Tikehau Capital (TKO) Earnings Call Transcript & Summary

Hello, ladies and gentlemen. Welcome to the Tikehau Capital Q3 2020 Assets Under Management Announcement Conference Call. Today, I am pleased to present Mathieu Chabran, Co-Founder; and Henri Marcoux, Deputy CEO. Gentlemen, the floor is yours.

Thank you. Hello, everyone, and thank you for joining us today. I hope you're all doing okay. And we're doing well in what is clearly a new operating challenge for many of us, brought by the new government restrictions across many countries. I'm Mathieu Chabran, Co-Founder of Tikehau Capital. And I'm now joining you from New York, where we are actually all happily still working in the office. We're certainly the outliers here. And I'm joined today by our Deputy CEO, Henri Marcoux, who's in Paris. We will run you through the main highlights of what has happened at Tikehau Capital during the third quarter and then be more than happy obviously to answer your questions. Before we get started, let me maybe give you a quick reminder of how we define ourselves and approach our platform. Tikehau Capital is an alternative asset manager that we created 16 years ago, which has built strong positions across private and public markets. Our unique model consists in proposing to our shareholders an exposure to alternative asset classes in 2 ways: First, by an asset manager with a majority of long-dated closed-end investment vehicles with recurring revenues coming from management fees as well as performance-linked revenues with carrying interest on top of that; second, by benefiting from the underlying performance of each of our alternative strategies, by having access to what I like to call the factory, given that the group deploys its balance sheet in our own funds alongside our clients. So in addition to aligning our interest with one of our clients, this second-to-none skin in the game is generating portfolio revenues which are the reflection of the performance we are delivering to our clients, our LP, at the fund level. I also want to highlight that management is the largest shareholder of the group. So there is a total alignment of interest between management, shareholders and clients. This is a unique setup in our industry, and I wanted to reiterate that. Moving on to Slide #5, which I guess is quite self-explanatory. We wanted to remind you how much the group has grown over the past 5 years and confirm that we're on track to deliver our main targets set for 2022. First, in terms of assets under management, we ended up the year 2015 with a bit more than EUR 6 billion of assets under management. Then at the time of the IPO in March '17, we were managing shy of EUR 10 billion of assets when we set then our AUM target at EUR 20 billion for 2020. Today, at the end of September 2020, we are managing EUR 27.2 billion of assets. And we are on track to achieve our 2022 guidance, which is to exceed EUR 35 billion. Looking now at the profitability of our asset management business. I'll remind you that in 2015, we were hardly breakeven. When we IPO-ed in 2017, we were profitable for the first time with a couple of million of euros of operating profit. By 2019, our NOPAM reached a bit less than EUR 60 million, and we now aim at generating more than EUR 100 million by 2022. And for those who did not have the chance to follow our first year -- our H1 results for this year, 2020, I remind you that our NOPAM was up by 39.5% year-on-year for this first semester, for this first H1 2020. This is another milestone on Tikehau profitable growth. So then moving on to Slide #6 and our third quarter highlights. Let me start this trading update by saying that we are very pleased with the way the group has grown so far in 2020 and, in particular, over the third quarter. That is clearly the result of the outstanding dedication of our team, which has remained focused on delivering and totally fully operational despite the circumstances, the unprecedented context that we've all been experiencing. So I wanted to reiterate all our gratitude to the Tikehau Capital team across our offices around the globe. We have indeed recorded a solid growth in our assets under management, which has increased at group level by 12% over the last 12 months and 6% over the third quarter of 2020. This has been achieved thanks to a very solid growth for our asset management business, which, as you know, is our core strategic focus and which increased its assets under management by 16.5% over the last 12 months and by close to 8% over the third quarter. Net new money was, in fact, very high in Q3 at EUR 1.5 billion, which is more than what we had recorded during the whole H1 2020 at EUR 1.1 billion, and that was mainly thanks to our private equity and our private debt businesses. If we look at the first 9 months of 2020, net new money amounts to EUR 2.6 billion, of which 2/3 was achieved in private equity and real estate, which is incremental to our average management fee mix and, therefore, future revenue generation. As you may have picked up, we have also completed the acquisition of Star America Infrastructure Partners over the course of Q3, which is, at the same time, a great way to address a large, growing and profitable asset class for the group as well as a way to accelerate our expansion here in the Americas. Star America is now accounted for in our real assets business line, which has exceeded for the first time the EUR 10 billion AUM mark at the end of September. During Q3, we have also further demonstrated our willingness to align our interests with one of our investors. And the group balance sheet has committed around EUR 400 million to our asset management strategies across private debt, real estate, real assets [indiscernible] and private equity. We view our strong balance sheet as a key differentiating factor of our model, which is, at the same time, leveraging our asset management business fundraising and also providing our portfolio with a direct and diversified exposure to the performance of the private asset classes and the underlying investment originated by the group. Finally, in spite of all the current uncertainties on the sanitary and on the macro fronts, we are pleased to confirm both our guidance for the full year 2020 AUM, which we think will exceed EUR 27.5 billion as well as our 2022 targets to reach more than EUR 35 billion of assets under management and to generate more than EUR 100 million of NOPAM. I'm moving now to Slide 7. So overall, as at the end of September 2020, total group AUM stands at EUR 27.2 billion, which is a 12% growth over the last 12 months. As you can see on the chart on this slide, AUM for asset management activity represents 95% of our total AUM, meaning EUR 25.9 billion at the end of September 2020. We are invested in diversified and complementary asset classes, and we have also been rebalancing our business mix towards more private equity and more real assets, as I was saying earlier. We achieved that through organic and non-organic growth initiatives while at the same time maintaining a solid momentum in all the other asset classes. On top of that, keep in mind that 80% of our asset management AUM stands within long-dated, closed-end structure, which leads to a good level of visibility on future management fee generation. And finally, I would also remind you that our assets under management are rather young, and our model does not rely on short-term carried interest generation. At the end of September 2020, the dry powder, the capital raised but not invested within our funds, reached EUR 6 billion. That gives us significant resources to invest going forward whilst remaining, as you would expect from us, very disciplined. Direct investments assets under management amounts to EUR 1.3 billion at the end of September, which is EUR 400 million lower than at the end of June. And that is due to new commitments that have been made in our own funds, as per our strategy, once again, to align our interest with those of our clients. So I guess it's fair to say that we keep on delivering on the strategy we have been implementing since our IPO. And with that, I will hand over to Henri Marcoux.

Thanks, Mathieu. Good evening to all of you. So now let's have a closer look at our asset management activity and more specifically, the fundraising trends since the beginning of this year. During the third quarter, we've been raising EUR 1.5 billion, which is actually more than what we have achieved during the first semester. And it is, as well, more than what we had achieved in Q3 2019. Even though, I mean, quarterly trends can sometimes be misleading, it is, in our view, quite a strong achievement for Q3 of this year. Now looking at the split by asset class. On the slide, you can see that private equity and private debt are leading the way in Q3 with EUR 700 million raised for each strategy. If you remember well our June disclosure, private debt contribution to fundraising was quite limited for the first semester, which was actually in accordance with our fundraising cycle as we didn't have any flagship on the market. On the contrary, in Q3, private debt is back to fundraising mode with, as an example, the fifth generation of our flagship direct lending fund, TDL V; or the gain of an evergreen mandate; or lastly, the warehousing of our fifth CLO that started early September. There, again, we are clearly demonstrating the benefits of being exposed to diverse and complementary asset classes. Finally, I'd like also to mention the evolution of our business mix. Tikehau Capital is gradually evolving toward higher fee-generating strategies. And this is what you can actually see on the 2 pie charts with the increased share of assets under management coming from private equity as well as a growing contribution from the real assets business line, which is not our largest strategy. Now looking at our different business lines on Page 9 and starting with private debt comments for Q3. So after a rather quiet start of the year, which was in line with our natural fundraising cycle, private debt has experienced a solid Q3, thanks in particular to the first closing of TDL V, which took place in July actually for EUR 220 million. We also raised EUR 55 million as part of the institutional fund, Novo 2020, and we have been chosen on top of that to manage EUR 150 million evergreen mandate for a top-tier French institutional investor. This is actually the first evergreen SMA we've been closing in private debt. Finally, I'd like to add that we have launched the warehousing of our sixth CLO in September, adding an extra EUR 200 million to the private debt assets under management. As far as private equity is concerned, so AUM has grown over the first 9 months, very strong, and that comes actually both from our energy transition fund as well from our growth equity funds. I'd like to highlight that actually, these 2 funds have recently been attributed with the Relance, the recovery label, which actually qualifies these funds as consistent with providing corporate with efficient equity financing as part of the French state recovery plan. So AUM growth also factors in a strong contribution from ACE Management, our subsidiary specialized in investment in companies in the aerospace, defense and security sectors, which has been selected by the leading aerospace players and the French state through Bpifrance actually to manage the support fund for the aerospace industry. The first closing of that fund amounts to EUR 630 million. And it has been achieved, i.e., at the end of July, in the early summer. Now moving to Page #10, so looking at our real assets business. So the growth over the last 12 months has been very robust at above 20%, and our AUM has actually exceeded the EUR 10 billion mark at end of September 2020. Sofidy has contributed strongly to that performance, and I'd like to remind you as well that we have finalized the opportunistic fund called TREO, Tikehau Real Estate Opportunity, in Q1 of this year. Finally, the AUM at end of September do include the integration of Star America to this perimeter. Finally, our capital market strategy have been growing strongly over the last 12 months and have proven resilient in 2020 both from year-to-date or a Q3 perspective with good performance across our funds, in spite -- I would add, in spite of the unprecedented context we've been experiencing. Moving to Slide 11. Maybe I'd like to emphasize a little bit more what have been the moving parts allowing us to reach the EUR 25.9 billion of AUM for our asset management perimeter. Maybe a quick comment before that on our disclosure. As a listed entity, our ambition is clearly to be fully transparent and to be in a position to provide regular trading updates to the markets and notably through our quarterly AUM update. That being said, I would like to remind that we are in a business which is actually benefiting from long-term tailwinds, with long-term commitments from our clients, and, therefore, long-term investment horizons fund of funds. My point is actually to emphasize that, I mean, quarterly analysis can sometimes be misleading and can sometimes experience cut-off effect. So this is why our growth momentum should always be considered on the long-time horizon. And I do think actually that Page 11, the following charts are actually putting our Q3 perspective -- our Q3 performance into perspective. And regardless of the time horizon you may choose, you may have a look into, the broader picture points to very positive momentum with, for instance, sorry, EUR 4.2 billion fundraising, which have been achieved for the last 12 months, and AUM growth of virtually double-digit over the last 12 or 9 months. Now I'll move to Page #12. So the second component of our AUM is actually the direct investments and what has been the evolution of our Q3. The quarterly evolution is actually pretty straightforward and quite simple for the quarter. At end of September 2020, our direct investments AUM stands at EUR 1.3 billion actually, representing a EUR 400 million decrease to the figure that was disclosed at end of June 2020. This evolution is clearly linked to new commitments from our balance sheet within our funds, in line with our strategy of alignment of interest with our investor clients. I'd like to add on top of that, that market effects on the group direct investments portfolio has been limited during the quarter at minus EUR 25 million. And finally, that our hedging strategy has had a plus EUR 6 million impact on our AUM at end of September. On top of that, at end of last night, the impact of those hedging strategy was standing at minus EUR 145 million. Mathieu, I'll let you maybe comment the private debt activity, Page 13. Thank you.

Thank you, Henri, for this overview. And in fact, I would like to walk you through now through our business lines. So Page 13, let me now give you a little focus on the private debt activity for these first 9 months. Since the beginning of the crisis, we have played, I really believe, an essential role as a committed stakeholder supporting the companies in which our funds are invested. We have maintained a very close dialogue, we had the opportunity to mention that back in July, and continuous contact with our portfolio companies. And we have supported them at different levels. The most important thing for us was, and still remain obviously, to help the companies preserve their liquidity as much as possible in this very uncertain environment. On the investment side, once again, as you would expect, we have remained highly selective, deploying our capital cautiously and maintaining our approach of investing in high-potential companies. And in that context, I'd like to focus maybe on one investment that we've closed during the lockdown, a great company called Polyplus. Polyplus is a company that was founded in 2001 as a spinoff from the University of Strasbourg and is specialized in the manufacturing of transfection reagents, mainly for gene and cell therapy industries. In February this year, after a company process, after an auction involving several U.S. private equity firms, Warburg Pincus secured an exclusivity with the existing majority shareholder, ArchiMed, to acquire Polyplus alongside the management team. In this context Tikehau Capital, I mean, we have the opportunity to arrange with Goldman Sachs EUR 160 million unitranche to finance this transaction. It is important to note that the company has grown at a significant pace, multiplying its revenue by 10x over the past 4 years, supported by the development of gene and cell therapies. And this is typically the type of growth story we like to support through our bespoke financing platform. Another illustration of what we are able to do with our private debt platform is the investment in Surfaces Group. Indeed, we participated in the financing of the acquisition of this company by Astorg in 2017. And then in October this year, the company was acquired by another client of ours, TA Associates. And we took the opportunity to reinvest in Surfaces Group by co-arranging, alongside Goldman, a EUR 250 million unitranche facility to support the acquisition. In terms of looking forward for this activity or over the next few quarter, our pipeline remains actually pretty healthy. And we are convinced that we'll be able to keep deploying our capital or private debt financing in high-quality assets. Moving on to Page 14, I'd like to discuss now our private equity business, which, as you know, has been a strong pillar of growth over the past few months. Our investment approach is to bring growth capital and to provide equity, to finance the development, the transformation, the expansion of fast-growing companies. We position ourselves as a long-term partner, most of the time alongside entrepreneurs, families, founders by providing patient and flexible capital to grow these companies. Our private equity approach is focusing on strong themes and real convictions. We are clearly convinced that the economic recovery will require equity investment and strengthening of those mid-market company balance sheets. We are also convinced that investing in companies active in the energy transition is the most immediate and efficient way to drive change and contribute to a low-carbon economy. On the deployment side, our T2 Energy Transition Fund, for example, has recently completed a minority stake acquisition of 30% in EuroGroup in Italy. This transaction perfectly illustrate the unique approach of our energy transition fund, which is to focus on technological innovation, energy transition and environmental protection. EuroGroup, to give you a bit of background, is a global leader specialized in manufacturing stators and rotors for electric motors and generators. And that support the development of, in an efficient way, the e-mobility solutions, if you want. The company has posted a pretty strong growth of 13% of its sales over the past 3 years, thanks to its strong technological expertise on electric motors components. And EuroGroup, which has a significant exposure to the electric vehicles megatrend and which is ideally positioned, if you will, to benefit from this expected boom in e-mobility. The transaction has been finalized after a very long selection process. And here again, that highlights the Tikehau differentiating edge by being local and close to the situation. We've been chosen because we had obviously the relevant platform to accelerate the group international growth plan. And as I was saying, not only thanks to our local presence across Europe, Asia and the U.S. and also, I guess, because we really understood the industrial issues and challenges and, in particular, the ones relative to the automotive industry. And so building a genuine, trust-based relationship with the management team as a committed partner and providing a true value-add support in this transaction were really the key elements of successes here. I would leave you also with some perspective. It's important to stress that we have a solid pipeline for the end of the year across all our strategies, so Ace Aerofund in the aerospace business, T2 in the energy transition, our minority growth expansion liquidity T2. And we'll continue to fundraise effectively our Ace Aero Partners fund, the one that we had the opportunity to discuss over our previous report a few months ago. Moving on now to Page 15. I wanted to provide you with a quick update on our real assets platform, which has grown significantly since our IPO. So as I was saying earlier, we renamed the real estate business line into real assets after the acquisition of Star here in the U.S., and I will elaborate a bit later. At the end of September 2020, this real assets platform managed EUR 10.2 billion of AUM, which is broke down on the left-hand side of this slide. What is important to note here is that we have, I think, a comprehensive and complementary real assets platform, which allows us to reach out to a very diversified investor base and to provide them with a broad range of solution and investment solution, be institutional clients or retail clients. So first, you will find our closed-end funds with our Core+ and opportunistic European strategies as well as our mid-market U.S. infrastructure funds, which represent 30% of our AUM at the end of September. 11% of our AUM is located within permanent capital structure. So we have 2 listed REITs funds here: One in France, Selectirente; another one in Singapore, IREIT. And I'll have the opportunity to come back to that as well. We also manage a couple of UCITS funds on dedicated to real estate and which are managed by Sofidy. And of course, we have a significant portion of our AUM coming from our SCPI, [ SCP ], corresponding to our real estate investment trust for retail clients, which is very sticky and granular and which represents a bit more than 50% of our AUM. So some key figures on the right-hand side of this slide. We have EUR 1.5 billion of dry powder in the real assets activity, and that would clearly enable us to save investment opportunity and especially in these very uncertain times. In terms of rent collection, what we did over Q2 and Q3, the second, the third quarter, was to precisely monitor collection of rents and negotiate with tenants when we could, where we could, and to work together to find the appropriate solutions, for example, by implementing rent deferral or granting some months of free rent or extending the leasing period. Nonetheless, the rent collection remained very healthy and exceeded more than 90% in Q3 for our main real estate fund. It's actually 98% for IREIT, close to 100% for the sale and leaseback funds we have and between 91% and 97% for 2 of our largest SCPI. This is -- there's no magic here. This is clearly due to the fact that we have high-quality credit tenants such as the French electricity -- electric utility company in France, EDF; or the German telco operator, Deutsche Telekom; or the French state administration. As you can see, our top 5 tenants account for 23% of rents, and the remaining 77% is very granular, as per our portfolio composition, amongst our SCPIs. Moving on to Page 16. I wanted to give you a quick overview of Star, which is the newest addition to our real assets platform and which manages closed-end funds in the mid-market U.S. infrastructure sector. This acquisition that we announced back in July enables us not only to expand in a new asset class for Tikehau, but also to accelerate our development here in North America. By integrating Star to our asset management platform, we really want to scale up their strategy, investing on balance sheet as we do across our asset management businesses like we did with ACE Management, for example, on the productivity side. We are also looking at enlarging the Tikehau Capital investor base, LP base and access to new investors for all our existing strategies. We had the opportunity to mention that, but I'd like to remind you that there is a real complementarity. There is no overlap between the Tikehau and the Star America LP base. Star LP is being mainly the U.S. for 70%; U.K., 20%; and in Scandinavia; whereas the Tikehau Capital LP is mainly Continental Europe and Asia. At the end of September 2020, Star had EUR 580 million in assets under management, of which EUR 180 million in Fund I that has finished its fundraising period and is already deployed; and EUR 400 million in Fund II, which we are currently fundraising, which is still in marketing mode and which has made 4 important investments to date. First, 2 student housing towers, the first one in Oregon and the second one in Seattle. Another investment in the Demand Power, which is a development platform for energy storage and distributed energy projects, with a pipeline at the time of closing of more than 100 potential projects. And then the investment in Cathcart Rail, which is a freight rail services and transportation company to fund its ongoing growth. Simultaneously, Star and Cathcart form a platform to keep on acquiring and operating freight rails, these type of businesses, across North America. Now on Page 17, I wanted to come back to the IREIT situation that I mentioned a bit earlier and give you a bit more color on one of this permanent capital vehicle, IREIT based in Singapore. So you may recall, we invested in IREIT in 2016, and that has allowed us and allowed the group to increase the AUM by benefiting of this real estate investment platform in Europe through a permanent capital vehicle which is listed in Singapore. This acquisition also enabled us to have a permanently listed vehicle -- focus vehicle, which is focusing on Asian investors in our platform. At the end of September, IREIT's portfolio comprised 9 office properties, 5 of them in Germany and 4 in Spain for a total value of EUR 630 million. In October, we -- I mean, IREIT completed a successful EUR 89 million rights issue that was 160% oversubscribed. The proceeds will be used not only to finance the acquisition of the remaining 60% stake held by Tikehau in a real estate portfolio in Spain and repay also the shareholder loan, which had been granted by one of the main shareholders of the company, [ CDL ] in Singapore. I would like to note also that IREIT's shareholders, I mean, the long-term shareholders of IREIT, so Tikehau, ourselves, CDL, AT Investments, they all supported and committed this -- to this rights issue. This operation and this rights issue also has helped us strengthen the IREIT financial profile, enables us to decrease its leverage from 39% to 35% with this transaction, which provides IREIT with additional headroom, additional debt headroom and some flexibility to fund the growth and its capital need. Moving now on Page 18. I wanted to give you a few words on the SCPI funds, which are some real estate investment vehicles designed for retail investors. This is, as you know, the core know-how of Sofidy, which we acquired in 2018. The SCPI market benefits from a very strong demand from retail clients, which are obviously looking for some yield in this persistently low-rate environment. And it's an attractive investment solution for them. And the vast majority of our clients in our SCPI are, in fact, investing for their retirement or their pension with a very long-term view. That as well as the fee structure of the business make the assets under management very sticky, with more than 10-year average duration and some fairly limited and controlled redemption capacity. Also, one of the main feature of Sofidy is the granularity of its portfolio with more than 4,200 real estate assets, which are managed on behalf of 50,000 retail investors and several institutional investors as well. As I mentioned a bit earlier, the rent collection has been resilient so far this year with between 91% to 97% of collection rates for the 2 largest SCPI. Sofidy approach is really to target Core and Core+ strategies, offering investors a strong security on rental cash flow, and that is due to the high quality of their tenants, as I was mentioning earlier, but also the location. As such, Sofidy is regularly singled out for the quality and consistency of its fund performance. You have some of the historical track record, impressive track record since inception on this slide. In terms of deployment over Q3, we can highlight a couple of transaction. The acquisition of an office building in Diemen, which is 10 minutes away from Amsterdam, the whole building is leased to ABN AMRO for 7.5-year leases. Another example could be the acquisition of an office building in Paris, avenue de Suffren, on behalf of one of its fund. And this is a 4.5% gross yield leased to a single tenant, which is a subsidiary of NBC Universal. So moving on to Page 19 and to conclude this overview. I'd like to say that here at Tikehau, we remain certainly very ambitious for the long term but also careful and humble given the short- to medium-term complex environment. We are convinced that we are moving forward with the right approach, the right platform and the right strategy. Investors' appetite for alternative is growing. It has been growing. It's benefiting from massive structural tailwinds, and we have the relevant strategy to help them allocate to this asset class. Nonetheless, as Henri was saying earlier, we do not manage the business by the quarter. And you can sometimes have cut-off effects from one quarter to another. And this is why we confirm our year-end guidance, which is to reach more than a EUR 27.5 billion of AUM. Again, this is clearly a floor. And believe me, all Tikehau teams are focused on exceeding this floor. In the medium term, and thanks to our setup and, I think, selective, disciplined approach, we're also confident to achieve our 2022 targets, which are to reach more than EUR 35 billion in assets under management by 2022 and to generate over EUR 100 million in NOPAM. As a reminder, at the end of June for the first half of 2020, 65% of the investment portfolio was invested in our own funds. We are now well positioned to achieve our 2022 objective, which is to bring this proportion up to 75%. Finally, we reiterate the target of a 10% to 15% run rate return on capital invested in our own funds. Voilà, I think that, that concludes our overview for today. Thanks, everyone, for your time. And with that, we are happy to answer any question you may have. Thanks again.

[Operator Instructions] Our first is Mandeep Jagpal of RBC Capital Markets.

Three from me, please, if I may. First question is on fundraising. Kind of good fundraising in PE over the quarter from equity values, in particular, in the aerospace fund. I was hoping you could provide an update on the target fundraising side for the growth equity and energy transition funds? And what's the timeline for closing these funds and potentially opening up new vintages? The second question is in relation to a comment I saw in the press release on the macro hedge. How do you view the necessity for the macro hedge as we move through Q3? What are the factors that you're considering that will inform whether you increase or decrease the level of protection at the end of the year? And the final question is on deployment of capital. You mentioned a cautious approach to deployment. But I was wondering if you could give an indication on the deployment over the quarter and how it compares to historic periods. I'll leave it there, if that's okay.

Yes. Thank you, Mandeep. Thank you for those question. I will try to address them. So fundraising, effectively, private equity, as you remember, was an important act for us this year as we had these few initiatives in the market, TGE, T2 and then Aerofund on the back of the successful [ beauty ] contest in July. Your question -- so as you know, we do not provide update on the individual funds on these calls and these meetings. But one thing I wanted to come back to is, there's been obviously some impact of the COVID in the fundraising and the way people operate and the way people can travel to do due diligence, et cetera, et cetera. So we've tried as much as we could to accommodate that. And as evidenced by the numbers today, people -- I mean, some people are still very much in business, and we can still get to some interesting closing with some -- those investors. So Aerofund, Aerofund IV is definitely a priority for us. Remember that we announced a EUR 630 million funds closed December, which was EUR 200 million by the French state and the BPI, EUR 200 million by the fourth large corporate backing this project and EUR 230 million by Tikehau Capital. So we are in full marketing here, and you will -- we will certainly provide by year-end an update here. On the energy transition fund, which is a very topical strategy, as you can appreciate and we've seen that -- that's an aside comment, if I can -- may, Mandeep. As we were marketing this fund globally, obviously, in our core markets in Europe, but in Asia, now here in North America, we were extremely encouraged by the shift that investors were actually taking towards those strategies beyond the brainwashing that sometimes we hear about that. And that is effectively extremely encouraging for us to be positioned and to have a real genuine skill set on this investment strategy. So as to your question, will there be some successive fund? That is clearly our intention as we wrap up the funding of T2 and that we invest very selectively T2 to have some successive funds given the expertise we have developed here. Now your second question on the macro hedge, if I can provide you some update. Whilst this is an AUM update, I think we have the opportunity to mention to you the rationale behind that, which was the third time in the history of the group, after 2009, after 2016 and now here to implement that in March, when some of the key indicators we are following in the credit space or elsewhere, where we're being very adversely hit, which was the case in March when, I don't know, the [indiscernible] or the S&P level on index dropped from par to 78, 70, 80 in 10 days when it took 10 months in 2009. And so we remain of the view that despite what we may have seen over the past few months, we approach the next phase of the cycle very prudently, and we want to maintain a very -- a prudent approach. I mean, the rebound we've seen in the past few months, at least the financial markets rebound, we know that does not mean much in terms of underlying real performance of the real economy and even more so on the back of the most recent measures across Europe and potentially in other part of the world. Now your last question about the deployment. You may have seen that when we reported H1, and here, I can give you that the trend is following that. We had deployed, end of June, EUR 800 million versus [ EUR 1.5 billion ] for the same period in 2019. And this selective pace has continued. It doesn't mean that we're not taking advantage of that. I mean, quite the contrary. As you know, we had a very successful special opportunity fundraising that we had the opportunity to comment on. We remain extremely opportunistic, I think, in a good way when we do this private equity investment and the pipeline we've mentioned. So you should really see the deployment as being on track and selective. And if you look at the various example I went through, I mean, those are Q3 investment that we've closed over the past 3 months. So you can see that not only we're active but very selective.

Moving on to our next question, we have Geoffroy Michalet of ODDO BHF.

Okay. I'm sorry to come back to the macro hedge. One more specific question is, is it extended? And if yes, until which date and for which amount? First question. Then some question on fundraising. I just wanted to have your comment on the capital market strategies because the net money is slightly negative, whereas the performance is quite impressive. Could you comment on that? And then also, on the direct lending fifth vintage, you indicated that it was your first close at a bit more than EUR 200 million. I just wanted to know if you could remind us at what level was the first close of TDL IV? And when do you expect to have the second closed? And then the last question on the CLO, you also indicated that you launched a EUR 200 million CLO. I had in mind that normally, the CLOs are between EUR 400 million to EUR 500 million.

Yes. This is Henri speaking. So just to come back on the hedge and the derivative, when we have disclosed our H1 results, we said we'd actually disclose that the position was rolled at end of September until end December. So the size of the position has not changed, and it has been rolled from September to end December, as we stated during the first semester results. Your second question was on TDL, TDL V. So the first closing, I think we disclosed the figure in July, was EUR 220 million. That took place in July. And there has been, since then, additional closing. And we are expecting a further closing actually to take place in November and in December as well and more specifically from Asian investors. Mathieu, you want to...

Yes. Sure. I mean, if I can address the CLO, maybe just to add on to the direct lending strategy that Henri mentioned. I mean, as you know, that would be sort of vintage, the fifth fund, the fifth generation. That's one of our most historical and most institutional strategy that we have implemented. So you were asking about the previous fund, it was -- that strategy was EUR 2.1 billion overall. The fund number III was EUR 610 million. So whilst we're not setting in a target, I mean, there is clearly some good momentum around the strategy. And I would add that ironically, what has happened over the past 6 months now, and which is actually very likely to keep on happening given the circumstances, has given a renewed interest for the asset class. I mean, remember that interest rates obviously are extremely low in Europe, but they're even lower now in the U.S. When people were nervous about either a bubble, either too much dry powder that have been raised to chase too few -- little opportunities, I mean, the reality that now all these private strategies are a real complement, as I've tried to evidence in our review to some situation, fast-growing mid-market companies, so we're expecting the appetite to still be there. Now your question about the CLO, so far, I just want to make sure I understand well. Were you talking about the opening of the warehouse or the pricing of the deal?

No. On the CLO, I was just mentioning the size because the EUR 200 million seems to be a bit below the usual size of a CLO.

You're absolutely right. So that's why I wanted to be very precise. So EUR 200 million is the opening of the warehouse that we are doing with the bank and as we've done here for the past 5-year issuance. And that's normally the size that you open, that you start ramping so you acquire assets. And once you get to effectively the EUR 200 million size, which in a normal market is roughly 50% of the deal, then effectively, you price the deal and then you get additional resources, dry powder to keep on ramping. So our last deal -- our first 4 deals were around EUR 400 million. The last deal, deal number five, which was obviously pre-COVID, was EUR 450 million. Now the market has reopened, sometimes a bit lower than EUR 400 million, EUR 350 million. So we'll see by the time of the final ramp what is the size, but you should assume an in-line size with our historical vintages.

Moving on to our next question, we have Nicolas Payen of Kepler Cheuvreux.

I have 3, please. The first one will be on your joint venture with Le Groupe de l’Hôtellerie, if we could have any update on that joint venture. The second one would be, maybe I missed it, I'm sorry, if I did, any update on Sofidy inflows year-to-date and also specifically in Q3? And finally, you recently had a large Swiss bank actually commenting on -- regarding its asset management division and, in particular, regarding its U.S.-based alternative asset management strategy, which according to their own words were quite disappointing. So I wanted to know if from your own view or your own feedback, you saw such things in the U.S. currently.

Thank you, Nicolas. Maybe I'll start with the third one. If you -- again, I want to make sure that I understand well when you say the comment of this Swiss bank disappointed by the performance of its U.S. alternative strategy. That's your question?

Yes. Exactly. They said that actually, their performance during Q3 and even year-to-date was rather disappointing. So I wanted to know if you observed such a thing.

Well, always depends what we're talking about, if we're talking of the performance of the underlying assets they're invested in. And if that is the question, it obviously depends if we're talking of private equity, private debt, infra, real estate? Or -- go ahead.

Yes. Sorry. If I'm precise, it was real estate funds, CRE, mainly, funds, [ CRE funds ].

Okay. Okay. So real estate, all right, okay. So yes, I mean, specifically in real estate, that's why we wanted today to give you an extensive review because you can legitimately have some question about the real estate, given what we've been witnessing in the markets. And I hope that we managed to reassure you on the quality of the underlying assets, tenants, et cetera. I mean, in the U.S., listen, let me start -- I've been using that -- please forgive me if you find that a bit short-minded. But at the beginning of the year, January 1, 2020, which is, what, 11 months ago, 10 months ago, there was a co-working company that was supposed to go public for close to, I don't know, EUR 80 billion, EUR 100 billion or something. That was a real hot topic. And today, as of November 5, 2020, I don't know how many of you on the line are sitting in an office. But all of sudden, we don't need any more offices, and the work from home has become the norm. So I'm taking this example just to stress how quickly perception may have changed. And unfortunately, I think that reality is not as binary. So commercial real estate, I mean, offices, even also in the U.S., and I don't know the example you are referring to, if those guys are overweighted. I don't know, in the New York City, for example, I mean, I can tell you, as I was saying by way of introduction, we feel a little bit alone right now sitting in our offices here at Tikehau and people in this working-from-home environment, whilst there is no lockdown out here. So commercial real estate, there's obviously a question mark of supply/demand on the long term. And I think that some of our competitors, listed competitors have been making some pretty strong statements about that. We remain very constructive long term, albeit selective, on commercial real estate. The -- that could be a good transition, by the way, with your first question. I mean, obviously, if you're looking at leisure and hotels and things like that, well, when people cannot travel, you don't have that much of a business travel or leisure travel. And we're seeing effectively some part of the market being under some significant pressure. But here again, I don't buy into the -- this asset class is gone forever, and I'll come back to your comment about Groupe de l’Hôtellerie. That's why we are trying at Tikehau to work with the historical partners, very skilled partners to assess, once again, merits of the underlying situation. And then coming back to the last point, I will spare you the resi discussion, which I think everyone would agree is relatively robust, particularly here in the U.S. But the question about the retail, right, and which types of retail, you saw that the first default in the CMBS world, which is a securitized market for real estate financing, has occurred in retail, in big malls, and the fact that many -- the traffic is decreasing and that we are seeing some real shift here. As you know, we are exposed to the retail market through Sofidy, extremely granular with -- you saw the numbers we gave you today in terms of rent collection. We would not be buying the Hudson Yards shopping mall here in New York. I mean, that's definitely not what we're going after. And the example you were referring to with your Swiss asset manager may have been overweighted into this type of asset class. So we remain very constructive on the asset class, albeit selective. The very fact that we now are reporting real assets by adding this infrastructure component is a sign, passing the EUR 10 billion mark that we are very real about that. You may have picked up that, for example, student housing, right? One may say, "Oh, you're going into student housing, but the universities are closed." Here, again, I'm not buying that university will remain closed for the next century. So being able here to position with long-term recurring infrastructure type of a concession with universities and leveraging our real estate skill set are very interesting axis of development. And so just to come back on Groupe de l’Hôtellerie. Effectively, this group led by Gilles Douillard, a very successful hotelier/entrepreneur, who's been a partner of Tikehau since inception 16 years, is one thing that we are very proud of because here, we can once again leverage some skill set adjacent to the group with some people investing alongside us. It's more than an operating partner. It's a real co-investors, and there will certainly be some interesting opportunities in the hotel space, as you noticed, many groups who've reported, listed groups in the space going through some difficult times. And there will be some opportunities coming out of that. I may leave the Sofidy question to Henri.

Yes. Thank you, Mathieu. Well, I think on Sofidy, we've been disclosing so far the fundraising year-to-date, which stands at EUR 500 million since January 1. What we can say on that is that, that from raising -- actually, more than 50% of that fundraising was concentrated in Q1. Clearly, during the first lockup, end of March and April, we've had a slowdown in the fundraising pace within Sofidy. But so far, from April to September and October, we have not seen any decrease in that fundraising. It has remained quite stable, and we are still attracting monthly -- significant monthly inflows on those strategy. And as such, the figures that Mathieu has just given you a few minutes ago, Page 18 of the slide deck, on the basis of a very strong performance of Immorente, Efimmo, and on the basis of the yield that is going to be distributed this year, is clearly a very strong strength of our real estate mutual funds within Sofidy.

[Operator Instructions] Our next caller is Arnaud Giblat of Exane.