Taaleri Oyj (TAALA) Earnings Call Transcript & Summary

Hello, everybody, and welcome to Taaleri's Fourth Quarter and Fiscal Year 2023 presentation. The year as a whole has been twofold for Taaleri. On one hand, we continued to exit our business plan, most notably the fundraise of SolarWind III. On the other hand, we've realized a sizable amount of investment income, which you will see later in the presentation. The fourth quarter, on its own right, has been very busy in the aftermath of our Capital Markets Day in late November. Now let's move to the highlights for the fourth quarter. We had strong results in our investment operations, boosting our operating margin to 39%. Our group income as a whole was EUR 17.7 million, and our operating profit was EUR 6.9 million. Within the renewable energy, we continued the fund raise. We had a second closing for our SolarWind III fund. And so far, we've raised EUR 430 million for the fund. Within the Bioindustry business, we continue to evaluate potential investments for the Bio Fund I and also continue the preparations for the venture capital fund. Within our real estate business, as previously communicated, we hired a new leader there, Mikko Krootila, and together with the team, they are updating the strategy currently. The profitability of Garantia's insurance operations remained at a good level. And finally, at our previously mentioned Capital Markets Day, we emphasized the changes to our strategy, which are the internationalization of our client base as well as our business and then the increase of our direct investments. The actions towards reaching our goals are in full swing. If we look at the fourth quarter numbers more closely, we can conclude that the investment income drove our profitability. The continuing earnings actually fell by 6.6% to EUR 9.9 million from EUR 10.6 million in the fourth quarter of 2022. Our continuing earnings, however, they grew by -- within the private asset management business. They grew by 18.5% to EUR 6.7 million, but the -- what we call the strategic investments, i.e., Garantia, our credit guarantee business, their continuing earnings fell by 39% to EUR 2.8 million. We have earlier said that as a consequence of the implementation of IFRS 17, earnings volatility will increase in Garantia's credit guarantee business. This is due to how certain costs and loss-making policies are booked, and this was the reason for the lower income in the fourth quarter. I'll however, revert to this later when I talk about Garantia. In the fourth quarter, we didn't book any performance fees compared to last year when we booked a sizable amount of performance fees in the fourth quarter. However, our net investment income was almost EUR 8 million positive compared to a loss in the fourth quarter last year. So our income increased by 9%, and from last year's fourth quarter to EUR 17.7 million, and our operating profit was at EUR 6.9 million, which corresponds to a 39% operating margin. The assets under management are now at EUR 2.6 billion, and the earnings per share for the last quarter was EUR 0.14. If we look at the full year of 2023, we can see that our continuing earnings grew by 8.4% to EUR 39.9 million. And our private asset management businesses continuing earnings grew by 17.8%. They stand now at EUR 24.4 million for the full year of 2022. And Garantia's continuing earnings for the full year were down 1%, amounting to EUR 13.6 million. Performance fees for the full year were EUR 1.5 million, and that's substantially less than a year before when we booked EUR 19.4 million in performance fees. But on the other hand, our net investment income for the full year grew to EUR 25 million, and that's compared to EUR 2.8 million in the year before. So total income increased by 12.5% to EUR 66.3 million and our operating profit grew by 17% to almost EUR 32 million. The operating margin for the full year was 48%. Earnings per share for the full year were EUR 0.81, and the Board of Directors proposes that a dividend of EUR 1 per share will be paid for 2023. If we look at the rolling 12 months of our operating income and our operating profit and our income, we can see on the left-hand side, the dark blue bar, which shows the continuing earnings that they have risen for EUR 36.8 million to EUR 39.9 million at the end of the fourth quarter. So a nice trajectory there. Above that, we have the light blue bar, which shows our other than continuing earnings, which is our investment income and then our performance fees. And for the last 12 months, they stand at EUR 26.5 million. And then we have, on the right-hand side, the operating profit and the operating profit margin over the last 12 months for the last 5 quarters, ending up at EUR 31.9 million for the last 12 months. If we look at our various sources of income in the fourth quarter, we can see that there's a fairly uneven split between them. And on the right-hand side -- sorry, on the left-hand side, we have the continuing earnings from our private asset management business, that's management fees. As earlier said, no performance fees were booked in the fourth quarter, and then Garantia's income from the insurance operations were EUR 2.8 million and then the sizable investment income booked at EUR 7.8 million, ending up in an operating profit of EUR 6.9 million. I would, however, emphasize that 1 quarter is a short time. So it's better to look at the 12-month rolling. And here, we can see that it's more evenly split. But here in comparison to last year, at the same time, we had sizable performance fee income, not that much investment income and now they've sort of traded places. So the continuing earnings or the management fees stand at EUR 18.2 million, performance fees at EUR 1.2 million, income from Garantia's insurance operations, EUR 13.6 million and then EUR 25 million from our investment operations, ending up with the operating profit of EUR 31.9 million. The strategy period that we had -- it ended in 2023. So our previous strategy period was from '21 to '23. Now we have sort of an ongoing refined new strategy. But there, we had 3 targets, financial targets. And the first one was the growth in continuing earnings. The target has been 15%. In 2023, we realized a growth of 8.4%. Our operating profit target has been 25%. And for 2023, we ended up at 48%, so clearly beating that target. But then again, on our return on equity, we've had at least 15%. And last year, we realized 13%, so slightly under our long-term target. Moving over to the business units, and we'll start off with the renewable energy and a few highlights to mention. Of course, the continued fundraising for SolarWind III and the fact that they announced the second closing in December with EUR 430 million in commitments. We also continued the preparations to exit our Taaleri Wind Fund II and Wind Fund III. These funds are at the end of their life cycle and thus, we are looking to exit them. Continuing earnings for the Renewable Energy business grew by 37% from corresponding quarter last year to EUR 5.2 million. No performance fees were booked in the fourth quarter compared to EUR 10 million last year. And net income from the investment operations stood at EUR 6.7 million. EUR 5.5 million of the investment income was generated from renewable energy development activities that have been done between 2018 and 2021 in Texas. Adding all these items together generated an income from the renewable energy of EUR 11.9 million in the fourth quarter. That is 10% less than a year ago when they had EUR 13.1 million. But it's good to remember that the swing factors are the performance fees and the investment income here. Management fees are normally quite easy to detect because the only thing that really moves the boat is if you have a fundraise or if you exit a fund. Operating profit was EUR 5.7 million for the renewable energy compared to EUR 9 million a year ago. Still had a good operating profit margin of 48.1%, and the assets under management are currently EUR 1.6 billion. Moving over to our other private asset management businesses. Activities here have centered around the advancing of new products and the investment operations of current funds. And the bioindustry team has done so far 3 investments in their Bioindustry Fund I. And of course, they are actively managing these investments on a day-to-day basis. Also, the Bio team is evaluating new investments for this Bioindustry I Fund. And they are also preparing the launch of the new venture capital fund, which we've talked about earlier. And finally, a very important thing, which was that we started the construction of the torrefied biomass plant in Joensuu and, of course, the team will be actively managing that as well. In the real estate business, I appointed a new director in November and together with the team, they're preparing a strategic update for the business. Continuing earnings for our other private asset businesses fell by 19.4% to EUR 1.5 million. And the decrease in the continuing earnings was due to a fund exit, so we exited our Forest Fund III, and thus, we had less AUM. And then also we had a mandate that ended last summer in the real estate business. And no performance fees were booked during Q4. And what I'd say is worth noting is that the changes in fair value of our own balance sheet investments affect the income and the results in this segment as well. And thus, as a whole, the income for the other private management business fell to EUR 0.8 million from EUR 5.8 million a year ago, and operating profit was negative EUR 1.7 million. If we look at the last 12 months for our private asset management business, I would again highlight the dark blue bar, which starts in the left-hand corner. And that's our continuing earnings, i.e., our management fees, they've risen from EUR 20.7 million to EUR 24.4 million at the end of Q4. And then above that, we have the investment income and the performance fees, they stand at EUR 18 million for the last 12 months. And then on the right-hand side, we can see the rolling operating margin and operating profit for the segment, which is now EUR 14.9 million and a margin of 39%. If we look at our funds, various funds that we manage, we have them all listed here. And on the right-hand side, I'd perhaps focus on the bar on the right-hand side, which shows that 63% of our assets under management are within our renewable energy business, 26% come from the real estate business, 6% are currently in our bioindustry business. Moving over to Garantia. Here, we saw the IFRS-driven volatility, which from time to time will be seen probably in the future as well. The insurer service result was, as I said earlier, EUR 2.7 million. That's a steep decrease from EUR 4.7 million a year ago. And the question is, why did that happen? Well, it was due to lower insurance revenue and then higher insurance service expenses. So the insurance service expenses increased due to losses related to onerous contracts. And at the same time, the decrease in insurance revenue was a result of changes in future estimates applied in the valuation of insurance contract liabilities. So one could say that there was some sort of a negative double whammy that occurred in the fourth quarter. It's however, good to remember that one quarter is too short a time frame to judge the long tail credit guarantee business that Garantia conducts. Income was EUR 4.2 million. And there, of course, the investment income is part of that versus EUR 1.7 million a year ago, and operating profit was EUR 3.7 million. The Garantia insurance exposure was lower than a year ago. Now it's EUR 1.7 billion whereas it was EUR 1.9 billion a year ago. Solvency strengthened to 246%, which means this is a very solvent business. And finally, I'd highlight the combined ratio, which still is very low at 29% for the fiscal year of 2029. Moving over to what we call other businesses. And here, it's mainly our nonstrategic investments. And let's focus on the light blue box down in the right-hand corner, where it says nonstrategic investments, and then there's a date, 31st of December 2023. That's the balance sheet value of our investments at the end of the year within our nonstrategic businesses. And that's an increase from a year before, EUR 1.4 million. And the main contributors here is if we invest into something if we divest or if we have to either increase the value or decrease the value of an investment. And we had some increases last year, and then we had some decreases as well last year that affected the balance sheet value at the end of the year. But as a whole, we continue to exit these positions at our own pace, trying to maximize the value of the investments we have here. Moving over to our results and balance sheet. And in the future, our new CFO, Ilkka Laurila, will be taking you through the numbers. I will do it today. And so if we look at the fourth quarter as a whole, this is a very busy slide, and I've already presented most of the numbers here. So I'd focus on the far right and recognize that the continuing earnings stood at EUR 17.7 million in the -- sorry, all income stood at EUR 17.7 million, and then you have the split between the continuing earnings and the investment operations. And then also, you can see how the operating profit has been built up after our costs ending at EUR 6.9 million. And then finally, the profit before taxes at EUR 6.7 million. And then if we move over to the full year, I would also here say it's a very busy slide, and I would focus on the columns to the far right, the change and then fiscal year 2023 compared to fiscal year 2022. And here, we can see the growth in the continuing earnings at 8.4%, the first line. And then we see the change in our income, an increase of EUR 12.5 million from EUR 59 million to EUR 66 million. And then the operating profit increased from EUR 27.3 million to EUR 31.9 million, far down on this chart. Okay. These are the key figures. And basically, I've gone through most of them, and I'd only say here that the increase in our assets under management was 5% for the full year, standing now at EUR 2.6 billion. Here, we have a snapshot of our balance sheet. Here you can see that our assets are totaling EUR 308 million, and our equity stands at almost EUR 209 million at the end of last year. And the dividend, as earlier communicated, the suggestion is EUR 1 per share. We can also see here that our cash and cash equivalents stand at EUR 38 million at year-end. And then our strategic investments within our Private Asset Management segment is now EUR 32.3 million. Garantia's investment portfolio is EUR 160 million. And within the other assets that you can see in the bar there, we have a fair number of receivables in that under that item. Okay. Let's summarize 2023 then. So within the continuing earnings, important to note, we grew 8.4%. And within the -- if you look at our income line, it grew 12.5%, and the operating profit, as I earlier said, it was EUR 1.9 million. And then if we move to the renewables. As a summary, the most important event has been the fundraise of SolarWind III, and now we have EUR 430 million in commitments in the fund. And then also, when we did the first close in the fund, we sold the development portfolio to the fund, which realized a profit of EUR 8.9 million for the Renewable Energy business. The bioindustry did their third investment in their Bio Fund I. And for the whole year, they've been very actively evaluating new potential investments to the fund. Then they've been preparing the venture capital fund and then the construction started for the Torrefied biomass plant in Joensuu. Within the real estate business, we had our Taaleri Forest fund, it was under the real estate segment. And there, we had a successful exit earlier this year -- last year, and then we appointed the new Director, Mikko Krootila and he started early this year. And within Garantia, they continued its good profit performance despite the sluggish housing markets and the insurance result for the whole year was EUR 13.5 million. And as I said earlier, they had an excellent combined ratio of 29% for the full year. And as a general note, I would say that we continue to advance our strategic roadmap. And this year, 2023, our strong investment income boosted our profits, whereas it was the previous year, really driven by performance fees. There was also a sizable amount of investment income as well, but that was mitigated by the fact that rates rose and then Garantia's investment portfolio suffered some losses last year, which they've recouped some of them this year. Okay. Looking ahead, in our strategy update, which we published in November, we underlined the biggest things that will drive Taaleri forward. And we're also going to do direct investments in the bioindustry segment and then our ambition is to partner with industrial players in that segment. Then also, we're going to grow our private asset management business as we've done before. We have a roadmap of funds that are sort of maturing. And once they mature, then we will have succession funds to those and, of course, divest the mature funds. And a further strategic goal for us is to increase our foreign investor base as well as seek international growth. That means that in businesses that are geographically located somewhere else, there, we will, of course, have activities closer to where the business is conducted. The renewable energy business will continue, of course, the fundraise for SolarWind III. And our goal, as previously communicated, is EUR 700 million in commitments for the fund. And the bioindustry continues with the investments in the Bio Fund and also, hopefully, we finalized the construction of our Joensuu plant this year so that it can be operational at the end of the year. The real estate business is preparing an updated strategy and Garantia continues to execute its strategy by serving its current customers and also developing new products. And I thank you for your time.

Thank you, Peter. Now we have time for some questions, and you can ask questions on the webcast platform, and we already have some there, but let's start with questions from the floor.

Sauli Vilen from Inderes. A couple of questions. First, about the renewables continuous fees. They were flat quarter-to-quarter, even though you made the second closing for the SolarWind III during the quarter, so like what I'm missing here? Why there's no growth?

So in the third quarter, we booked EUR 600,000 interest income from the debt vehicle that we had, which was part of the development portfolio. And then the consequence of the closing was about EUR 500,000. So net-net, sort of those netted out each other, but the fact was that the third quarter had a one-off in a sense.

But -- so the fourth quarter, that's like keeping the clawback from the second close...

That's about EUR 500,000.

Okay. Okay. Then your renewables AUM was roughly flat. Well, had up, but roughly flat quarter-on-quarter, even though, well, you made the second close. So is -- are the old wind farms, are they [ weighing ] it down or...

No. Actually, in SolarWind II, we didn't use the full investment capacity we have there. And as they exit the investment phase, then the sort of the assets under management that result in management fees fell to the extent that, that wasn't used fully out. So during the investment period, you get the fee for the commitments, but then after that, you then get on the invested capital.

Then on the -- still on the renewables. On the carried interest, you booked EUR 5.5 million for the development projects. But if I recall correctly, in the press release, you said it was EUR 4.1 million in December, maybe so...

Yes, that was a net number. So there was also some other items related to that, but that EUR 4.1 million was a net number. So we took some costs also at the same time, which were not directly related to this, but had -- was within the renewable energy business.

But are those costs booked in your P&L?

Yes. But as a single item, that was EUR 5.5 million, but then the net effect that we booked was EUR 4.1 million.

Then you had a minor write-down on renewables, still EUR 600,000, if I recall correctly. Write-down or is it amortization more? In Finnish, it's [Foreign Language]. So like a bad debt write-down or something like that.

Renewables.

Yes, I think so. If I...

I have to come back to you. I don't see that number in front of me now. Sorry.

Yes, no worries. Then a couple of more. On the other private assets, there was a write-down also in the top line, the EUR 700,000, was it WasteWise or...

This was a company called Tracegrow.

All right. Yes. And in top line, do you still book the Turun Toriparkki like EUR 200,000 minus on the top line still on a quarterly basis? It's been a top line effect, at least it used to have. So just checking...

Yes, for Turun Toriparkki was refinanced last summer. So I would presume that sort of numbers have changed. But I don't have the number for you exactly. Sorry.

Yes. Then finally, sorry if I missed it in your report, but if I recall correctly, you were supposed to do the Bioindustry I final close in -- at the end of the year?

It's actually -- I think the final final close is by -- I think it's by May this year. Yes, according to the sort of the LPA.

Okay. And you -- I guess, since you still keep it open, you still expect to book in some more AUM...

Yes. In theory, yes, but it's already had quite a leeway. So I'm not sure if there's going to be any more. But for technical reasons, we keep it until then. And don't quote me on the may, it might be some other date, but it's around those days.

Then finally, on the dividend proposal. I know it's not your decision or anything, it's a Board decision, but maybe you can shed some light on it since at least I, and I think also other market participants believed after the Capital Markets Day that the times of the extra dividends are over, and now you focus more on the own balance sheet investments. But here we are with a fairly hefty extra dividend. So how we should interpret it?

Yes. I think -- so EUR 0.50, you could say, is operational, and EUR 0.50 is the final dividend that will be related to the sale of the wealth management business. So in the future, as we've earlier said that if we find investments where we want to deploy money, then dividends might be lower at least when we're consuming that capital. But if we don't have -- if we have ample of cash and we're over-solvent, and we might do extra dividends. But I think the general rule is that we say that over half of our operating -- or our net profit, we will distribute as dividends. So I would say that's sort of the mode we're in.

And then finally, on the real estate, obvious -- at what time frame do you believe you can come out with the new strategy there? Obviously, that's much needed there.

Yes, I mean we're working on it. And I don't think anything -- even if we come up with a strategy, we don't expect any major sort of success in short term. But I think the point is, we have a team that is capable and we have a new leader. So I think for us, as we said at the Capital Markets Day, we have patients here and we sort of believe that you can establish a good position in the market once it normalizes. But of course, the strategy is the key to what you are really doing then.

Then we have some questions here. How is the current investor appetite for the SolarWind III Fund?

Well, I'd say last year was a tough fundraising market in general. We know that all the statistics sort of support that. I would say that in light of that, we were very successful in raising the amount of money we did. For this year, it's really to be seen what the final appetite is, but of course, we have a long list of investors and then we have those that are in deep due diligence. So I think it's -- I would say it's probably a little bit better this year, the appetite than it was last year because interest rates have stabilized.

Then we have a couple of questions about the exit plans for Wind II and Wind III Funds. What are the plans and how much carry potential do you see within the funds?

So yes, we booked so far about EUR 14 million in carry in 2021 and 2022 together. And of course, that's an assessment of what it is. We're kind of -- there's no reason to change those numbers as such. But we don't typically communicate. We say that it's a conservative number that we've used, and that's basically we'll stick to that narrative. But the plan is to exit it this year or exit both funds this year.

And what level of dividend do you expect from Garantia? And how is the outlook for the business?

The dividend we expect to be EUR 15 million for fiscal year 2023. The outlook for the business, it's, of course, partly dependent on the housing market. There is some correlation to the mortgage market naturally as its mortgage guarantees that they to the biggest extent, guarantee. But I'd say the risk position has been good. If we look at the losses there and the combined ratio, it really tells its own story. But hopefully, there's a little bit more activity in the mortgage market this year that then will drive growth there. But in general, the same disciplined underwriting will continue and then whether it's mortgages or it's other guarantees that will then be seen, which one will be in the driver's seat.

And also regarding Garantia, what was the main reason for higher claims?

Well, those are, of course, policies that then have -- and the likelihood of a loss is high enough so that you make the claim. So I don't have the exact details on the split of that, but that's the general mode of how you then do the claims.

And also questions from the webcast. Why such a big decrease in performance fees in 2023?

So the performance fees are a function of 2 things: One is funds that we exit, and then we might have made a sort of -- we might have booked in advance part of that performance fee. And then when we do the physical exit, then we book the final fee, the difference between the fee and what has been booked earlier. And in 2021 and 2022, we booked, as I earlier said, EUR 14 million in total for Wind II and Wind III funds. And those were really big contributors to the performance fees. Also last year, we had this Finsilva performance fee that we booked. It was a forest fund that was sold some years ago. And then we sold our data center Ficolo, which also generated performance fees. So there was a lot of events in 2022 that generated performance fees, whereas for last year, for 2023, we didn't see the same thing. But as I said earlier, on the other hand, our income, we have 4 sources of income: One is management fees. One is performance fees from the funds. And then we have the Garantia's insurance premiums and then we have the investments. And over time, all of these will generate fees. But when it comes to the investment fees and the performance fees, they are, of course, much lumpier by nature.

What is the most important strategic target for the group in 2024?

It's really to execute our strategy and to be able to continue to forward these projects that we have that then will hopefully lead to funds. That's one part, that's sort of new. And then on the existing side, it's really the SolarWind III fundraise that is sort of the -- as it's outraising right now. That is the most important event to the sense that once that fund is raised, then we will, of course, start deploying those funds. And then -- so I'd say really that it's SolarWind III and then the new sort of business opportunities that we're forwarding.

And what is the most significant risk faced by Taaleri in 2024?

Well, I'd say that, of course, if we're not successful in launching these new funds, then we don't have products to market to our investors. And then generally always when it's a private equity operation, it's the success in the investments that we're managing, but how successful are we in driving those. The market circumstances are, of course, the same for everybody. So I'd say that there -- it's more a question of how do we internally deal with the investments that we're managing, what is the quality of them? And then how successful are we in the fundraises.

And how do the rising interest rates affect Taaleri's operations and result?

So in 2022, in particular, the higher interest rates affected Garantia's investment portfolio as they had 88% fixed income. And as the rates rose and the credit spreads rose that eroded the portfolio, and we saw that in the results. Then of course, if you look at very long-tailed assets, for instance, renewable energy or some of the bioindustry initiatives we have, and why not real estate, they are asset heavy. And of course, the discount rate has a big effect on the value of the assets, and then it might also have an effect on the appetite that investors have towards these assets. I think the important thing for us is that interest rates have stopped rising. That's really important because that takes out some of the uncertainty.

And are you planning on launching any new group-wide ESG initiatives in 2024?

Well, we communicated quite clear at our Capital Markets Day that sustainability and ESG is at the core of everything we do. And if we look at the -- on a corporate level, we have CSRD that will be live 2025. So of course, we're preparing to be compliant with respect to that. But in the fund business, 75% of our funds are Article 8 or Article 9, so we have already a very stringent framework under which we operate. So already these existing frameworks are quite stringent, but we're not planning sort of outside of that, any major changes. Of course, when it comes to our direct investments, there we have our own framework then and our own KPIs for what we track when it comes to sustainability?

And some more questions from the floor.

Yes. Still Sauli from Inderes. Yes, just a couple of questions. About the bioindustry ramp-up, in CMD, you basically said that most likely, their own balance sheet investments in Bio will be deployed in like '25, '26 or forward. Is that still the case 90 days later?

Basically, yes. I mean if something materializes earlier than it does so, but I think just to be practical and realistic, we still stick to that narrative, yes.

Then obviously, you stated fairly ambitious plans on Bio's AUM growth in the CMD. So should we expect like another fund launch during '24, is VC fund a thing this year?

I'd say VC fund is the thing this year. So what we do is we do preparations for any other potential products during the year and so then '25 would be more realistic.

Yes. Then 2 more on Garantia. Your insurance exposure fell quite a bit in the corporate side. Well, was that planned? And how low you believe that the corporate exposure actually will drop considering the fact that your focus is on the housing stuff?

But we don't mind increasing the corporate exposure if we can underwrite good risk. So it's not like -- but we had -- there was a bond that expired, I remember last year. And so you have these one-off events that then impacted it. But I don't have a number. I mean, I think the point is you want to underwrite good risk and then the consequence of that is then your balance sheet. But we're very solvent. So there is sort of room for underwriting. And actually, I hope it will grow and not continue to fall.

Yes. Okay. And then finally, not sure are you willing to comment this, but just trying my luck. What is the running yield of the Garantia's bond portfolio at the moment? Just a rough figure would be much appreciated.

Well, I won't answer that. I do know it, but I'll keep that to myself.

[indiscernible]. I have one question. When thinking about your new strategy, you have a quite ambitious target also in real estate capital under management. So now it's below EUR 700 million, but your target until 2026 is EUR 1.4 billion. Could you -- maybe including some measures or acquisitions or something like that, could you a bit open that issue, please?

Yes. It's really an ambitious target. We know that. And the real estate business as such, I mean, it's going really through a tough period right now. We can read it in the papers and those who have invested in real estate know that. But eventually, if you have an operation that can and has the qualities to manage bigger sort of or should I say that they have the qualities to manage certain segments within the real estate space, if you choose those right, then as the market normalizes, you have a chance to really be sort of in the epicenter and then get the assets needed. It can be mandated. It can be funds. It can be open-ended funds, it can be closed end funds. So I think it's more a function of that, how have the real estate cycle has gone and what happens when you have a downturn and those who sort of emerge out of that. How could that play out? So we know it is an ambitious target, but it's not impossible, but it really means that we have to get a lot of things right to hit that target.

Yes. Maybe it's also dependent on the interest rate development. Is it dependent on that?

Well, of course, long-term assets always are dependent on interest rates. But as such, the sector is not going away. There's going to be a lot of need for sort of assets to be managed professionally. So I think it's more a function of that if you can get a decent market share in certain segments, then you will get there. But then the appetite, so the allocation within portfolios for real estate, we know that they were quite high and that's one of the functions why you've seen this big downturn is that there isn't that much money sort of coming in. But eventually, it's probably too early to say when the market will normalize, but assuming old cycles, it takes 2 to 3 years to get through a sort of a downturn.

One question still. Is it connected to housing or commercial? Can you say commercial real estate or housing?

Yes, I'd say it's both. We have a couple of funds that we manage for Aktia, and one of them is a commercial real estate portfolio. But within the mandates, in particular, it could very well be commercial portfolios.

Thank you. I think that's all for questions for now. So I think we are wrapping up.

Thank you very much.