in equipment and installation, maintenance of heating devices for personal housing and another 1 which is in the space industry, which is going to be closed very soon, where the stickiness of technology and system engineering makes that specific investment, extremely relevant in a vertical, which is supported by the underlying trends, which are, in my view, very long term and very promising.

Excellent. Thank you very much, on for one. I hope you have a chance to meet some of the audience.

Thanks for [indiscernible]. Thanks.

Good afternoon, everyone. I'm Karen Hiland. I'm a partner and I focus on our direct investment business. And I'll spend the next few minutes just talking about our direct investment offering and in particular, the existing PPET direct portfolio, which makes up around 28% of the trust's NAV. And just to be clear, when we talk about direct for PPET, it covers both co-investments alongside our underlying as well as single-asset continuation funds. So let's start with why does PPET met direct investments in the first place? I think Alan mentioned a couple of these points earlier. The first reason is really about lower cost. Co-investments are available to us, but on a no fee, no [indiscernible] basis from the underlying GPs and continuation funds generally at lower economics than buyout funds. So investing in this part of the portfolio blends down the overall cost for PPET shareholders. It also gives PPET a greater degree of control, control over capital deployment and cash flows, but also over portfolio construction. The ability to dial up specific strategies, sectors or geographies when the manager sees fit. And it's a great way to deepen relationships with the GPs in our book, as I think you've just heard very eloquently from Jean-Francois. And finally, as you saw on the slide earlier, we're generally targeting at least a 2x return from our direct portfolio, so adding these into PPET is the ability to -- as a source of alpha, the ability to boost returns. So Patria's GPMs business has a long-standing track record in direct investing. We've deployed over EUR 2.5 billion and over 150 deals since 2013, and that's all working alongside our core managers in the U.S. and European lower mid and mid-market. And we're delivering strong returns for investors. I'm pleased to see. So we've delivered consistently top quartile IRR and DPI across our vintages and direct deals and our realized returns are strong at 2.5x over approaching 35 deals in the portfolio. So what's your secret sauce? How do we deliver these consistent returns? I think the first and really the most important aspect is it all starts with our GPs. We have access to a very differentiated opportunity set alongside our core partner GPs, where we have these long-standing and deep relationships. And our team is very good at sourcing from that GP network. So we have nearly EUR 3 billion of flow each year of direct deals, which gives us the luxury of choice. We're often working with sector specialist managers, over 80% of our primary picks in recent years have been to GPs with the sector specialism. And from a direct perspective, we love that. It drives up the quality of deals going in the top of the funnel. And then we have significant direct investment experience in the team, and we're using that to select the best of those deals. And in terms of the assets that we're acquiring, we can come on to look at the portfolio in a bit more detail. But generally, I would say we're seeking to buy growing, resilient, cash-generative businesses, and we're able to access those at a discount to comparable companies in terms of valuation, on average, 20% over the life of our direct program. And that's possible because of that lower mid and mid-market focus and the ability to unlock deals on a primary bilateral basis. So if we focus in a little bit more on that deal flow. So you heard from Jean-Francois and in the testimonials and videos earlier about how we build was mutually beneficial relationships with their GPs, not just a provider of capital. but really positioning ourselves as the co-investor of choice. They're call #1 when they're making a new investment. And pleasingly, that's working. So we see over 100 deals every year, and importantly, over 90% of the deals done by our core GPs as co-investments are offered to Patria. And as I mentioned, we have that significant direct investment experience, and we're picking the best of those deals, and we measure that. The portfolio that we've completed outperforms the portfolio that we've seen from our GPs by 0.3x the money multiple. So that evidences our stock selection capabilities and makes the direct investment team feel better about coming to work in the morning. If we look at PPET's portfolio in a bit more detail. So we've made over 40 investments in the PPET's Direct program since 2019, deploying GBP 300 million so far. The portfolio is diversified by sector and by GP, as you can see here, and it's performing well. So we're sitting at 1.7x money multiple and 21% IRR. And we're starting to see realizations come through in the portfolio. We've noted 3 on the slide here, 2 of which we can thank [indiscernible] at [indiscernible], and that's generating an average 2x return so far. And as Alan mentioned, probably around half of the direct portfolio is in what he's calling the exit lounge. So we expect to have more liquidity coming through in future years. You can see here that nearly 80% of the assets that we've completed in the debt portfolio are alongside GPs within Patria's primary book. But we're also increasingly seeing deals alongside the broader Patria's stable of GPs. And to that end, we have recently -- PPET has recently committed to Patria's co-investment partnership fund in Q1 of this year as a cornerstone investor, which is a co-mingled fund program, which will access deals from across Patria's European GP platform. The benefit of that for PPET is it broadens the funnel in terms of the investment pipeline, it allows for more consistent deployment over time, and it allows the deals to be done at a lower cost. So in conclusion, I think directs for PPET really deliver lower costs, better control and enhanced returns. And hopefully, Patria's strong sourcing and selection capabilities are generating strong returns for PPET shareholders. Happy to discuss that further, the drinks afterwards. But for now, I'll hand over to Cameron, who will speak to PAI, the source of a lot of that direct returns.

Good afternoon, everybody. So I'm -- yes, I'm Cameron. I'm a partner based in Edinburgh. And I'm delighted to have alongside [indiscernible] from PAI. Thank you for coming. Pleasure. Before we dive in, just a quick bit of context on the Patria-PAI relationship. So as you saw in Mark's slide, this is absolutely a core and very long-standing 20-plus year relationship with ours. We've done pretty much everything we can do alongside these guys from multiple primary commitments across both their flagship and more recently, the mid-market strategy, secondaries of both flavors and multiple co-investments, some of which you see on the slide here. So to kick off then, again, thanks, Shane, for joining us. Perhaps we can just start with a few words on you, your background, the PAI platform, and some focus?

SP-15 Sure. And thank you very much for having me. So my name is Jan O'Driscoll. I'm a partner at PI I'm based in London, and I sit in our client and Capital Group. So from that position, I manage our U.K.-based client relationships, and I also manage our equity syndication program. I'm a member of the Investment Committee on our flagship fund, and I also co-Chair our Realization Committee. PEI is a Paris headquartered, pan-European, privately owned pure-play private equity platform. We currently manage approximately EUR 30 billion of AUM, which we deploy across 2 principal programs. Our flagship program is on Vintage 8 2023 at EUR 7.1 billion. And more recently, we launched a mid-market fund with the help of Patria in 2020 at EUR 930 million, and we're in the final throes of raising Vintage to at EUR 1.2 billion targets. As an investor, we have a well-defined market position, which we summarize as a leader in European real economy by investment. For decades, we've been deploying across 4 core sectors: food and consumer staples, business services, health care and industrial goods and services. Within those sectors, we often look for 3 characteristics for those deals: partnerships, so that's partnerships with founders, with families, with corporates. We like businesses that have a very compelling and legitimate strategic exit. And to the point that was made, we haven't had an IPO at PAI since I think it's 2010, 2011. It's just not an exit we underwrite. And then the third thing we like and that we promise our partners and that we've successfully delivered is co-investment. If I could be self-serving and pick one of our [indiscernible] deals that best summarizes PAI. It would be the 1 Alan referred to. So Froneri, which covers the partnership nature. It's a joint venture with Nestle, real economy, ice cream co-manufacturing as well as strategic exits. So Furnari is one of the most successful European LBOs of all time. It started off as a Yorkshire-based ice cream co-manufacturer, which we bought into as a GBP 70 million EBITDA business in 2013. And today, the EBITDA is EUR 1.2 billion, and we hold it in a sector-defining joint venture with Nestle. And to date, and through our continuation vehicle, this is still going. But to date, we've returned 18x capital to investors and counting.

well, [indiscernible], not too shabby. Brilliant, thanks. Maybe just sort of double click and zoom in just to bring it to life a little bit. Are there any particular subsectors you guys are focusing on that you point at the moment?

Yes. So I think at PAI, we see the consumerization of health care as 1 of the most compelling long-term trends in Europe because it sits at the intersection of 3 very powerful forces: demographics, affordability or lack thereof in the public health care systems and changing patient expectations. We're seeing consumers take much greater ownership of their health than at any point in the past. Health care is increasingly moving upstream from treatment to prevention and people are becoming far more proactive about maintaining their health and quality of life. So whether it's rehab, mental well-being, nutrition, mobility, chronic disease management, consumers are increasingly seeking solutions that help them stay healthier for longer. In addition, we're seeing a much more engaged and proactive consumer. People are educating themselves, researching products online, following health experts and making conscious decisions about how they manage their well-being. Health is no longer something that begins when you cross the threshold into a hospital or a clinic, it is increasingly begins at the start of every morning as part of your daily consumer behavior pattern. So with all that said, the team is only investable when it comes with the right to win, and that's where we like to think our decades-long focus on both consumer and health care gives us a differentiated perspective on businesses operating at this intersection of wellness, health and consumer behavior. We've not been absorbing this from the sidelines. We've been actively investing behind it in often cases with you here at Patria. In fact, 3 of the 11 platform deals we have done in the first vintage of our mid-market fund are directly exposed to the consumer health care theme. There's [indiscernible], which is a founder-led designer and manufacturer of orthopedic implants, which we successfully exited last year. There's NutryPure, which we've done together and is one of the logos up on screen, which is a founder-led digital native vitamins, minerals and supplement business. And then another logo on screen, [indiscernible], which is a leading pan-European provider of post-acute rehab services. So whilst the 3 businesses operate in different sectors of the market, they are all beneficiaries of the same structural shift of consumers taking greater and earlier ownership of their health.

Alan mentioned before the strategy evolution of the trust. How would you summarize your kind of evolution of strategy over the years?

Sure. It's interesting because, in many respects, it isn't about -- the story isn't about changing our strategy, it's about staying disciplined and consistent and then expanding the platform around it. So it isn't so much our strategy that has evolved, rather it's the scale of our platform, it's the breadth of resources we can bring to our portfolio companies and it's the range of products and opportunities that we can offer our clients. To illustrate this concept, I can talk about our mid-market fund, which I referred to before, which we initiated in 2020. Over the years, as our flagship fund grew over successive vintages, the average deal size increased, and we started spending less time in the mid-market where many of our historical roots and successes had occurred. However, many long-standing investors, such as yourself, still value that mid-market, where active ownership can really be transformational from a value creation perspective. And so armed with the LP reverse inquiry, we created the mid-market fund in 2020 to provide a dedicated access to that part of the market. Importantly, though, our mid-market fund is not a different strategy. It's the same PAI DNA at a different part of the market. We're still investing in leading businesses in the European real economy, leveraging our sector expertise, focusing on active ownership, driving operational improvement and creating value through strategic growth. I think a successful platform extension comes with a meaningful degree of cross-pollination, which ends up where the sum is greater than its parts. So coming back to our example of the mid-market fund and the flagship fund, our mid-market fund benefits from the sector teams in the flagship fund. It also has access to the very well resourced portfolio performance groups, capital markets capabilities and all of the infrastructure of a upper-mid, large-cap private equity fund. Our flagship series on the other hand, benefits from the mid-market, keeping us close to entrepreneurs, founder-led businesses, emerging category leaders and new market trends. So I think if there's one thing I want to finish on is that we're very conscious and talk quite often at PAI about the fact that our clients aren't looking for strategy drift from us. So while our platform may evolve, it's important the strategy remains constant.

Great. And think ideally from one of the companies there just is a case study almost to illustrate that kind of approach to value creation, can you give us a few words on that?

Sure. So I've -- I'll focus on so which is a leading Spanish grocery retailer, which we bought in 2022 in partnership with Patria with a direct co-underwrites at the time of our bid. So what attracted us? High-quality business with a differentiated customer proposition built around fresh, locally sourced products and superior customer service. And so from a value creation perspective, the question wasn't about fixing the business, it was how to turn a successful regional leader into a national champion. The first lever of value creation was organizational. We worked with management to strengthen the leadership team, improved governance, build the infrastructure needed to grow the business to a much larger footprint. The second lever was organic growth. We accelerated the store rollout program as well as the franchise model and took the company footprint from 277 stores at entry to 344 at exit. Third lever, operational excellence. Through the support of our performance group, we again worked alongside management to fashion and deliver a comprehensive value creation plan that included category management, private label development logistics optimization, labor productivity, waste reduction. This program delivered over EUR 11 million of operating savings. The fourth lever was M&A. To accelerate the strategy, we bought -- we made the acquisition of a business called Haiber, in Madrid, highly complementary business that strengthened our position and delivered material financial and operational synergies. So as what was the result? The result was a business that was materially larger, stronger, more scalable than the one we acquired. During our time, sales increased by 40%, EBITDA by over 50% and market increased in all of our -- market share, pardon me, increased in all of our key regions. The company successfully evolves from a regional operator to a nationwide grocery platform. And in terms of dollars and cents, I'm very glad to say we exited the business on the 23rd of December last year, returning 2.8x cash on cash and 30% IRR over those 3 years.

And then a similar question to Al's to Jean-Francois. Hopefully, the answer is similar. But what do you value from partners like us?

What he said. There are 3 big qualities, conviction, engagement and professionalism. So very similar. The first one is conviction. Private equity is a long-duration asset class. Value creation is rarely immediate and very rarely linear. We see you approaching investing with that perspective, both when you deploy in us as a GP, but also when you deploy alongside us directly into a portfolio company. We don't see you reacting to short-term noise or underperformance to a budget. We see you stick to your convictions by remaining focused on the underlying investment thesis. That's steadfastness over time. and the conviction and ownership of your own investment decisions goes a long way in a partnership. The second quality that comes to mind is your engagement. So you've been an invaluable partner on our LP advisory committees, and you very often share our mid-market funds advisory committee. What we really appreciate there is that you never simply advance your own agenda. The best outback members recognize the role is an exercising judgment in the interests of the fund as a whole whilst appreciating and recognizing the commercial realities of operating a profitable private equity platform. You approach [indiscernible] as a governance form as opposed to an advocacy group. And it's that institutional maturity, which means that when you do bring us some feedback we know it matters. The third quality, which I think I heard in the snippets is professionalism, private equity operates to demanding time lines. Your team is responsive, well organized, able to engage quickly on the key issues that matter. We know we'll receive thoughtful feedback, clear communication and a timely decision. In addition to these qualities, I think it's fair to say that your own success has been played a key part in the length and breadth and duration of our partnership. So as we've gone from a single product platform offering primary fund access, we've evolved to offer primary co-investment secondary products, et cetera. And you've kept up step by step alongside us initiating new strategies, new pockets of capital to engage across our entire ecosystem. And finally, as one of our senior partners, Stefano likes to point out with us -- to us and as evidenced on this page, when you invest with us, good things tend to happen. So we've stopped trying to figure out why that is, and we just start to consider you as our lucky charm.

Okay. Okay. Thank you, [indiscernible]. All right, quick fire around, just to finish. One-word answers, please. How would you describe the deal environment at the moment selected of your sector as a focus, what's the sort of what's right pipeline just now.

Industrial Services.

Most exciting deal on that page?

It's a [indiscernible]. I'll go with Patria.

It's my pleasure. Thank you so much.

Thank you.

Hello. I'm Patrick Knechtli. I'm a partner with Patrick GP [indiscernible] head up the secondary side of the business. I joined the team 17 years ago in the midst of the global financial crisis when the trust was trading at a 70% discount to NAV. So we had a bit of work to do to rebalance the portfolio and stabilize the trust. So my first job was to -- in terms of the secondary market and secondary activity was to sell some of the fund interests out of the trust. Once we had the portfolio stabilized and have paid down some of the debt, fortunately, we were then able to start concentrating and contemplating secondary purchases. So today, 2 types of secondaries, LP leds and GP loads. LP leds are the acquisition of secondary interest in a single fund or a portfolio of funds, where the LP initiates the transaction importantly as a way to rebalance their portfolio, reduce exposure to certain GPs, funds or the asset class in general or simply because they need some cash. GP leds, this is where the GP initiates a transaction, transferring one or more companies into a new vehicle as a way of providing optional liquidity for the LPs in the existing fund while continuing to own and support those assets in a new value creation phase and providing more time and, in some cases, more capital. So for PPET, the attraction of buying secondaries are the ability to target particular funds at a more mature stage of development. It enables you to get money to work quicker in portfolios where we have good visibility on the quality of what we're buying. You get instant diversification, particularly through the LP-led transactions and it's a shorter time to actually getting your money back as well. And if we're doing our job properly, we should be able to buy well ideally at a discount to net asset value, all where we can see some immediate markup in the portfolio benefiting performance of the trust overall. So just a quick word on the secondary market. We've seen tremendous growth in secondaries. I've been doing secondary for 25 years. But over the last 10 years, 6x growth in terms of deal volumes over that period. And last year, the market reached over $200 billion in transaction volumes. Colin indicated it earlier, but GP-led has been a big factor, particularly in the last 5 years around that growth, and you can see that sort of the blue part of these bars. And I'm pleased to say that there continues to be strong momentum today with both LPs and GPs needing to generate liquidity during a period where the standard exit routes have been tougher, more challenging. And then fundraising as well on the secondary side has struggled, in fact, to keep up with the growth in these deal volumes. So that creates an attractive buying dynamic. So our approach to secondaries within the trust since 2013 has been quite selective. We have tried to cherrypick the managers and funds that fitted best within the PPET portfolio. Often that meant some of the the funds that everybody else was targeting as well. So one of the consequences was we were a little bit inconsistent in our deployment into secondary deals. And in some cases, we were buying at points where those target funds were at relatively high prices. For all that said, we did 30 deals. We were deploying roughly GBP 25 million on average per year. And the returns are okay, above target, but not as stellar as we hope to produce in the future. So going forward, what we're planning to do is to -- for PPET, to get its baseload of secondary exposure through our dedicated secondary funds, the soft funds, and to continue to be able to do secondaries directly as a means of topping up exposures, filling gaps in the portfolio or as a way of using excess cash. And we believe this should lead over time to more consistent deployment and a higher exposure to secondaries. It will provide exposure to a broader range of opportunities and ideally should deliver better returns. So what does this soft strategy look like? We're targeting secondaries that are hard to access, but where our platform, GP relationships and portfolio insights give us a right to win. We're buying funds that we already know and that we like tends to be weighted heavily to the lower middle market space in Europe, and we're doing that through a mix of LP leads and GP leads, but definitely weighted more to those diversified LP-led deals. We've achieved good returns in the prior 2 funds, and we've managed to do that without using leverage, unlike many of the very big secondary firms. And in turn, that's helped us to deliver very strong and consistent cash. You saw a version of this slide in Colin's presentation earlier, but this is the annual distributions coming from our soft program over the last 8 years and the top blue line is the yield. So annual distribution is divided by opening net asset value, and that's averaged out at 29%, which we are super pleased with especially when you compare that to the average secondary market, which has been around 20%. But actually, as you can see, that bottom line, which is the secondary market, has actually dipped down quite a lot in the last 3, 4 years at around 10% to 15%. So why is that? Why are we able to achieve that better cash generation? Well, I think it's focusing on the smaller cap exposure. That's delivered more exits and more exit optionality going forward. It's the mix of deal types, very diversified with the more concentrated GP leads, which have delivered some really outstanding returns in the last couple of years despite the market environment. We've also been a very active manager of our portfolio in terms of being a tactical seller. So that has maintained the cash generation levels. And then again, we're not using leverage as well. So for some of the big secondary firms, when the cash comes back from the underlying portfolio, that cash is being consumed at the fund by the fund leverage, which is not the case for our soft funds. So PPET committed to our latest secondary fund, Patria Soft 5 about 18 months ago, and I'm pleased to say that it's got off to a fantastic start. We've made 12 deals to date, or we closed 12 deals, deployed $230 million of capital, which should be around 1/3 of the expected fund size. And as you can see in the pie charts, heavily weighted to the diversified LP-led deals, which is exactly what we want to do early on in the life of the fund, around 70% Europe, 70% lower middle market. And best of all, I think we've managed to buy really, really well during this environment such that the portfolio is already marked up to 1.3x as of December, and we hope to maintain that as well with the latest deals that we've closed. So just to sum up, we think that secondaries fund secondaries is a very compelling part of PPET's strategy. There's a very attractive market opportunity right now, and we've evolved PPET's strategy to capture that opportunity and deliver more consistent deployment over time and performance through the different market cycles. And happy to say that the PPET investment into our new secondary, Soft 5, is off to a very strong start. Thank you very much.

I'm glad I gave that fire alarm warning at the start. Okay. So I think we're pretty much on time. Are we good? Right. We're fine. Good. Right. We have 10 minutes before we have the reception outside for Q&. There may be questions online, but maybe we'll start in the room. So yes, does anyone have any questions please raise your hand, and we've got a roaming mic.

Can you hear?

Yes.

It's Connar Finn from Barclays. 2, if I may. So firstly, on leverage, can you discuss maybe trends on the primary side in terms of underlying fund leverage and how that compares to European mid-market versus the rest of the market? And then secondly, on sponsor-to-sponsor transactions, there's obviously lots of discussion around when exit conditions normalized. But what do you think are the key catalysts for that because we've got obviously really strong public markets, lots of dry powder, okay fundraising is difficult, but what do you think are the key catalyst to see an improvement in the sponsor-to-sponsor side?

Okay. I should have mentioned the start, I've got the -- I reserve the right to delegate these questions. So on primary funds, maybe Mark have passed the mic, I want to cover that.

Sure. I mean I think we've actually got an into our presentation on this. So Alan, why don't you get the slide and I'm getting -- basically, one of the main attractions of the lower mid-market and the mid-market is the lower levels of leverage. And so we're continuing to see that trend today that within our portfolio of companies lower levels of leverage are being used. And there's also a country-by-country twist to that as well in that, for example, in Germany, we are seeing them as a German GPs using a lower level of leverage than would perhaps be the case in the U.K. So it comes down to individual country managers as well. But definitely, the trend is that there's lower leverage being used at the lower end of the market today. versus the margin.

Okay. And then the sort of catalyst looking a little bit at Colin here, but maybe you give your views on that?

Yes. I mean, it's difficult to be too precise, but I think rates are pretty key in it. So as we see rates come down and hopefully the end conflicts, I could see more of that happening. I mean I think a lot of it is confidence based just now CVs are a great answer to lack of sponsor-to-sponsor deals because you know what you're buying because you're already dealing it. you can determine if the price that you can do the CV is sufficiently attractive for LPs backing it. There's generally a significant capital from the GP behind the deal. So yes, sponsor-to-sponsor are probably going to be quite a lot slower in coming back until we get a more normalized rate environment. We have actually seen in our book some greater activity in the U.S. in recent months for the first time in ages, it's actually been much -- ew volumes being much lower than Europe in the last couple of years. So hopefully, that is green shoots, and we often see the U.S. lead Europe in these things.

Yes. I mean just to add to that, anecdotally, I mean we speak obviously to our GPs quite often, there's a lot of exit planning. Private equity managers are under a lot of of pressure from their investors to generate DPIs as it's called in the industry and generate cash distributions. There is a lot of dry powder, as you say, it was at $1.2 trillion and whatnot. So you've got those sort of kind of structural factors, which should drive more activity in exits. But to get transactions done, there needs to be certainty and the last 3 or 4 years have been pretty poor in terms of like having a backdrop, which allows people to price with certainties the sharp rise in interest rates, which meant the bid-ask spread was just too wide to get a number of transactions done. That started to kind of normalize, rates peaked and start to fall, and then we saw from PPET an uplift in 2024, the second half, then tariffs became the thing in the half 1 '25, things took longer. And now we've got this sort of pincer movement of software AI plus Middle East. So I think there is a pent-up demand. I don't know if it will be a tsunami, but there's a pent-up demand. I don't think it needs a catalyst, it just needs a period where maybe the President of the United States isn't doing something crazy or just a bit more certainty in the broader market, I think that's what's required, I would say. Does that answer your question, Connor? Attempt to answer your question. Any other questions? we must have covered all them. Congratulations, team. Final calls for questions. Okay. Then that's us. Just before -- are you seeing some words now or Okay. I'll get off this -- sorry. We got 1. All Right. Okay. Mark is going to take this. The moderator will come on.

[Operator Instructions] Our question comes from Milosz Papst with Edison Group.

Can you hear me?

Can you hear us?

Yes. Yes, I can. Just maybe 1 question on what you've discussed in terms of the multiple arbitrage between the European market and the U.S., right? You've highlighted that there isn't kind of an opportunity to buy regional, let's say, regional champions in Europe, bring them to a global, let's say, level and then potentially sell to a U.S. investors. So what do you see in terms of U.S. participation in the secondary buyout space in Europe? I understand that there have been some geopolitical events, which affect probably the activity. But in general, maybe you can comment how it looks like in recent years?

Yes. I think a lot of it is, in Europe, when we're investing in a mid-market business, it's founder-led or family-owned or as a carve out that not everyone wants to do like some of our managers just heard [indiscernible] speaking about it. It's at that point that perhaps a U.S. player that's got a sort of smaller presence in Europe or U.S. trade buyer, strategic perhaps doesn't want to take on that sort of opportunity or that opportunity doesn't really have the scale. So the opportunity, the way that we see it is the ability to buy these businesses, transform them, again, stealing from Latour's sort of naming there, but like transform these businesses, increase the scale that increases the likelihood of getting interest from the U.S. And we've seen a number of U.S. trade buyers come in, in recent times, buying businesses that once were mid-market companies in our portfolio. I don't know if anyone in our team would have anything to add to that, but maybe if there's any examples, but -- that spring to mind. But that's the opportunity that we see it. It's a little bit of sort of a regional thing, but it's also a scale thing as well, increasing the size of the business that it goes on to the radar of the larger U.S. private equity firms and especially the trade buyers.

There are no further questions on the webinar. I'll now hand back to management for closing remarks.

Thanks, Alan. So just reintroduce myself. I'm Marco D’Ippolito. I'm the Head of the Patria GPMs private equity platform. So I think I've got the most enjoyable job in our event today. We've now finished the formal presentations and on your host for the anniversary celebration of the Patrick Private Equity Trust. So we'll shortly be closing the London Stock Exchange and the bell-ringing ceremony. It's a first for me. The team here at the LSE will give us all the instructions we need. But I'd like to ask you together on the other side of the building, the VIP room, and I'm sure take a much needed break, if you need it. So just before 4:30, the Stock Exchange team will gather us on the balcony. And if you don't want to be part of the bell-ringing and photographs, you're welcome to watch from the VIP room next door or downstairs in the lobby. Rebecca, Isabella and Ryan can -- will guide you to where you'd prefer to be. So as soon as we've closed the market and taken a few photographs, all of which will be done in less than 10 minutes, we'll go directly upstairs for a salivary drink on the beautiful terrace. I hope the weather stayed nice, and I really do hope you can stay and raise a glass with us. So we'll be joined by other members from Patria, the team members, some former Trust Board members and former employees from Aberdeen as well as representatives from the Association of Investment companies. Now 1 health warning. A few members of the media, who will cover trust and private equity are with us today. They're here on a strictly social basis. But do bear in mind that if you are in conversation with them and discuss business, please don't say anything you have an issue with seeing in print. So Emily from our PR Agency SEC Newgate is also here. raise your hand Emily, there you are. So if you have any concerns, please do speak to Emily or Rebecca from our communications team, and they'll help you. So thank you again for joining us here, and I look forward to you celebrating upstairs with us very shortly. Thank you.