Tikehau Capital (TKO) Earnings Call Transcript & Summary

Hello, everyone. Good afternoon. I have the privilege of, being on stage, the first one. So good afternoon, good morning and good evening to those of you who are listening on the webcast today. So I'm Louis Igonet, I'm heading the investors relations for Tikehau Capital really delighted to be here with you in person. It looks a little bit surreal, but it is real. And what we're going to talk about today is real definitely. So it's been a while since we had the Capital Markets Day back in 2019. And so we are very happy to be here with you. So in a few words, the agenda of today, to first start with opening remarks from Antoine Flamarion, from Mathieu Chabran co-founders. Then we'll go through the opportunities, growth opportunities on the alternative asset management space, deep dive into how we view impact investing, sustainability and how we want to address private clients going forward. Then we will deep dive as well into our asset management strategies, explore the outlook in terms of scalability, profitability for our asset management. We'll have a Q&A session, a quick break and then go back to talk about our synergetic balance sheet, how we invest this compounding balance sheet. And then Henri Marcoux will go to the financial model before we end the session. So who will be your speakers today, well, first and foremost, Antoine Flamarion, Mathieu Chabran, our co-founders; Cécile Cabanis, our Deputy CEO, in charge of Human Capital, sustainability and communication will work through our impact investing and sustainability strategy. So Cécile joined in September '21 with a wealth of experience we're happy to have you on board Cécile today. Thomas Friedberger, our Deputy CEO, in charge of Investments, Macro & Research, also co-CIO. In fact, a Tikehau veteran, if I may say, a founding shareholder of Tikehau. So Thomas thank you for being there. And Henri Marcoux, a familiar face to many of you, who will talk about the financial model and walk you through some scalability aspects of the model. So what we're going to talk about today in other words what you need to remember before you leave the room, and please don't leave after this slide. First, we are on a strong journey, which is set to accelerate in the asset management business. We are on strong markets. We'll go back onto the tailwinds. We have an increasingly scaling and increasingly profitable asset management platform, which is very much supported and with a compounding growth effect coming from our profitable and liquid balance sheet. So all that is powered by people. It's powered by talent and powered by culture, and that leads to a compelling value creation model that we will walk you through and -- which is on the verge of accelerating for the coming years. Without further ado, maybe I would like to welcome on stage Tikehau Capital's Co-Founders, Antoine Flamarion and Mathieu Chabran. Thank you, gentlemen.

Oh, coffee.

Morning coffee. So I'll -- Antoine, Mathieu it's great to be on stage with you today. What a journey, I would say, not only since you created the company back in '04, since the IPO back in 2017, but even since we all got together here in London 3 years ago in 2019. Tikehau has probably changed dramatically. We made many progress on many fronts. The environment has changed as well. Competition has changed. The macro environment has changed. So looking back, I mean, how would you measure the progress made by the company? And what about things then metrics and also things that cannot necessarily be quantified? So Antoine, would you walk us through our thoughts on that?

Thank you, Louis. Hello, everybody. Thanks for attending this Capital Markets Event. We'll try to keep it simple and fun because after 2 minutes, I saw your face, you were like, so we'll try to make a little bit of fun. So first of all, we are also entrepreneur in the financial service industry. And for the last 20 years, the entire financial services changed. We used to have large bank and insurance company and the entire landscape has been changing. If you look at Goldman Sachs' market cap now, it's smaller than Blackstone. If you look back 20 years ago, Blackstone was a Goldman Sachs client and a small client. So this entire world is changing, and we are, for sure, benefiting for that. You have now 17 alternative asset manager listed in the world. You have 6 in Europe, and we are part of that. So how are we measuring our success? And we don't know yet if it's a success. We think it's the beginning of the journey. So I don't know if it's Chapter 2, but we are just starting. We started the firm in 2004 with EUR 4 million, as you know. And now we are a EUR 4 billion market cap company. We are managing close to EUR 34 billion, and we are still counting in euros; some are counting in dollars, so we may change that. But one big take for the day is that we may adapt the currency of our asset management. The joke aside, -- that's where we are now. So to measure the success, we've got a couple of metrics. And obviously, it's not only financial metrics. As you know, we are building something for the good and we'll discuss a little bit later, sustainability, but part of the measurement is really the size. And as you become bigger and more visible, I think you get some acceleration trend. So when we started with EUR 4 million 18 years ago or 17.5 years ago, would it make sense to be a EUR 34 billion AUM and hopefully reaching a much bigger size? And as you know, on the blue circle, we decided not to put some numbers. So now as the world is becoming uncharted territory, we may un-charter a little bit the series of figures. So we started with EUR 4 million. Now it's a EUR 4 billion company. You all know the market cap of JPMorgan, which is EUR 400 billion. And I think the trend is there. I don't know if it's our trend, but the trend of the industry is really there.

Yes, maybe on some metrics about the growth on the asset management business, could you just walk us through the track record there?

Yes. So when you look at the key metrics we've been following, obviously, we looked at our management fee rate. And as you know, there is a huge pressure in the asset management fee industry. People are always talking about declining margin. It's true in the traditional asset management. When you look at the alternative asset management, and you've got a good proof of concept, when we floated, when we did IPO of the company, we were managing at 75 bps on average, now we reach 102 bps. Main reason, obviously, is that we are changing a little bit the mix product, doing more private equity, more opportunistic real estate. But that tells you that there is no stress on the margin. Obviously, the CAGR of all the key indicators you see here have been growing at more than 100% per year, at least for the fee-related earnings and the asset management EBIT. We released our guidance this morning. As you know, the CAGR is a little bit less ambitious than that. We always have been on the conservative side, and you see on the next few slides that we've been all the time over-delivering. At the time of the IPO, we set a few targets. AuM, EBIT margin, percentage of the balance sheet invested in our fund. After 2021, we are almost there, so 1 year in advance, and it has been very turbulent. And since we founded the firm, we had the Global Financial Crisis in '08, the sovereign crisis in '12 and '13, the pandemic, now we unfortunately have a war next door in Ukraine. And it's really becoming uncharted, but despite that, we've been over-delivering and over-reaching (sic) [ overachieving ] our target. So I think the goal and the plan is to continue to act as entrepreneur. As we said, we are on the goal. We are responsive. We are creating, we are not competing and the playground is huge.

Thank you, Antoine. So now if we step back for a minute after this journey, as you described it, and what does it take to build, to grow a business like Tikehau Capital? And maybe starting with a provocative question about this ever-ending (sic) [ never-ending ] debate, about do we need -- do you want to be asset light? Do you want to be asset heavy, Mathieu? Maybe this provocative question is for you. Can you help us please settle that debate once and for all?

Is that provocative? No. What does it take to build? It takes some equity. That's how we started 18 years ago. Tikehau was a balance sheet before being an asset manager. And this balance sheet has been the engine effectively fueling our asset management development from 2006 onwards. And I think Louis -- as you and I have experienced over the years, over the year the fact that we've been able to tell our investors, our shareholders, our partners that this alignment of interest that the balance sheet provides whenever you launch a new strategy, you create adjacencies that will become a flagship for you further down the road because we like, as Antoine said, create, not compete. So what we've been trying to do over the years and what we are still doing even more so given the uncertain times is to hopefully find the next big idea. Remember when we launched a private credit, for those of you have been following us ever since we were -- we were listed. In 2007, 2008, our first direct lending firm that was not even a direct lending firm at the time, we didn't know, was EUR 125 million. Fast forward 15 years, it's a EUR 10 billion practice we have. And at the time, that was a new initiative, a new strategy. Same thing with the energy transition that Antoine touch base on when we came to the market in 2018. I mean it seems like yesterday, but it was a long time ago in this strategy. That's because we have this balance sheet that enabled us to put our conviction to work, demonstrate the merits and then scale it up. So for me, it's not a debate. It goes together, the model has been built like that. We intend to keep capitalizing on this balance sheet, we're now more and more exposed to our own strategies, which is creating, we're talking about compounding, why only give access to third-party LPs performance of our origination platform when we can, ourselves, dedicate our own equity and create this compounding return that LPs are looking for where your balance sheet can be exposed to that? And so you're opening a second engine of performance. Obviously, the ecosystem that Tikehau has been built on, and some of you, many of you have been part of that for many years now. And I really think has made a difference. That's where the balance sheet is a differentiating factor. I'm sure we'll speak about M&A. You know that M&A has been only very selective at Tikehau for the past few years, but that's a great currency obviously you saw a currency to do that. So very much I think that when looking at Tikehau today, 2022, it's part of the model is a [ hole ], and that's a [ hole ] that we believe, as Antoine said, has been overperforming and we'll keep overperforming.

And applying the Tikehau recipe, I'd say, to the acquisitions we're making by investing in their own strategies and scale them up, I guess, also part of the balance sheet capital use. But over there on the platform maybe and it's a people business. I often you -- hear you talk about the fact that it's a people business. But there's a good reason why we talk about human capital. In fact, and as we grow and we grow pretty fast, as you alluded to, how do you make sure that there is something cementing this platform and that these 700 people are, in fact, one single team. Antoine, you want to share your thoughts on that?

I mean part of the journey is to build a firm. It's not only about raising money, investing, managing the investment, delivering, reporting. At the end of the day, we are building a firm and it's a people business. So obviously, we've been investing a lot in making sure we develop our own capacity. So it's not only 700 people in certain offices around the world, but you have to invest in the culture, in the DNA of the firm. And obviously, it's learning by doing. But I think we put together an amazing platform, in which, first of all, we have this very strong alignment of interest. And you don't see that very often in the financial service industry. And all the partner of the firm are investing. When they join, they invest money in the firm. And we feel like also regulation is changing because the regulator from around the world are asking more and more skin in the game. So you see that, for instance, in the CLO business, we invest in all of our strategy. Employee and management control 57% of the firm. So each time we invest EUR 100 million in a firm, that means that we collectively invest EUR 57 million. So in terms of management of the risk, we feel like we are all risk controller, and that's part of the culture. And each time we are launching a new strategy, so for instance, we are launching, as we speak, energy transition in the U.S. on the back of the success of the European one we launched a few years ago, the team is investing there. Everybody is really aligned. And then obviously, you need to execute in a very efficient manner. It's becoming more and more uncharted, as we said. We'll discuss probably later inflation, interest rates. Just to give you a sense, if we invest EUR 1 billion in 10-year French government bonds on January 1, this EUR 1 billion is worth EUR 900 million, so it's EUR 100 million of mark-to-market. And so we're going to see some turbulence coming from the large institution. And we need to make sure that we execute properly and we are not trapped in either the wrong country, the wrong asset class. And we may be lucky or not, we'll discuss Russia and Eastern Europe a little bit later. But as we said when we announced the results, we are excited as entrepreneur focusing on the growth, but we make sure we avoid the trap. So Chinese real estate investment in Russia, we are doing nothing in Africa right or wrong, but that's what we decided to do. We are not part of the big technology boom in the U.S. also what's happened. So making sure we execute properly has been part of the culture. And each time we bring people on board, we need to make sure that not only the interests are aligned, but we continue to execute.

Yes. So maybe Mathieu on the U.S., maybe as a case study of...

Yes. And even before that, on the culture and the team, and I think you can you've got a slide where you have a snapshot of the team today. We are talking about the journey. I mean Tikehau, today is 700 people, 37 nationalities, 13 offices. We announced this morning, the opening of new offices in Israel. It's extremely diverse and sitting in the U.S. As you can imagine, the DII is becoming an increasing -- a topic of focus. And that's something I'd like to stress because when we last met in London for the last Capital Market Day, it was probably half the size in terms of people. And so the Tikehau journey, the Tikehau story is really about all this team that is developing across the world with these boots on the ground that makes the big difference. In our view, we're very convinced. Antoine and I and the rest of the team that we make the difference by having boots on the ground. We don't visit LP every 3 years because we have a new fund, a new vintage to sell. We talk to the investors, the partners every day that generate comeback to the ecosystem, that generates some deal flows, some ideas, some opportunities. We just don't wait for the info memo well organized in a process. Obviously, we look at that, but we've been able to generate that, thanks to the people, the team and it's been growing ever -- even through the pandemic, where we have grown in many new geographies. I was mentioning Tel Aviv this morning, but we opened Frankfurt last year and it's starting to pay off. It was Amsterdam, 2 years before, Japan, obviously, the U.S. 4 years ago, which is a -- which is a big market. And just since you're asking, Louis, I can use this example. We'll come back to that. When one of these big hubs, London, Singapore, New York, Paris being a place on its own, obviously, when we have these hubs, it's to spread the perception, the footprint of the brand, what makes a difference with the LP, with partners, with investors. And being there on the ground every day, I can tell you that it's a massive uplift to the perception, to the reach. And, as of today, when you look at the team, one thing I did not -- I did not insist on is talking about diversity. We've got 43% of women at Tikehau and including at the top senior level in this industry. As many of you know, that's one area that has been challenged a lot. And that pays back because we need this diversity in the way we approach things. I was saying earlier on to some younger people this morning 14 years of experience, but you cannot cheat with experience. So effectively, having this new generation challenging us in the way we operate in the day -- in the way we invest makes a significant difference. So I would not underestimate with that it's also built on this team, on those people that has taken us to this stage.

And maybe if I'm adding something on the culture of the DNA and the platform we put together, which is very difficult to perceive from the outside because from the outside, it will be okay, what's your FRE number, what's your FRE margin, what's your growth? what's the return on equity of the company? What's your IRR, your multiple on your latest exit in Italy, Assiteca, [ 2.6% ], very good. But when you build a firm, when you develop a company, you want to make sure that the culture is there. And as you expand, you want to connect the dots because as you see on this slide, we have advisory board. We have an International Advisory Board. We've got a lot of operating partner. We are leveraging a lot of shareholders. So we try to do repeated business with our partner and shareholder. And that's true from institution. You invest. They are shareholders. They are an LP. They co-invest. You want to launch a new initiative like we partner with a lot of different corporates. As you know, we partner with Total in the energy transition. We partnered with Airbus, Dassault, Thales, Safran on the aerospace. We are going to announce, in the coming days, a partnership with some large corporation in the agro-generation space. So you need to make sure that you connect the dot within your shareholder, within your partners, it's very important. And as you expand, as you grow, it's a key differentiator. Everybody has been piling stupidly into SPAC in the U.S. and then it came to Europe. And suddenly, we say, "okay, let's do SPAC. We take the 20% looks good. And the market in this area. What we've been doing is that we partner with a long-time shareholder, Bernard Arnault or Financière Agache, and we launched a series of SPAC. And in 9 months, despite that the market is closed, we have already 3 SPACS, 2 in Europe, 1 in Singapore and using always the same methodology, partnering with the best. So for instance, the first SPAC, we have -- we hired 2 CEO, Diego De Giorgi and Jean-Pierre Mustier to run a fixed space -- sorry, a SPAC in the fixed space. In Singapore, Neil Parekh, former Australian banker is running the third SPAC. And I think that's the way we've been connecting the dots. You want to do repeated business because as you expand, as you go, you want to make sure your cement all that. And it's becoming super complex because 13 countries, 700 people, hundreds of shareholders, hundred of LP, you want to make sure you connect the dots. And I think now we are becoming to see the acceleration. And you see that, obviously, on the numbers, but not only on the numbers, and I think you will -- you can expect more from us on this front.

Thank you for that. So -- and now that we get a sense of platform, which is a key enabler, the balance sheet, which is compounding growth across the board. Let's talk a little bit about the outlook. I mean you alluded to, Antoine, at the beginning, given this -- more than EUR 65 billion guidance. When I hear you talk to employees around the company, I hear you often say it's still day 1. So presumably, it was really day 1 in 2004, but it feels like, today, 18 years, almost 18 years after launch is still day 1. So I guess probably that ties back to the culture you were referring to, but since it's just between you and me, can you share with me what makes you so confident that Tikehau will keep growing and increasingly profitable? What makes you so confident about our prospects? Mathieu, you want to give it a shot?

Sure. Because the real day 1, it was a 1-man show and then started developing. And today, it's day 1 with an infrastructure which is certainly by European standards, close to second to none, the quality of people, which is second to know, this balance sheet going back to us in the question. That's the main cylinder of growth to be able to replicate this virtuous model, the infrastructure. This close relationship with investors and partners. And so this virtuous circle that we like showing which is, okay, create not complete to innovate, we discussed that at length. You launch a new idea, but no one trust you. because it's the first time, everything we never heard about energy transition in 2018. Well we believe in that, we get some balance sheet capital, we bring corporate strategic partners, and here we go. 12 months later, the portfolio is 60% invested and then people come because it's becoming a real appealing strategy. And so you start effectively scaling, and you can expand to the U.S., as Antoine said, we're launching the same strategy. So you then have this very virtuous circle that we've been explaining, which is you've got your own capital you invest that brings the people, the LP, you scale, then you got the management fee, the performance fee. And all that is not to be looked at in a position because it's -- as I said, it's just one. And, and I know, I leave that and Louis, is that, as your firm grow, and remember that Tikehau Capital, the recent entity, the benefit from 53% of all the carried interest performance fees, then it materializes, Henri will come back to that. We're not accounting like certainly in the U.S. and some here where you're accounting as it progresses when you account when they realize. So as the funds grow, as they materialize, you've got the third engine of performance kicking in. So yes, it's certainly day one of Chapter 2. That's probably the way I would put it, Louis, but in this virtuous circle.

Okay. So it's about moving to the next level scalability, driving operating leverage. Also, everything that has been -- the firm has been investing in is not yet at maybe its full potential. Talked about performance fees, about investment portfolio compounding interest -- investment returns. So now looking at maybe 3 main metrics. Antoine, maybe you want to walk us through the 3/2026 outlook, even though we know that 2026 is a mere milestone in the growth of the company?

So it's tricky because I gave you the EUR 400 billion market cap of JPMorgan, and now we have to go back to some smaller figures. But the only thing we can say is that when we started this firm with EUR 4 million, and I remind you, it was 50 people investing EUR 4 million. So obviously, the journey has been amazing. The growth has been amazing. Innovation has been really strong, and we'll continue to do that. The guidance we released this morning, and we see that as guidance. And as we said before, we try to be very conservative in the way we approach things. That's why we keep over-delivering. So first of all, we said EUR 65 billion of AuM, so more or less doubling that. And obviously, we want to make sure that we raise AuM, which are profitable because obviously, you can do a very different strategy, which we will not pursue is by a traditional asset manager, generating probably limited revenue, no margin and probably not positioned on the right sector. So we're going to continue to grow. And you will expect, and you'll see later that this growth is coming from all the engine, all the geographies, all the asset classes, including some innovation. I mentioned agro generation. But as Mathieu pointed, when we started energy transition, and by the way, before the fund of in 2018, which is EUR 1 billion first-time fund and the next one is going to be probably in the EUR 3 billion, EUR 4 billion range. We started in 2012, 2013 by financing companies in the energy transition space. So we use our direct lending platform to finance energy transition. And then we migrate that into private equity. So we're going to continue to innovate. And we put this EUR 65 billion. It's with limited innovation. So obviously, and we discussed that again, but we can expect probably more growth from new territories, new geographies, new asset classes. In terms of profitability, and obviously, it creates a very strong operating leverage. We put our FRE guidance at EUR 250 million. When we leased the firm we said in 2019 that we'll do EUR 100 million in 2022. So it's going to accelerate. And on top of that, as you know, 54% of the carried interest and 100% of the performance fees of our UCIT fund are within the balance sheet within the listed company. So that means that when the PRE kicks in, and you probably all look into detail this morning on the Partners Group results, which is our closest peers in terms of PRE percentage. It's more or less now EUR 1 billion coming from FRE and EUR 1 billion coming from PRE. And then we have the balance sheet. And the balance sheet is a key differentiator. There are not so many firm with the balance sheet. And bear in mind, when you have the balance sheet, you are the one with the option. If you want to give back the balance sheet to the shareholder, you'll do it. And then you become an asset light, and you probably all have been read the Brookfield comments from Platts saying, yes, we may spin off the company. So when you have the balance sheet, you have the option and you better have the option. Then when it's becoming turbulent, and it's becoming turbulent, there is something new any quarter, it’s interest rate, inflation, and we'll see more crises coming. Maybe tonight, you cannot turn on your iPhone because there would be a major cyberattack then what's happening? So to tackle that and to make sure we deliver, we have this balance sheet, and we've been very calm on the balance sheet. When we published our results 10 days ago, we had EUR 1.1 billion of cash on the balance sheet and a EUR 700 million -- EUR 725 million credit facility. So it's EUR 1.8 billion. And now when you have EUR 1.8 billion sitting on your balance sheet, you can do a ton of things. Because as you all know, the entire landscape is changing. And the value of a lot of asset management company, finance company have been declining. The largest H1 manager in the world, Man Group, is a EUR 3 billion market cap. So that tells you -- I'm not saying that we are buying none by the way. We don't want to be active in the H1 industry. But we're going to invest in this balance sheet. We've been delivering mid-teens. And I think we're going to probably increase that because the portfolio will be more mature. So this is what we gave this morning. And obviously, the plan is to make sure we continue to over-deliver.

Maybe if I may, and the balance sheet, is the best toolbox an entrepreneur can think of. Sometimes when people take a company public, it's an exit, right? It's to monetize, sell. When we listed, those of you who have been following us, there was no primary, no secondary. And twice, we tapped the ECM market, not because we needed to reinforce our equity base, it was to effectively grow. Then we tapped the DCM market. As of last night, we got a second investment-grade rating from S&P after a feature a couple of years ago. And we're building a credit curve, as we say, with the various issuance being the first sustainable bond issuer as an asset manager in Europe, it's another tool. We now have EUR 1.5 billion senior facility with a pool of bank that would not have talked to us, had we not have this balance sheet. So as an entrepreneur, that's the best tool we can think of.

And maybe moving on to how 2021 is a good example of the returns we can bring to shareholders thanks to this compounding model with -- basically on this, I wanted to remind people about the dividend policy and the capacity that we have given this compounding model to deliver on both ordinary dividend and the capacity to distribute more than that given the strong growth of the portfolio. And circling back with the EUR 250 million guidance, I mean, many of you have made the calculation, but it implies given the dividend policy, which is to distribute more than 80% of our FRE and PRE that shareholder returns are set to increase pretty dramatically. Maybe a final word before we wrap up on this session about -- we talked about the plan, what's in the plan, but also what's not in the plan because there are some additional options that we can explore. So you touched base on a little bit of both of those items. But maybe opening up to a wider perspective on these items, will we see M&A opportunities, look at new geographies? Can you walk us through maybe a bit of a option there?

Sure. I mean, Antoine, alluded to it, the optionality, but in a good way that you have because we cannot time the market. 3 months ago, the world was a different place than it is obviously today for many reasons. And again, as an entrepreneur in a growing firm, in a fast-growing firm, M&A, we've been asked all the time about the M&A. Valuation 3 months ago was very different from today. And for us, the arbitrage is always, are we buying goodwill or are we trying to create goodwill? When we ask 100 meet 100 to the capital allocation committee of Tikehau, is it to pay someone out to selling? Or is it to invest as working capital and build as we've been doing? Now things might change. We showed in the past that we could be extremely reactive, Antoine mentioned a few of them in the aerospace, private equity and infrastructure. But those transaction were made over the past 3 years at an average of 6 to 8x EBITDA and you guys are all experts and you know where we trade and where it has traded lately. Now if things go back, come back, we can do it. very selectively in some geographies, in some products, it might be faster to effectively buy and expand, and we can do it. And you should expect us to effectively do that -- do that and see that, nothing transformative, but those bolt-on acquisition. The new geographies is core. I think we told you 3 years ago that our priority was industrialization of our processes of our asset management and internationalization 3 years later, obviously, across Europe. I mean, we're mapping now very nicely with the perfect footprint, all the Western, Southern Europe. There's certainly some key markets in the Nordics, maybe to address. Asia out of Singapore, out of Seoul, out of Japan over the past 6 years, we made tremendous progress. And in the U.S. more recently, which is really the Americas, Canada being a great market, but there are still some untapped market for us where if we had to open an office in Canada or in Australia, yes, you have to finance a working cap for a year or 2, and that's where the balance sheet again is a great differentiator. And on permanent capital, I mean, probably Antoine you want to address that, but.

And we had the plan. And obviously, there will be other plans because we've got the balance sheet and we've got option. Mathieu mentioned M&A opportunities, new geographies we'll discuss a little bit later, also retail because it's becoming a big theme. When we list Tikehau, 1% of our AUM was coming from retail channel. As of now, it's 20% more or less direct and indirect. So obviously, we're going to accelerate that. Permanent capital is a big theme, very different in the U.S. and in Europe. In U.S., it's been mainly driven through insurance company purchase. In Europe, it will be a little different from regulatory reason, but we already put in place some permanent capital. So we've got 2 listed REITs. When you manage a listed REIT, you manage permanent capital. We've got a private real estate company with no maturity. We've got some SMA with no maturity as well. So we are already in the permanent capital. We're going to accelerate that with our own way of doing things. But as Mathieu mentioned, and we as well, we've got a lot of options. So there is a plan. We're going to deliver and hopefully over deliver the plan. But because the market, because the economy, the macro, the geopolitical environment is changing super-fast, so you want to make sure you adapt. And when you can launch a business of SPAC, you do it. When we started investing in cybersecurity directly and indirectly, we've got some balance sheet investments into some cloud and cybersecurity fund. We've got our own team managing cybersecurity fund. Unfortunately, the cyber will accelerate. Energy transition was also a good example. So there is the plan, but you should expect us with lot of new ideas, innovation and continuing at an accelerated pace.

Well, thank you very much, gentlemen, for these insights. I think you -- that's a great transition for the next item, which is a quick video on our corporate culture, which illustrates, I think, everything you just described. So thank you, gentlemen. [Presentation]

Thanks for the attention. So without further ado, maybe moving on to Chapter 2 of today's presentation with Thomas Friedberger, who is going to join us on stage. Thomas is going to walk us through the growth opportunities in the alternative space. So Thomas, please come on.

Thank you, Louis. Good afternoon. Let me talk for a moment about the growth opportunities in the alternative space. So asset management globally -- our assets under management globally are roughly $110 trillion as of today, growing at a 6% CAGR thanks to a strong tailwind, namely the increase in global savings. Tikehau is positioned on the alternative segment, which is growing faster than the market and will be enjoying a 16% market share in 2025. And indeed, looking at surveys, like the most recent Preqin Investor Outlook Survey, for example, a vast majority of CIOs intend to increase their allocation to alternative asset classes in the coming years. And not only alternative will enjoy a 16% market share in 2025, but also a 46% wallet share with a net revenue margin of 90 basis points on average, confirming alternative as the most profitable segment in the asset management industry. So let me wrap it up. A growing asset management industry in which Tikehau is positioned on one of the fastest-growing segments, representing almost half of the revenues of the whole industry. Now despite this very, very favorable trend in asset management, that should continue, our conviction is that the discussion (sic) [dispersion] of performance between asset managers and even between alternative asset managers will increase as growth will be more concentrated on businesses benefiting from mega trends, and here is why. The 3 mega trends that have been strong tailwinds for corporate profits since the mid-1980s are now reversing simultaneously. Those favorable trends were lower long term, nominal interest rates, lower corporate tax rates and globalization. They have allowed companies to over-optimize their production costs, their taxes, the level of capital they are operating with to maximize return on equity. This is not necessarily, to be honest, bad news as the search for infinite growth at any cost to justify high levels of debt and high valuation does not work properly. It has a negative impact on climate and biodiversity that's related to the E of the ESG, on social inequalities, relating to the S. It creates bubbles and misallocation of capital relating to the G. So we all know a more sustainable growth model taking into account extra financial criteria is the way forward. In this new environment, where over-optimization creates vulnerability, companies will be forced to invest massively in order to achieve to both gain in resilience and remain competitive. The new CapEx cycle is starting and CapEx creates dispersion as good investments are only made by the best companies. The COVID crisis and the crisis in Ukraine are accelerating those trends. So applying our motto, "Create don't compete." Tikehau has been building expertise over the last couple of years on what we thought would become mega trends. We've done so by setting up investment teams, offices, plugged in the local economies, partnering with corporates and sector specialists, creating an ecosystem of business partners and relationships that will act as a strong competitive advantage if those choices prove to be the right ones. So which are they? Well, first of all, let me start by saying that we intend to stay away from high-duration risk because we think long-term interest rates are -- will continue to grow higher. We intend to stay away as well from unreasonable multiples. Antoine alluded to it. It's not in our DNA to invest on unreasonable multiples. We intend to stay away from market beta because we are convinced that the value creation in Asset Management is definitely switching from asset allocation to asset picking and also we intend to stay away from highly levered companies. So in a world growing at a slower pace, high growth will be concentrated on mega trends. It seems even more abuse in the context of the crisis in Ukraine, but energy transition, cyber and digitalization look like clear mega trend to us and have been -- and have been for some years now. For example, the T2 Energy Transition Fund, Antoine and Mathieu were alluding before is to date still the largest private equity fund in Europe fully dedicated to energy transition and we intend to launch the equivalent strategy in the U.S. In cyber, we managed the largest European private equity fund, dedicated sector. Digitalization, what is it? It's about investing in tech enablers, allowing companies to digitalize production process to digitalize supply chains relationships with our clients and vendors. That has been the main focus of Tikehau growth equity fund #2 and the success of fund is on the agenda. Real estate asset reconversion. I'll come back on that in a moment. And with regards to special situation and hybrid capital, I'd say, European companies, in particular, will have to face pressure on margins and will, at the same time, need to invest, being able to provide special financings and hybrid capital solutions will create opportunities. It's also about bringing resilience to European companies we are talking about here. And by the way, the asset management sector could also fall in this category, as explained earlier. Like energy transition and cyber, asset management is fragmented. It's undercapitalized, it's growing fast. So there is a high economic value in being well capitalized in this sector, which we think we are. And opportunities on that will be addressed at a corporate level, as mentioned before. But this shock is also an opportunity to invest in quality businesses at reasonable valuations. Direct lending in that manner has proven its robustness and flexibility during the COVID crisis. I'll come back on that in a second. In listed equities, the consumer staple sector currently enjoys the highest valuation discount compared to broad indices since the dot-com bubble in 2000. The sector is performing well at passing on inflation to the consumer and is a play, essentially a play on the growth of the middle class in emerging markets and in Asia, in particular. It's one of the main convictions expressed in our listed equity funds currently. Banks are well capitalized. They are more robust than in the previous cycle. They should also benefit from the steepening of interest rate yield curve, but we prefer to play the theme through the SubFin segment as risk/rewards look higher than in equities. Tikehau has been managing a dedicated fund in SubFin, with the same portfolio manager for more than 10 years. Last, but not least, -- last but not least, sorry, higher dispersion brings value opportunities. What we mean here by value is either opportunity is coming from providing liquidity to sellers or having enough capital to be contrarian on segments of sectors with a strong potential of recovery. Tikehau has been pioneering the private debt secondaries business with the fund managed out of New York having recently executed the largest ever secondary transaction, providing liquidity to one of the top-tier LPs globally. Private equity secondaries in Asia looks also very attractive. Asia is a large region. It's difficult to find the best players in private equity. The GP-led private equity business will develop on the back of the strong growth dynamics at play on this continent. With regards to short duration credit, our short-duration strategy currently enjoys around 2.5% yield towards expected returns for 0.8 duration, which look to us as an interesting value proposition as well. And aerospace is one of the largest contributors to the European trade balance, having suffered extreme stress with the COVID crisis. The sector is made of large OEMs, some of them being our partners, but also hundreds of smaller suppliers lacking capital. Tikehau has been mandated by the Spanish and the French governments to manage private equity funds aiming at consolidating the supply chain of the strategic sector that has also to converge towards net zero trajectory. So the supply chain will need to adapt. So all of this can be wrapped up in one sentence, companies, governments, and investors need to build resilience in order to evolve toward a more sustainable economic model. Bringing this resilience is what we have been doing at Tikehau through our different businesses. We intend to accelerate on this, and we intend to put a lot of energy into it. So here is why we are confident our business mix is highly coherent. Private debt is about financing the real economy. Mid-sized companies represent 1/3 of the GDP and 1/3 of the jobs in Europe. It's strategic for governments -- it's probably, by the way, the reason why government-led national recovery funds are direct lending funds. We've won mandates in France and in Belgium. On top of being a floating rate business in the context of inflation coming back, direct lenders, often being the sole lender, can measure and report the impact of those financing on job creation and the environment. So direct lending is about creating local resilience. The dialogue between the sole lender and the borrower generates flexibility, and we like that. Real estate is about bringing resilience to the strong urbanization trends at play globally. 50% of mankind currently live in cities. It will be 70% in 2050. Core real estate addressed through Sofidy is about investing in well-located and highly adaptable commercial and residential assets. Value-add real estate is about asset transformation and reconversion to adapt to new urban schemes by creating green spaces, creating energy efficiency of buildings, creating density, limiting commuting. And here also, we can measure and report on impact. So we've built a strong expertise there, and we are confident we are also on the mega trend on that manner. Private equity is all about bringing patient capital, sector expertise and network to companies, partnering with industry experts to allow entrepreneurs to accelerate the development of their business. Tactical strategies is about bringing special financing and hybrid capital solutions to companies who need to adapt, to pivot, to accelerate, to remain agile. Tikehau Special Opportunity Fund II, will soon be fully invested. And so the successor fund is on the agenda as well. And last, but not least, what we call capital market strategies is essentially the management of concentrated portfolios of high convictions based on our own fundamental, financial and extra financial research. It's providing Tikehau with a 360-degree view between liquid and private assets in credit, in equities and in real estate. It's highly scalable, and just like retail-oriented real estate funds in our core real estate strategies, it's accessible to nonprofessional investors, raising the Tikehau brand awareness because happy investors in those products are potential shareholders for Tikehau. Let me finish with what are the key success factors in this industry. Well, first of all, the generation of excess return looks pretty obvious. We will go nowhere without generating superior performance. With regards to large-scale platform, it is necessary to broaden the deal flow to remain selective. It's also necessary to source larger transactions, offering -- being able to offer co-investing opportunities to our clients. Impact and sustainability. I will let Cécile in a second elaborate on that, but definitely we are convinced that extra financial expertise generates financial value. Democratization of private markets, I will have the privilege to talk to you a bit more about that in a moment. Innovation, create don't compete. We've proven over the past couple of years that innovation brings value, and we intend to accelerate on that manner. And last but not least alignment of interest in an industry which is highly undercapitalized. We think that skin in the game makes a difference. Thank you very much.

Thank you, Thomas. Don't go too far because we still need you for the next session. Just before we deep dive into both sustainability and impact investing at Tikehau as well as what we're doing with private clients, maybe a quick video on how we view impact and sustainability and how we're committed to this strong thematics. So the video, and then we'll have Cécile Cabanis on stage and Thomas Friedberger again. [Presentation]

Good afternoon. So let me take 15 minutes to walk you through and deep dive on our sustainability agenda and impact framework and show you how it's been built and how it's fully equipped to now answer the mega trends that were mentioning by Thomas on both transition and resilience. Sustainability journey at Tikehau started around a decade ago with a very strong conviction that we had the ability and the duty to anticipate the trends in order to make sure that we were building innovative, relevant and scalable solution to support the real economy, and making sure we were accelerating the positive change that were needed. And as you can see, every year, we've been building very consistently the framework, the foundation, the capabilities. We've been leading in deploying innovative solutions. We've been pioneering, and you heard Thomas already talking about the T2 Energy Transition Fund. And for that, as you see, we've been recognized and awarded. Now the journey has just started. We built the foundation. We build the platform, and we are now fully equipped to accelerate. So when we talk about sustainability agenda and impact platform, what are we talking about? The title on the slide says sustainability is fully embedded in our business model. It's not just words. What it means is that 100% of capital allocation includes sustainability criteria, both in the analysis and in the decision process. We discussed about alignment of interest and how the balance sheet is a very strong enabler. In addition to that, 20% of the variable compensation for the talents is based on a climate and people objective. And following the inaugural sustainable bond of last year and the most recent U.S. private placement, we have now 63% -- more than 63% of the debt that is linked to sustainable criteria. In order to address the critical challenge in climate, biodiversity and society as a whole, we have built a platform with where we define 4 very strong priorities. And this has served us in terms of guidelines in building our innovative solution across the platforms. So what we have today is now more than 70% of the AuM, which are classified SFDR Article 8 and 9 outside real asset business and more than 80% when it comes to private equity business. And within that impact platform, and we've been sharing that already since the beginning of the presentation, we have made sure that we were focusing and accelerating our strategies on climate. You heard Mathieu on the video. We have an emergency when it comes to climate change, 3,000 days. to reduce by half our carbon emission, 3,000 days to unwind 50 years of history. So if we look at our impact platform and the strategies that we've been developing, Thomas mentioned a few of them, cybersecurity, mentioned the potential on real estate reconversion. And you can see that we are really leveraging our multi-asset platform. Then let me deep dive on what I said has been our focus and acceleration, which is climate and biodiversity dedicated fund and strategy. So for almost a decade, we've been financing companies that are supporting energy transition. And this is very important because even when we launched, and it was mentioned earlier, when we launched the T2 Energy Transition Fund, as you can see, it was ahead of the Fit-for-55 package from the EU. So now with all the strategies that we've been building across the platform, we have more than EUR 1.5 billion of capital commitments that is really targeted into fighting climate change and decarbonizing the economy. If we deep dive on the T2 Energy transition fund, Thomas already mentioned that there were three areas that was -- that were really important. It's penetration of renewable. It's low-carbon [ mobility ] and it's energy efficiency. And if you look at the bottom of the slide, you can see that we've been having very strong output. We've been now investing EUR 800 million in 10 companies. And you can see the very strong output that we have on [ these 3 ] area beyond the very strong financial performance. So with that, we are now fully ready to accelerate. We mentioned the decarbonization fund and strategy for North America. We have announced this morning the closing of a new adjacency, which is Tikehau Green Assets that we will present later in the presentation, and we are working on regenerative agriculture strategy. So if you look at the top of the chart with all the platforms that we've been building for the past decade, we are fully ready and fully equipped to also address the REPowerEU plan that came out following the current crisis. How did we build that? It was not by chance, but it's through 3 very important things: a disciplined framework, big capabilities and organization and governance. So if we start with the framework, I mentioned that, overall, all capital commitments includes sustainability criteria in the analysis and the decision. If we focus now on our thematic and impact investing, we have a specific approach with 5 pillars. The first pillar, I mentioned it in the video, is intentionality. What is the theory of change? What are we trying to address? The second one is additionality. We are putting capital, but much more than capital with our expertise and knowledge. We are engaging with management teams to make sure that, together, we can enhance their sustainability knowledge, understanding and road map. The third pillar is measurement and reporting. And this is key because you don't manage what you don't measure. And measurement and reporting is absolutely key also to build transparency for the stakeholders of our companies and for the stakeholders of our fund. So this is the overall framework. And then we have added 2 very important pillars. The first one is alignment of interest. Alignment of interest we mentioned earlier, more than 75% of the balance sheet is committed into our fund alongside with our clients, to make sure that we are fully aligned in terms of interest. Alignment of interest could also be what we pioneer in our unit tranche and corporate debt business with ESG ratchet, and it's also answered to additionality. So what we do is, we have developed ESG ratchet, by which your interest margin is adjusted upward or downward based on sustainability achievement and criteria. In order to be relevant, we do that company by company. And generally, we are setting 3 to 5 objective maximum. So I've gone through the 4 pillars. The fifth pillar is independent assessment because it will be very important to give comfort to all the stakeholders of the companies and of the fund that we are walking the talk when it comes to achieving the impact objective and making the right progress. This framework is operating by talent and an ecosystem of people. Very importantly, we don't have a team -- a sustainability team centrally. What we do is that we put sustainability experts within the business team because it is the way that you would ensure proximity, agility, up-skilling and action. Second, I said that we had been very focused on climate dedicated strategy. So last year, we decided to set up a climate action center and the word action is important. It is harnessing the financing solutions and making sure that we are aligned with the guideline of the International Energy Agency, the IPCC, and the objectives set by the EU. It's an ecosystem of around 30 professionals. It's a mix of sustainability experts, business teams and also taking talents from the broader ecosystem of Tikehau, and this is led by Pierre Abadie, as you saw on the video. Organization alone is not enough. You need best-in-class governance. So we set up a governance at all level of the company from the Board oversight on strategy and monitoring progresses down to very specific task force per business to make sure that we are making the right progress in terms of delivery and short-term priorities. And on top of that, when it comes to capital allocation, we have specific governance, including for our Fund IX an impact committee that would be part of the decision process to ensure that the portfolio and the allocation matches the objective in terms of impact of the fund. Last, I think it's very important because I think what makes your strength is your differentiator. It's very important to understand how this has been possible. How it has been possible to build the differentiator that put us now at the forefront and fully equipped to address the trends? It's because of a unique culture and unique assets. It's an entrepreneur-led company. It's a young and agile organization. We have a strong balance sheet. We have a multi-local and multi-asset platform, which enables to connect the dots and cross-fertilize. And we have very passionate and engaged teams. And last but not least, a proven track record when it comes to the solutions that we've been building. And that's how everything what I said earlier has been powered including what Antoine and Mathieu mentioned in terms of being able to do best-in-class partnerships. So it's with that, that we've been pioneering. It's with that, that we've been accelerating and scaling. And doing that, we've been growing in expertise to address the trends of today, and we are fully equipped now to really accelerate on those. Thank you, and I will leave the mic to Thomas on Private Client.

Thank you, Cécile Cabanis. So let me add a few words on private clients because it's really a growth priority for the group going forward. As you can see on this slide, about 20% of our assets under management come from high-net-worth individuals, private clients and family offices. We are observing a strong interest from nonprofessional investors for private assets as people more and more want to finance the real economy. They want to have an impact on the environment and on the social issues. They want to invest locally and with purpose. So the strength of the Tikehau platform has allowed us to accelerate in product innovation, as I will show you in a minute. It's fair to say also that regulation is becoming more favorable in Europe with regards to private asset investments for nonprofessional clients. And also technology, interestingly, is completely changing the distribution model. On top of -- so on top of offering a broad set of traditional vehicles like open-ended funds or listed REITs, for example, we've managed to innovate in offering private asset solutions to nonprofessional clients. So we put you here a subset of examples of innovations that have been performed over the last couple of years. For example, in 2019, we partnered with Fideuram Intesa Private Banking to distribute a solution, investing across the whole Tikehau Capital platform. In 2020, we partnered with Banca March in Spain, to set up our first LT fund, European long-term investment fund, which is a very interesting format for distribution through private banking. And last year, we also innovated in the unit-linked space in France by launching 2 unit-linked products eligible to life insurance contracts fully dedicated to private assets, one in private equity around our T2 Energy Transition Fund with CNP, the largest life insurance company in France, and one with our partner MACSF, which is the first-ever unit-linked product fully dedicated to direct lending, and which is, to date, a great commercial success. So as you can see, Tikehau is addressing the opportunity in several ways. Historically, Sofidy has been covering nonprofessional investors, both directly and through distributors. Private Wealth Solutions has been set up. So it's a group that has been set up this year to offer tailor-made solutions to high net worth individuals and family offices, including co-investment opportunities, which is a large development angle for us. Also, the group covering distributors across countries has been reinforced. It's now able to offer both liquid and private asset solutions to private banks and IFA platforms, and a digital distribution expertise has been developed internally through Homunity. So thanks to this setup, we are able today to offer to private clients a full range of investment solutions covering all our asset classes in a vast number of formats, ELTIF, retail dedicated real estate funds, co-investment vehicles, unit-linked products, club deals UCITS liquidity funds. It's now all about expanding this service to more geographies. It's now the objective. Thank you.

Thank you, Thomas. Moving on to the next section. And then after this section, we'll have a quick break. We'd like to deep dive into the trends driving the growth of our asset management business, and I have the pleasure to welcome on stage again Mathieu Chabran, our Co-Founder, Henri Marcoux, Deputy CEO; and Thomas Friedberger also will be joining us for that session. So first of all, maybe moving on to the next slide, the 3 main takeaways of that section is going to be, first, what's the growth trajectory within our asset management business, which is, in fact, the reflection on the execution and investment performance. Second is how we can offer -- what we can offer to clients, what kind of performance we can derive from our investments and our strategies. And third, Mathieu will deep dive into how scalable our strategies are and how that is going to drive growth for the next chapter. So welcoming Henri, Thomas and Mathieu on stage for that section. Thank you.

Thank you, Louis. Good morning. Good afternoon, everyone. Happy to be here today. Let me start maybe by that. And maybe I will start with a very simple but critical principle in our business. I think it's all about performance. So we're going to try to demonstrate to you today how are we achieving that performance all around the platform. And the main message we want to provide around that is effectively this kind of virtuous flywheel effect that is going to drive the overall business for the -- starting with deployment, obviously, relying on a very strong deal flow that we are able to generate all around our businesses, having very strong discipline into investment within selectivity, notably, and then effectively building on our track record, building a solid performance all around our fund, which will at the next stage, generate a strong dynamic within our fund raising. So let me start maybe with selectivity and how does our selectivity translate into figures. Well, the main message here that we wanted to provide you is that from 2017 to 2021, we have been multiplied by 3 the number of opportunities we've been reviewing all around our processes. That means we are relying on a very strong deal flow that has been massively increasing years after years. And here, you can clearly see the effect of the overall platform, relying on the 700 employees, the 13 office we were mentioning and all the operating partner working along us providing that strong deal flow. And meanwhile, that deal flow has been increasing massively, we have maintained a high selectivity rate, which stands above 95% consistently over the past year. That means that we have decided -- we have decided to discard more than 95% of all the opportunity we have been reviewing over those years. So maybe a strong message here. And why maybe -- why are we probably more selective than what you can find elsewhere? You have here 3 main message on that slide that you should keep in mind. First one is that because founders and employees ownership is close to 57%. So here, we have a full alignment of interest between shareholders, management and all of the stakeholders. Second reason is because 9% of our AuM are coming from our balance sheet. So here, once again, we are fully aligned with our LP, with our clients into the way we are managing our AuM. And third point -- third takeaway of that is that within our portfolio, more than 75% of our portfolio are invested into the funds that we are managing. And we think that these 3 points are clearly differentiating factor in an industry where we see sometimes lack of alignment of interest. So talking about performance, important to provide you some concrete data point on our performance and our asset quality. You do have here on the left part of the page, some indicators on our front. We can talk first and foremost, with direct lending. You will see that the performance of vintage #3, vintage #4, on exited transaction stands above 10%. And actually, such performance is clearly helping us strongly to fundraise fifth generation, which is ongoing. -- on special opportunity, we have a similar trend where we currently have IRR on TSO, which stands above 30%. On the gross equity side as well, our Tikehau gross equity secondary, which where we have contributed assets from our balance sheet, stands with an IRR above 30%, so very strong achievement. On the infrastructure side as well, the fund generation #1, stands with IRR above 15%. And by the way, here, you can see that, once again, such performance is clearly helping us and providing strong support to fund raise next-generation [ Star ] infrastructure fund #2 has achieved above EUR 700 million into the fund raise. So that's about fund performance. Second one is about quality of the assets. We are managing a portfolio company. And so within all the funds we are managing, we do have assets. So important to provide you with some KPI on the quality of those assets. First one is about our Direct Lending platform, where we are benefiting from a low 0.48% of default rate across the platform since 2014. Another KPI that's interesting is about our real estate business and notably the rent collection rate, which stood above 90% for the year '20 and '21. We are running on a very diversified portfolio, and we have been crossing the COVID crisis by maintaining this high level of rent collection rate. Latest example we just provided, Antoine alluded to previously, but our gross equity fund has just announced its latest disposal, which is an insurance brokerage company in Italy, Assiteca, where we've been delivering a 2.5x multiple and 45% IRR on that transaction. Well, to conclude with this section, I could not pass on fundraising because clearly, I think that slide is demonstrating all about our business model. If you have good performance, solid portfolio result, well, the dynamic around fundraising then comes naturally. And for the year 2021, we actually achieved a EUR 6.4 billion net new money, which is more than 50% increase compared to the previous year. And that clearly here demonstrates once again the very strong confidence of our LP, of our clients into the business model of Tikehau Capital. Those inputs into net new money clearly transform itself into a very strong increase of our fee-paying AuM. You can see here on the right part of the page that our fee-paying AuM have been multiplied by 3 between 2017 and 2021. And you know fee-paying AuM is clearly a strong pillar of our revenue generation capacity for the coming years. I will let maybe Thomas now provide you a few data on offer.

Thank you, Henri. So what are our clients looking for? Well, they are looking for yield through income-driven products, providing predictable returns in the mid- to high single-digit area. So this covers private debt, core real estate, liquid fixed income. it's currently a bit less than 80% of our assets under management. To be noted, most of those investment solutions are indexed on inflation or our floating rate. So it's important to keep in mind the context of the comeback of inflation, of course. And they're also looking for value-add through products driven by capital gains and those products have both back-ended, but higher returns. And those cover private equity, liquid equity, tactical strategies, value-add real estate and infrastructure. And this is the part growing fast in our asset mix. So in yield products, we have a strong expertise. Teams are in place, giving us a high operating leverage brought by the geographical expansion of our LP base but also by strong adjacencies. For example, the Private Debt Secondaries business or the Direct Lending Impact business, our new business is growing fast and having developed thanks to the private debt expertise. For value-add, those vintages are less mature, but they are positioned on what we think are the right trends, as alluded before. They are more profitable and highly scalable, thanks to their positioning on growth trends, for example, cyber or energy transition. So this graph is plotting the level of fees vertically against the time horizontally. As you can see, those value-add strategies are positioning at the top end of the chart, and the cycles are growing. So I would say the product mix is evolving and diversifying, which will bring profitability, scale and stability in revenues. Thank you. I will pass it on to Mathieu now.

Which is a great transition before I move on to the scalability. Just to add here, we're not -- we don't see Tikehau as an asset aggregator. I mean Antoine alluded to that. It's not about being the biggest and adding through M&A or organic growth at any price. It's about having a profitable growth. I think we demonstrated earlier on, over the past 5 years or I should say, even since inception. And so it's important as a transition to the scalability that we all keep that in mind. The scale is at the core of the development because you can have the best -- next big idea. If you check the balance sheet investment, as we said, which is a start and which is at the core of our virtuous development, it doesn't really help your asset management business. And so here, as we said, we've got this emerging strategy defined as lower, smaller, I should say, funds, smaller strategies because yes, you have to go through the institutional process with your third-party investors. By the way, that's one thing we did not touch base on. What we see in the cycle of fundraising that we start with our balance sheet. We bring our friends and family, as we like to say. Then you bring some people who can react quickly; some family offices, people who don't go through consultants, people who think of you and can help you to get to the next phase. We'll talk about the co-investment opportunity later. And then you start having, obviously, the more institutional base that very often gets you the scale but has a process in itself, which is longer. And so being able to address the whole spectrum and Thomas touched based on the retail part that we can effectively impart during this fundraising process. Again, it's another factor of scale. So once you've scaled an emerging strategy and you get to the established phase, then people are no longer challenging you on the merits of the strategy, on the merits of your positioning and on your expertise, and then you can repeat through vintages. And that's actually an interesting slide of the various drivers to get you to scale. And I say, it's first the vintage growth -- are you stretching later on that affecting your strategy, you started with EUR 100 million, can, 6 years later, be a EUR 3 billion vintage strategy. Obviously, the frequency. We're not trying to deploy and invest as quickly as possible just to be able to raise the next fund that, by the way, we hope to get bigger to get more performance fee, et cetera. The model is not the model of TKO. We will invest if and only if we see the opportunity. In 2009, our first special opportunity fund in 2007, I should say, when we launched our first special opportunity fund, the world got to such a place that we did not invest the whole fund because we didn't see the opportunity. We didn't try to deploy at any price to go back on the road and raising of the next fund. So the frequency is also important. The distribution we just touch based on. It's effectively how wide can you go into how many client customer base to effectively reach out to a broader audience. We just made a comment as an aside, and I know that sometimes they can make too many digression but we can talk about retail, which is a great way to grow. But don't forget that the overall pie of the industry and the TKO pie as a whole will keep on growing because there is an unlimited untapped of geographies of investor base -- institutional investor base that are obviously much bigger asset allocators. So we keep on focusing on this multiple angle even if it takes sometimes longer. The customization is very important. People want bespoke today. They want the fund of one. They want the bespoke approach where they can effectively have their own investment criteria. And that comes without you pushing them a product, but trying to pull and get to what would be their investment criteria and design. And the cross-selling we just mentioned. I mean, today, we've got 2/3, if not more, of the TKO LPs, which are invested in more than 2 strategies. So the other step is always to get into the first meeting. And then if you deliver because performance is key. As Henri said, today's performance is tomorrow fundraising. Let's never forget that. And we all came out of a very favorable tenures that was very accommodating. So it's important that we don't lose that -- we don't lose sight of that. So that's an example also on the geographies. TKO is first and foremost -- was, first and foremost, a European player. We expanded outside our domestic market here in the U.K., then in Belgium, in Italy, in Spain, in the Benelux with a local presence everywhere, by the way. We just added Germany last year. And as we moved into Asia 5 years ago, in the U.S. more recently, obviously, you have more work to do to promote your brand, to raise the brand, to make the impact, if I may say, with your investor base. And that is paying off. It's paying off because we haven't been doing just the fly in, fly out to Singapore, to Melbourne or to Toronto, but to have some people on the ground developing do so -- do this dialogue. So today, as you can see, last year, we raised more than half of our fundraising outside of domestic market and we obviously expect this trend to continue. A quick snapshot on the U.S. and in Asia, which -- I mean not the U.S. -- on Americas, as I said earlier, 4 years over there, as we've been doing everywhere in every single market, planting the flag, promoting the brand, trying to convert that into relationship, into fundraising, then establishing some dedicated investment strategies, so you have a few data points here. I mean right now over there, we're running some public credit with CLOs to high yield. We launched the secondary private debt activity, which is very complementary to what we've been doing on the primary, very successfully for the past 10 years. As we like to say, it's an adjacencies that we're going to scale because we managed to do that and get $1 billion in the ground in a matter of 18 months, thanks to the balance sheet. And then we brought these investors and family offices. The -- a few example of partners, but also shareholders. It was important for us like we did in Asia when we arrived there in 2014. And when Temasek became one of our strategic partners, same thing happened with Morgan Stanley, and then it broadened the horizon of our partners. In Asia, where we've been under the leadership of our partner, Bruno de Pampelonne and J. B. Feat, Neil Parekh now over there, its hub in Singapore, in Korea, in Japan and same thing. Temasek became a shareholder. It's opened up a new relationship. T&D out of Japan became a strategic shareholder. And you develop and you grow and you scale your footprint in the region. There's so much more to do, obviously, in Asia, like in the Americas. I touched based on the co-investment model and the customization. Many of our investors, yes, they can invest in a fund, in a commingled fund in a blind pool of capital, but they also want to -- they also want a little bit a la carte. And what they want is when you have effectively the special of the day, they want to look at co-investment opportunities in LP, in real estate, in credit, in secondary credit. And so that's -- we're back to the balance sheet. We're able to do that because we have the balance sheet. The fund can invest, the balance sheet can effectively come in. And if you will, warehouse, like many of our U.S. friends but nonetheless, competitors have been using their balance sheet very successfully to grow their asset management business. That's what we do, and that's how we -- that's an example we did with Egis, which is a leading engineering firm, where we've been able, alongside our Energy Transition Fund, to bring in a significant sidecar, if you will, investment proposal for some LPs. And maybe here, Louis, do we have a present? An example of another adjacencies that is scaling up and that we've been able to launch, TGA, Tikehau Green Assets. [Presentation]

Another example of the scalability, and we can transition with Direct Lending better, TGA is the last comer, if you will, within the wider impact and climate platform that started with EUR 200 million 3 years ago now. We're getting close to EUR 2 billion across the product that Cécile walked you through. And this TGA is a great example. I mean the team came to us and they said, well, there is a blank here in our offering that will be key to cross-sell because of what [ Clara ] just walked you through. What did we do that the adjacencies that we were talking about? We launched the project. We got some very good news actually over the past few weeks and then we can scale and we know that it's an unlimited -- it's at the crossroad of infrastructure of corporate financing, very bespoke once again. So this scalability aspect, here, it speaks for itself. I was referring to the EUR 120 million fund in 2007 that we now call Direct Lending. The reality, Maxime Laurent-Bellue told you about that. At the time, it was a pre-crisis fund, that was a beginning of a new asset class that was not defined per se in Europe. It was the case in the U.S., it was not in Europe. Fast-forward 10 years. It's a EUR 3 billion -- it's a EUR 10 billion overall private debt strategy. The last one was EUR 2.1 billion. We're currently raising the vintage #5 and, obviously, will be a higher fund. And all that goes -- it goes across our strategy. And if you fast forward, it comes back to what Antoine was saying about the -- I don't even like to call them guidance. I mean we'll come back to that. First, it's not guidance. What we gave you this morning is where we will be as a natural execution of the plan, now that it is fully funded in a way both infrastructure, people and resources. So -- well, that comes to the number, not to repeat, although maybe we should repeat that. That's where we're heading. We're not heading -- as you know, the target that we're aiming for, that's a natural growth of the execution, as I said, of this operating leverage and the scale that we'll be able to reach. We're providing you here with some kind of a view of how this will grow. Value-add is growing, that the profitable growth that Thomas was referring to. That's how we managed to go from 75 basis points to 102, and there's still room to grow. That's how we managed to go to -- we're going to be going from 36% to a mid-teens operating margin, and there's still much more to be gained there and getting into this more than EUR 65 billion by 2026. I think that -- I'm probably the last thing between your coffee break. So we wanted to take a few questions. There's still some parts to be covered, but we'll be happy not to leave any question unanswered.

So you have mics in the room. And so please raise your hands if you have any questions. Antoine is going to join us on stage, and we may also take a couple of questions from the webcast.

Mandeep Jagpal, RBC Capital Markets. Two questions, please. The first one is on the AuM growth profile. You've got a doubling of AuM by 2026. But given the step-up in fundraising in 2021, how should we expect the shape of the AuM to grow to that date? Will it be, for example, a similar level of fundraising each year for the next 5 years? Or will it drop down and then continue to accelerate up? Second question is on cross-selling. You mentioned -- I think you mentioned 2/3 of clients are in more than 1 at the moment. Is this clients investing in new vintages of the same strategy? Or is it Tikehau has been able to cross-sell into other asset classes? I'm trying to get an idea here of how big the opportunity to cross-sell is now that you have a wider asset class offering.

I might just answer the second one because I just covered that. It's effectively going wide and then going deep. It's effectively having investors investing across different strategies and then across new vintages. So that's really part of the whole holistic approach we are developing with the business development team. So it's both effective.

And your first question on the fundraising, if you do the math, we raised EUR 4.3 billion in '18, EUR 4.1 billion in '19, EUR 4.2 billion in 2020. And then subsequently, we raised EUR 6.3 billion in 2021. So if you go from 34 to 65, everybody has been doing the math. So 5 years, it's a EUR 6 billion-plus on average. So we think and we may be wrong, but we've been, and I say a couple of times, probably very conservative. And it's going to be bumpy and you never know what could happen. Interest rate increasing is changing a lot of thing. But we feel like the trend is really big for private assets. All the CIOs globally would like to allocate more into these private assets. So we are benefiting from that. Number two, our innovation, and we continue to be at the forefront because Tikehau Green Asset is something new. It's a fixed income/infrastructure dedicated to green assets. It's something totally new like our private equity energy transition. So if we do properly our job, and our job is make sure we deliver performances, Henri has been touching base on these performances. We delivered performance, and we've been delivering performance for 17 years because if you are not delivering performance, you don't raise money. So are we going to raise EUR 6 billion per year? We don't know. Maybe this year we will raise 0 and the next year EUR 12 billion. But what we think is that because of the scale, and Mathieu took the example of Direct Lending, we start with EUR 100-plus million fund. And I'm telling you while we're knocking at the door of investors saying, well, we are raising a direct lending fund, people will tell us, "Direct lending? The banks are lending money." And it was the case in Europe in 2008, nobody remember, but that was the case. When we started marketing our Energy Transition Fund in 2018, same story, energy transition, what for? Why? And the entire fundraising of T2 has been probably done in the last 3 to 4 months. I mean it's been work. So I think the accelerating trend on pace will probably enable us to go at a quicker pace, hopefully. That's coming from innovation, new products, new geographies. We mentioned this morning, Israel, but the 2 largest insurance company have already invested EUR 500 million with Tikehau without having an office. Are we going to be able to accelerate that? Hopefully. Mathieu mentioned next office could be Canada or Australia. So new geographies, innovation, new product, scale. And last thing, retail. We've got already 20% coming from retail investors. It's becoming the next big thing. As I said, Blackstone is raising EUR 10 billion per month in the U.S. coming from retail. We are plugged to any channel; private bank, IFAs. We have a slide on Homunity. We never mentioned Homunity. It's a EUR 10 million turnover company, EUR 4 million EBITDA. It's a totally digital platform. 45,000 clients register. We start selling our fund, we sell third-party fund. We are going to expand this platform. We have a project called [ Opal ], which is going to promote third-party funds from our ecosystem to private clients. So a very long answer to the question on the EUR 65 billion, but it will come through various channels, various geography, various product, innovation. Scaling up project and direct lending is a good example. And as you become bigger, you talk to the bigger guys. And obviously, the bigger guys, they invest EUR 500 million in your strategy, and we are getting close to that. So I think it's going to probably accelerate on the fundraising.

Next question, maybe Arnaud and then Tom. So -- sorry -- so I missed the gentleman right here with the hand up.

Two quick questions for me. Firstly, on M&A. Can I check if your targets exclude M&A? Are they entirely organic? And you did highlight M&A as a bigger opportunity. And clearly, we've seen a lot of private managers come to market last year, a lot of interest for this year. Are they -- with maybe valuations coming down, are you seeing a bit more interest from people looking for a way to list maybe through a sale? That's my first question.

Yes. The targets are organic, okay? But obviously, we can add some M&A as we've done over the past 5 years very selectively. As I mentioned, nothing was transforming. We see it the same way we want execution of the plan to be perfect. We all know that an M&A transaction can look very good on a spreadsheet, but the execution and consequences can be more challenging when it comes to a people business. So what we've done so far was we to add some expertise, private equity, aerospace, cybersecurity, infrastructure in the U.S. that we can build on, if we were to expand here in Europe. And we're always looking at M&A around 3 objectives. One that obviously, it's diversifying from a business standpoint. I think it's fairly unlikely you would see us doubling up in some core markets or core strategies we're already active in. But to your point, if the valuation were to retrench, and we saw that in the public market, it took, what, 2 months to effectively pull back significantly. Maybe the IPOs that were realized last year or that were in the pipeline, to your point, or the trend around minority stake investment. There's been a lot of growth around these [ stakers ] in the U.S., now in Europe; the Owl Rock, Petershill, Blackstone, Hunter Point, many. Obviously, valuation could become much more appealing for us if effectively the arbitrage of using balance sheet capital to grow was less interesting than using balance sheet capital to buy. So that's really how we're approaching M&A. We've got a dedicated team at Tikehau, screening all day long some opportunities. We're plugged with banks, we're plugged with managers. You will be surprised how many incoming calls we get from managers who are not trying to sell themselves in a process, but just to get access to the balance sheet because they need to raise the next vintage. They want to raise an adjacent strategy. And so here again, even for others, it becomes appealing. And here, you can have some very interesting structuring and some kind of, let's say, merger more than acquisition. And it comes back to also the people and the culture, which in our business is the main hurdle.

And to add a few things. I mean, number one, these targets are without M&A. On the other hand, we've got the balance sheet. We've got cash. So we are always looking at all the companies and all the transactions. So for instance, the latest transaction announced last week, and you can talk to Peter Cirenza over there. You know Carlyle, we know them for 20 years, okay? So it's been bought by [ IM Sebastian ] for EUR 750 million. It's a small company. So we look at that. We look at all the possible private market transaction. We've been looking in private equity in real estate, in private debt, in infrastructure. And our view, and we may be wrong, but we decided to take a very calm approach so far on acquisition. So you have 3 examples there of acquisitions we made, very different. Purchase price are very limited. And you've got really 2 different strategy here. The best in class and let's call them for now, and obviously, it could or it will change. Blackstone has only made 1 major acquisition in the U.S. in 2007. They bought GSO for $900 million. And the idea was to get distressed fresh credit precrisis and it was the right call. And Mathieu mentioned Hunter Point, I don't know how familiar you are, but Bennett Goodman sit on the 16th floor of our building in New York. So the guy who founded GSO is sitting with us in New York. And the other firm was -- made no acquisition. It's probably the best performance in terms of stock price in Europe, is Partners Group. So you have this school. Are we belonging to this school? Probably. And then you have other school doing large acquisition, equity being one very good example. We are contemplating everything. We think that the price paid so far have been fairly crazy in this industry. And bear in mind, 5 years ago, nobody will look at alternative asset manager. So Bridgepoint, who just became public. Some of the historical partner sold their share for a fraction of the value of the IPO just a few months before the IPO. So nobody was really realizing that this sector is super-appealing. But we came from a sector that nobody has a clue to super-appealing and super-expensive. So as Mathieu pointed, there are cycles. So we are going to look, obviously, at acquisition. We spend our time, as I said, we have a dedicating -- dedicated team. But you should expect us being very calm on the multiple paid. There is no doubt about that. Just if I may, Louis, I mean because we never get bored in our business. Last week was the new first -- you may have, it's all public, CBAM, which was one of the fastest-growing CLO asset manager in the U.S. and we had just opened here in London, which was a wholly owned subsidiaries of Eldridge, an insurance company. They sold their business to Carlyle, but without any employees. They just sold the business and the management contract, how [ relative ] can that be? And that's an interesting step also into our industry. And obviously, if you can remove the cultural risk, that effectively increase -- it increase the -- it's more [ relative ], obviously, it becomes a totally different proposal.

Do you have another question Arnaud?

I have a second question. We've seen a trend, I mean, with TPG and others, even KKR, of a higher share of carry going to employees. Perhaps that's a view that the market doesn't appreciate enough the value of carry. Is that something you've considered?

Obviously, compensation in this industry is a topic with a majority. We create our own model, putting the bulk of the carried in the structure. Are we changing that? Not for the time being, because that's part of our DNA. Obviously, you have to adapt to the market. But our retention rate has been pretty strong, especially for the management as a whole in the various geographies, in the various business units. So in the U.S., they probably migrate the compensation model, so -- and figures are public. So for instance, Scott Nuttall's latest package is $1 billion. Jonathan Gray at Blackstone, same thing. Are we in this territory? I don't think. Are we moving? You have to be curious and to look at what's happening in the sector. But we feel like we probably keep the same business model, i.e., a bunch of carried and performance fees in the listed company.

I think Tom raised his hands and then Nicolas afterwards. Thanks.

So I had a couple of questions. Firstly, I completely hear the points you're making about the balance sheet and the compounding of growth that enables. But I also note the comments you're making about Brookfield and what they're potentially looking to do. I'm trying to kind of synthesize those 2 things. Is it possible that you might observe if Brookfield does ultimately decide to split its fee business from its balance sheet and that works out well, it could be something that you would consider? That will be the kind of first question. And then secondly, I guess, on the retail, private wealth piece, is a platform like iCapital one that you are currently kind of listing products on and looking to kind of distribute via -- or are you kind of accessing that piece of the market in a different way?

Maybe on the retail, to your last question, 20 years ago, the market was fairly different because all the savings were embedded mainly in insurance company, banks and retirement plan and system. All that is really migrating and you observe that everywhere. So you just mentioned iCapital. For those of you who are familiar, Temasek is a shareholder. So you can talk to Benoit. iCapital raised EUR 40 billion last year, EUR 20 billion the year before and EUR 8 billion only in January. And so this trend is becoming massive. For various reasons, difficult to -- there is long-term trend, but I think during the pandemic, people were at home with their device and they start putting money everywhere. And that has been probably an accelerator to retail money coming into private assets. So to tackle that, we'll be really multichannel, being able to partner with probably one of the largest or at least the most profitable private bank in Europe, teaming up with Fideuram in Italy or Banca March in Spain is venue. I'm going to continue to pursue that. I mentioned Homunity. We are very calm on the fintech because we think valuations are fairly crazy. We decided to build our own fintech distribution channel. We're going to accelerate that. So the retail appetite is probably bigger for this private asset. There will be [ trap ] because you need to -- it's 10-year money. And if performances are different or bad, they will be bad surprise. So you have to be very cautious. And obviously, when it comes to reputational risk, we think that we have to be very cautious with retail in general. He's going to answer on Brookfield.

I thought we had answered the question, but I appreciate why you're asking the question because you're always debating, but our conviction is very strong, Tom, I think, and we tried to demonstrate that. And at a time where everybody is trying to create a balance sheet, all the asset-light or the traditional GPs are trying to build the balance sheet, either by way of effectively letting a minority investor in, the GP stake I had mentioned, or the listing or even SPACs. I mean, for some of them, it's creating, I mean, long-term flexible capital. So as much as you know, we've been listening, we're looking at what's happening. We also saw that when Brookfield makes an announcement, a few days later, people write, well, is it such a good idea, actually? And so Antoine talked about optionality, being an entrepreneur led, as we've been saying all along and being fully aligned with any shareholders in the interest. Obviously, we will monitor the optionality. But at this stage, we think it's a powerful engine for growth. But having the optionality on your side is always a good thing. So to do the math very simple, and we did on purpose, obviously, we've got EUR 1.1 billion of cash, a EUR 700 million facility. So let's call it EUR 1.8 billion. We've got [ 175 ] million of shares. So that means that we can give EUR 10 per share, if you want like that. Is it the good things to do? We are the largest shareholder, so we get EUR 1 billion out of that. Okay. Great. But as I said, we are a builder entrepreneur. We want to grow the company, continue to have fun by building the company. And I think with the balance sheet, you have the option. With no balance sheet, you don't create the energy transition business. With no sheet, you don't do the direct lending. You don't do the cyber. You don't do the CLO in the way we are doing it. We manage 2 listed REITs with the balance sheet. Without the balance sheet, probably not possible to do REIT this way. So we have the optionality, which is always good. I think we're going to use the balance sheet and we are going to compound the balance sheet, and we've been doing that for the last 17.5 years. If you remember, when we listed the firm, at the time we list, we made more or less EUR 300 million of net income, only EUR 1 million was coming from the asset management. You saw the figure we released for 2021, EUR 140 million is PRE and FRE. So I think we multiply by 100, the profit of the asset management, and we're going to continue to do that. And then we've got the balance sheet invested in our strategy and in other strategies, and we have a few slides to comment that. but it's a powerful tool. And all the people who get listed, when you talk to them and you've been talking to them, ranging from the founder, the CFO, they say, okay, we'll sell a little bit of share. But we raise money to launch seed new strategy. They all are pursuing the same thing. So we have to be objective. They have no balance sheet. Now they have a little bit of a balance sheet. We feel very happy with our big balance sheet. And there are multiple ways. I'm prepared to, if I may, take the bet that when we next meet for the next Capital Market Day, I don't know when, in a couple of years, there will be more models with this long-term evergreen, call it, however you want, balance sheet type. Look at what Apollo did with that field. Look at what KKR did with Global Atlantic, like I'm convinced, we are convinced that this is the way and that's why we want to accelerate with that.

Maybe one question for the gentlemen over here. Please raise your hand, yes.

Nicolas Payen from Kepler Cheuvreux. Two questions, please. The first one, you talked a lot about the tailwinds in the alternative asset management industry. That's something that actually Partners Group spent a lot of time this morning on. And they also mentioned that they've never witnessed so much competition in that space as well. So I wanted to know if you witness this competition on returns, on pressure on investments? That's the first question. And then the second question, if I can play devil's advocate. You talked a lot about launching new strategy, new geographies, new products. Aren't you afraid at some point to lose focus?

I'm losing focus. Competition. We used to say and we'll use it 5 times already. Create, don't compete. To be frank, and I don't want to be arrogant, but we don't feel like there is competition. We are managing EUR 34 billion. We are very small. And you will not find us in the competitive landscape. We are not doing LBO control. That's where everybody is competing. And as I keep saying, firm starting with an A doing LBO, Apax, Advent, Apollo, Astorg, tons of people. We are doing minority private equity. Tell me who is doing minority private equity in our space? Limited people. You will find sovereign wealth funds, large family office. But the way we've been developing the business and maybe because we have no choice because we started very small with our EUR 4 million. Frankly, we don't feel too much competition. Energy transition. So when we start doing investing in equity in '16, investing in Total Eren, at the time it was EREN, they had difficulty to find a partner to invest. We did that, bringing on board Peugeot Invest. It was a EUR 60 million investment. This company already today is close to EUR 400 million EBITDA. We have 6% of that. At the time, nobody was looking there. Now everybody wants to enter the energy transition. As Henri mentioned, we have already 10 assets -- 10 companies in the fund. So we feel like we have assets, we have the team, we have adjacencies with Tikehau Green Assets. So when it comes to energy transition, we don't feel too much competition for various reason. The big guys, they are looking at elephant hunting in the energy transition. You don't have so many elephants. So I'm curious to see where they will deploy money. But we feel like enough opportunities for us and maybe we are missing one thing, but we feel like we have limited competition. And it's been true for latest real estate transaction. We purchased in Portugal, thanks to our strong Iberia presence and office, a strong office in Madrid, 4,000 flats in Portugal at 6% yield for EUR 800 per square meter. The competition was only 2 other bidder, it was Cerberus and Lone Star. So you end up being in a country competing only with 2 guys, and we don't see Patricia from Germany, Allianz looking at Portuguese real estate or KKR with their real estate arm. So competition a little bit, but not much. And I think in all of our strategy, we see limited competition. There will be probably more competition because more people are coming to the market. But -- and we may be wrong. But only -- and I finish on the competition, we continue to be super disciplined on the way we invest. 95% of the opportunities we decide not to pursue. We look at them. So we have enough opportunities, limited competition, and we continue to deliver return. So that will be the first thing. And the focus, I'll let Mathieu answer because he's very sensitive.

The -- I mean you lose focus if you don't have the local origination, if you don't have listing expertise, if you don't have the people upfront and here again, you need to front-load your expenses because if we're launching, [ Clara ], you saw here who joined us a few months ago. I mean she had to be there for us to start marketing the fund with the rest of the team. So if you cannot effectively support this working capital that is required to launch a new strategy, to open a new office, effectively you're using focus and you're running like a headless chicken. But what we've been trying to do, and that's why we see now the operating leverage is really kicking in, is by front-loading this expertise within core verticals, private debt, private credit and all the way we decline that, direct lending, leverage loans, special ops, CLOs -- Oh, by the way, you have CLO here in Europe, we extended the CLO in the U.S. We've got the same [ John ], who you saw in our screen earlier on, overseeing all that, very synergetic because the credit team headed by Rodolfo Caceres, who's been with us for 15 years now, they're all integrated, like-minded in the way they approach credit. So you can lose focus if effectively you don't dedicate the right resources. But if you anticipate this growth, then there is no reason why you wouldn't scale these strategies. And maybe one other last example. We launched last year Tikehau Private Debt Secondaries. Everybody has been doing secondary private equity. Nobody has been doing secondary private debt. We launched that. It's a first-time fund. It's -- as we speak, it's EUR 325 million fund. It's not a huge strategy so far. But now, you launched the first-time fund with EUR 300 million. And subsequently, we've been able to purchase a EUR 500 million commitment into the largest mezzanine fund based in the U.S. at a discount from an Asian insurance company. We bring co-investor. So that means that the likelihood we have over EUR 1 billion in this strategy after 18 months is very strong. We have a dedicated team, very seasoned. The return of this fund so far is 1.5x multiple. So it's secondary private debt, 1.5x multiple. So we feel like we build the firm by innovating, creating and the management fee relative to the 1 or 2, by the way. And there are a few strategies probably where we are not at scale or we never get at scale. But at the end of the day, and if you lose focus, then you stop growing, you deliver less profitability and you start doing wrong investment. So far, in a challenging environment, I think we continue to deliver. So we feel pretty comfortable on that.

Maybe it's time for break. So let's take a 10-minute break here. Let's meet at 03:25, if you don't mind. Thank you. There's a catering area right next door. Thank you. [Break]

Okay, thank you. If you don't mind, please take a seat and we'll get started with the next section, a quick video and gather some testimonials from portfolio companies, partners, people from our ecosystem on how they view Tikehau and what Tikehau brings to them. A quick video and then we'll dive into the next section. Thank you. [Presentation]

Okay. Embarking on the fifth chapter of today's presentation, I will welcome on stage Henri Marcoux and Antoine Flamarion to walk you through how we are deploying our capital and how the synergetic approach in portfolio allocation. Gentlemen, the floor is yours.

Thanks. Good afternoon again. Welcome back to the post. So maybe I'll start with here. And just wanted to illustrate how our investment portfolio has been evolving from 2017 to 2021. You can see here on the page that actually the proportion invested within our funds has been jumping from 33% to more than 75%, which means that actually, over the last 5 years, we have been investing massively within our funds. We've been aligning our interest without all of our LP. So back to 2017, the 33% were representing EUR 500 million. We are now talking about EUR 2 billion of investment within our funds. And by the way, those 75% represent already the high end of the targeted allocation that we had announced back in our last Capital Market Day in 2019. So maybe a question here, interesting to understand is why do we have an investment portfolio? Well, simply because that's a key asset, which is going to allow us to compound growth in all of our businesses. So our portfolio, as we said, is divided in 2 natures first in blue, our invested ecosystem and direct investments, roughly EUR 600 million. And then the investment within our funds, EUR 2.1 billion. And those investments within our funds are key because first and foremost, they will allow us to compound third-party fund raising. Also, accelerate innovation. We did touch base previously on TKO Green Assets, on T2 transition. So these assets is key to launch new strategies. Also, co-investments alongside TKO Strategies, which is a key allocation. And finally, all these investments will allow us as well to build a strong and predictable investment returns for the targeted return on equity that we have announced earlier today and which is part of the new guidance. So focusing now on our own strategies. I did mention the EUR 2.1 billion of investment. You have mainly 3 components within this EUR 2.1 billion: First and foremost, the allocation within our, which stands actually at EUR 2 billion, then the co-investments alongside all of our funds, standing at a bit lower than EUR 100 million. And finally, the amount invested within the 3 SPACs, might actually touch base on that, full alignment of interest more than EUR 40 million invested by our balance sheet, a SPAC, which is that natural extension of our asset management business since 2004. So why do we consider our balance sheet as a terrific launch pad to our new strategies? Well, mainly 3 reasons that you can see here. First, innovation. We did touch base on that. But that balance sheet allows us to develop new concepts and to innovate. Thanks to that, we can build the team. We can do investment, we can build the track record, and then thanks to the track record, we can effectively go and meet customers, LP and demonstrate them that the processes we have initiated is proper and is properly delivering some real return. Second, obviously, because that balance sheet also helps us in growing new strategies with a strong support from the balance sheet. And finally, as well, the scale-up effect on all the established strategies of the group, which is obviously the third impact of that strong launch pad, which we are considering as our balance sheet. A good example of that launch pad I was mentioning is obviously T2 Energy Transition. We did touch base of that. But back in 2018, when we created that fund we had actually the investment from the balance sheet which has supported the new launch of that strategy which has allowed us to demonstrate that we were able, thanks to that new strategy to clearly create some expected strong return for our LP. So now an important question you may ask. And actually, by the way, that's a regular question that we are receiving is, how much do we need to invest into our funds. And I think, by the way, that the proper question is not how much do we need to invest into our funds. But how much do we want to invest into our funds because we want to invest into our funds, not only because it's going to help us on third-party fund raising, but because we want to benefit from the performance of our funds. This is key. If you can -- the main takeaway, I think, of that slide is to understand that from 2017 to 2021, we have been taking, on average EUR 500 million commitment per year within our funds. With different strategies that you can see here, either private debt secondaries CLO, Energy Transition, real estate value add. What you need to consider for our next stage of expansion from '22 to '26 is that we will take an additional EUR 500 million of new commitments in all-- in our strategies that we will be launching starting this year up until the end of the plan in '26. Now having said that, main question should be how these commitments are actually affecting both our AuM and then our investment portfolio. Well as far as AuM are concerned, no change on that. Obviously, the commitment from the balance sheet will be computed within our AuM, once these commitments are signed. Second effect important to keep in mind is the effect on our investment portfolio. Here, you need to keep in mind that the cash out associated to these commitments will actually be spread over the fund investment period. So here, we are talking about 3 to 5 years to properly monitor the real impact of the balance sheet commitments into cash out as well into effect within our investment portfolio. So good question here. Why do we want to invest into our funds. Well, we want to invest into our funds because actually, we want our balance sheet and we want our profit and loss to benefit from the returns of our funds. We want to invest into our funds because we know our funds, we have designed them, we know how they invest, we know the quality of the assets they are investing in. So all these KPIs, by knowing all these funds, we are actually building a kind of portfolio allocation, which arrives here to EUR 2 billion of investments. And thanks to the allocation in mix between private equity, real estate, private debt, capital market, we are here and we are here to deliver all this 10% to 15% IRR by allocating once again our balance sheet within all of our strategies in order to deliver strong returns. I will let Antoine maybe tell you a few words about our ecosystem investments.

So when it comes to the balance sheet, Henri is doing the EUR 2 billion part, and I'm doing the EUR 500 million part. So obviously, I will be quicker. We invest in our funds, as Henri mentioned, because we have a strong team, and that will deliver return, and we've been building the firm over the 17.5 years like that by investing our money. And as I was mentioning before, when we've IPO-ed the company, the bulk of our profitability came from the balance sheet investment. Now we are migrating more into an asset management business but we will continue to invest the balance sheet in our fund, as Henri described, but also in 2 different parts. One part is our ecosystem. And it's been paramount at building the firm. We invest with partners and you see a few examples because that generate co-investment opportunities, expertise, network, additional geographical footprint. And I think that's been part of the strategy initially, and we're going to continue to do that. And you'll see in detail the ecosystem. The direct private equity investment is more the legacy side of the balance sheet. We used to have balance sheet direct investment. We are migrating that to an asset management business to generate management fees, performance fees and carried but we still have a few things. We had a few listed investments that we sold in 2021, DWS, [ Assiteca ] and Eurazeo, delivering a good return and putting less volatility on the balance sheet. But we still have a few investments. First, I start with the ecosystem. Some of you will be familiar with this name. Some will be not. So I'm taking 2 examples on 2 different things. J.C. Flowers and Augmentum. We invested in these 2. One is a listed company, the other one is a fund dedicated to financial services. Thanks to that, when they both sold interactive investor to [ our brethren ] a few weeks ago. They were both shareholders. We both have money there. And in addition of realizing return, we co-invest with these 2 firms. They are invested in financial services, so that will give us additional way to tackle fundraising. So for instance, Augmentum is investing mainly in the fintech space. So as a consequence, we talk to their portfolio company, which will start selling some of our fund. Same thing with J.C. Flowers, and we are doing -- by the way, we could add also StrongPoint, which is a U.S.-based dedicated fee and focus on financial services. So we try to cross-sell, cross-fertilize around the platform. Are we obliged to invest to get that? No. But as always, you've got skin in the game, so you have a better intel on what's going on. And it's been like that since inception. You saw, [ REA ] on the screen. We are doing various things with LionTree. Thanks to them, we invested in Univision. I know how familiar you are we made a EUR 40 million investment from the balance sheet. The company is now making more or less EUR 1 billion EBITDA. So it does generate opportunities return. Cross-selling, expertise, cross-fertilization. And obviously, it takes time because you want to extract the right thing with all this ecosystem. But we decided a while ago to invest in this ecosystem. And it could be firm. It could be companies. One is delivering performance. Two is bringing added value to us, expertise, and that's enabled us also to grow in some geography, whereby it's more difficult. We want to have exposure in Southeast Asia. What do you do? You partner with Temasek, that's one. Two, you invest in Dymon Asia, which is buyouts, Southeast Asia firm, that's enabled us to understand what's happening in the region because you get the reporting, and it's always better to receive the reporting, talk to the portfolio company rather than reading on the newspaper what's happening in Southeast Asia. So, it's not a huge amount of money. It's delivering return, and we're going to continue to do that, and that's been part of our secret sauce. The legacy part, which is now smaller in terms of costs, just taking one example of a portfolio company, we are still invested in called Claranet. It's a U.K.-based company, but global. When we invested in this company, the company was making EUR 55 million EBITDA. It's now making EUR 85 million EBITDA. We own 17%. Partners Group 3%; and the remaining is the founder and the management team. it's mainly doing cloud and hosting. It's going to be a very good investment, no doubt, but that's part of the legacy. And as you see, it's smaller. And then just some realized investment from the balance sheet. So as we said, we've been always delivering return from the balance sheet. You've got a few different examples. JustCo is a Singapore-based company. DRT is global, and Spie is mainly Continental Europe. So -- and we discussed a couple of times the balance sheet. We see that as a key differentiator as long as you deliver performances because if not, then you get twice the punishment. So you want to make sure the balance sheet is synergetic and you cross-sell, you cross fertilize. I talked earlier the example of energy transition. Without the balance sheet, it would have been very difficult to scale this business. But obviously, you need to be disciplined. because, as I said, your delivering return is always complex. So you need to make sure through your capital allocation committee that you deliver return in the long term. And you can tackle various opportunities as well. I'll give you an example. If tomorrow interest rate are going -- are increasing at a much faster pace, that's creating turbulence in the credit market, then you will have a lot of stress, distressed credit. We used to do a lot of that in 2008, 2009. Now we have a fund doing that. But by the time you launched the third generation of the fund if the market is collapsing tomorrow, at least you have the option, but you need to be disciplined. And if you are disciplined, then obviously, it's profitable. So in short, we're going to continue to use the balance sheet, mainly in our funds more and more to get scale, but also we continue to be opportunistic on various investment because one, we generate return; two, it's synergetic. And three, it's enabled the entire firm to understand what's going on in the various parts of the world, the various asset classes and the various capital structure. We used to say be curious -- when you invest in funds, we want to make sure that everybody at Tikehau has access to the reporting because that generate idea, thought and expertise. I stop here on the balance sheet.

Thank you, Antoine, Henri. So I will ask Henri to stand on stage for the final section of today's presentation on the financial model. It's going to be a wrap-up of some things that you have heard already and some clarity on the financial model and how we're going to create value for shareholders. So Henri is on stage. Right after that section, we'll have a second Q&A session and then a couple of drinks all together. Thank you so much. Henri?

Thanks, Louis. Well, maybe I think that the main message we wanted to provide you today is that we are just at the beginning of our journey to deliver strong, sustainable and growing returns. And you know the 3 pillars of that delivery are here on the slide. First and foremost, fee-related expectation. We touched base on that, and I'll come back in a minute, but EUR 250 million, which is our guidance by 2026 in terms of fee-related earnings. Second component will be obviously our performance-related earnings potential, and I'll come back to that in a minute. And obviously, the third component will be the perpetual capital base that is generating strong return, thanks to the allocation within our funds that I've just described. So Mathieu talked previously about scalability. And so why is that scalability so important? Well, actually, because it is driving our operating leverage within our business model. And as such, we wanted to provide you with a quick illustration of how we intend to increase our operating leverage. Well, you know when we are launching a new strategies, as we stated previously on T2, we need to actually build a team to front-load the OpEx. And as such, we are facing a J-curve, obviously, no doubt on that. But then when we have our successor funds, the new vintage, when we are leveraging on the track record of the fund, increasing the size and reinforcing the team, no doubt as well that the revenue growth attached to those new vintage is clearly much higher than the additional operating expenses that we need to face. And actually, we think that the potential to increase our operating leverage is real across all our funds and all our strategies. Thomas presented you earlier today, the speed between value-add and yield strategies. And here, again, on both of them, the operating leverage is concrete. You can see that on value add, where usually we are operating less mature strategies with vintage #1, vintage #2, we are benefiting from a high level of management fees. And as such, that level of management fees is clearly higher than the operating expenses that we need to implement in the context of this launch. As far as yield products are concerned, here, we are talking on closed-end strategies more mature, such as TDL V, such as well our volume-based strategies. Here, we are talking about capital market strategy, about CLO. And clearly, here as well, the operating cost are already in place. And clearly, all the additional revenue that we will generate with the additional AuM on these strategies will clearly trigger a strong operating leverage. So all of these drivers clearly enable us to provide you with this new guidance by the year 2026, which is to achieve at least EUR 250 million of fee-related earnings. So very strong increase compared to the latest figure we had delivered back in '21 with EUR 95 million of fee-related earnings. As far as our FRE margin is concerned, you can see here that we are expected to increase from 36% to mid-40s. Maybe a few comments on that, just to keep in mind that as far as the working assumptions around that figure are considered is that we've been taking into consideration a conservative approach as far as our revenue compared to our AuM at a level of 100 basis points for the next 5 years. Now performance-related earnings. I know we've been talking about that today, but just wanted to provide you a few additional data on that because clearly, on top of the fee-related earnings, our performance-related earnings, mainly made of carried interest and performance fees are a key earnings generation engine for the coming years. So what are the main takeaways that you can see on that page? First is that our AuM eligible to carried interest have been multiplied by 2 from 2018 to 2021. And that actually stands at EUR 14 billion. Second takeaway is that those AuM eligible to carried interest have been increasing by 25% during the year '21, which is actually a higher percentage than the increase of our AuM, which means that we've been focusing primarily our fundraising efforts on AuM eligible to carry interest. Maybe a few data points to keep in mind on that. We can -- obviously very important, the amount of AuM, which are currently invested stands at EUR 9.2 billion And third KPI to keep in mind is obviously the amount of AuM, which have an IRR above the other rate. It actually stands at EUR 5.5 billion, representing an increase of more than 80% compared to the previous year. I would like maybe to stop just one minute on some of our key features when it comes to performance-related earnings. First and foremost, the shareholder-friendly allocation that we have currently. 53% of our carried interest are allocated to the listed entity, 100% of performance. Second point to keep in mind, the cautious profit and loss approach. We do not accrue any performance fee or carried interest. We wait that the performance is realized across our funds to book those performance fees all around. That prevents us from any negative revenue impact, which is key to understand and to address earnings generation for the coming years. Third takeaway of that slide, obviously, is a midterm profitability attached to those AuM as more than EUR 14 billion are currently eligible to carry interest. We wanted to provide you as well a final word on that, on how do we compare to our peers as far as the carried interest allocation is concerned. You can see here that the shareholder proposition for Tikehau stands at 53%. The sector average stands at 36%. So here, once again, we're seeing that the shareholder proposition that we are proposing is much appropriate and very positive versus our peers. Now maybe moving to capital allocation priorities for the coming years. which means that actually how this cash flow will be used for the coming years. We've been touching base on our true nature of revenue. Our cash flow from the asset management, mainly made of fee-related earnings and performance-related earnings. Those cash flow will be actually returned to shareholders in the context of our dividend policy. We stated that more than 80% of the cash flow from our asset management business will be distributed to shareholders, benefiting strongly to our shareholders. As far as the cash flow from the investment activity is concerned, portfolio return, capital recycling, those cash flow actually will be made up of financial means to fund our future organic and [ inorganic ] growth. We've been talking a lot today about our balance sheet, our key assets. So I think it was important also to provide you with a few data points on our balance sheet, to keep in mind. Investment portfolio, EUR 2.7 billion. I guess you have these figures in mind. It's been repeated a lot today, but important to keep in mind. Second one, cash and cash equivalent, which stands at EUR 1.1 billion and an undrawn credit facility of EUR 725 million. Our balance sheet is consequently liquid and benefiting from a strong shareholder equity of EUR 3 billion. In addition to that, we wanted also to update you on our credit ratings. Since 2019, we were rated investment grade BBB- by Fitch rating. We are very happy to announce you today that since last night, actually Standard & Poor's has also provided us with an investment grade rating, BBB-, which is, I think, once again, a strong recognition of the strength of our financial model and our financial perspective for the coming years. So if you put together all these 3 sources and the use of capital in the short-to-medium term, what is the outcome? Well, the outcome is actually that we are benefiting with more resources than uses. Having a look at our resources, EUR 1.1 billion of cash plus an additional EUR 725 million of credit facility. And on the midterm, we are also benefiting from our portfolio investment, EUR 2.7 billion, which will return capital. So we are expecting those return of capital. So not taking into consideration the net cash flow here, we have a total of resources, which stands above EUR 4.5 billion in the next to medium term. In front of that, use of capital from an organic point of view. We said we had EUR 1 billion of uncalled commitments within our funds. And in addition to that, I did mention previously, an additional EUR 2.5 billion of commitments within the funds we are managing, within TKO funds that we are expecting for the next 5 years. So ultimately, that means that the main outcome is that we are benefiting from EUR 1 billion of resources that could be used either for growth options, which have not been completed within our plan at this stage. I think there was a dedicated section from Mathieu and Antoine on that to know how this additional resource is not computed within our plan could be eventually used in our next expansion phase from '22 to '26. Important point. I wanted maybe to conclude on that one, obviously, which is an important point. But how are we going to achieve this mid-teen returns on equity by 2026? This is a new guidance we have provided this morning, important one from a return on equity perspective. So first, I think it's important to mention here that we will be using our balance sheet. We've been repeating that a lot today, but that's big asset, our main asset that we will be using in the context of that return on equity. That balance sheet will obviously be used not only to fuel our asset management business. We touch base on that. But scalability, operating leverage and a strong generation of fee-related earnings. Second point will be driven by the performance of TKO funds that will obviously drive our performance related earnings but as well, all of our portfolio returns being invested within our funds. Third point, obviously, investment portfolio with our direct and ecosystem investment, that will drive as well all the overall results to the mid-teens return on equity by 2026. Thanks for that. I will now leave Antoine maybe and Mathieu for the closing remarks.

So now we are delivering the real plan in the next few slides. So forget everything, now we are -- I'm going to show you the real plan. We gave the guidance this morning. The most important thing is that we remain and we're going to remain entrepreneur in the changing in the fast-changing financial services industry. And that's a key advantage because we're only -- there are only a few entrepreneurial-led firm today, if you look at least the 15 listed one, entrepreneurs are retiring, and that's not the plan. So we are going to continue to drive this company as an entrepreneurial company. We're going to continue to be ambitious. And our mission is not only financial KPIs. Cecile explained to you that our ESG is really by design. And also, by the way, the ESG framework is changing super-fast. I give you the example of this week -- sorry, last week from the German government that they decided that they will invest EUR 200 billion in their defense system. So now it's really ESG because you invest in defense, but that save democracy. So it's very important. But joke aside, we're going to continue to be really investing in ESG. And we are a young company. So we have no legacy. As I said very often, we don't have oil and gas. So our life is probably easier when it comes to energy transition. Thomas mentioned the mega trend, and everybody probably has the view on where are the mega trends and it's agricultural, it's cyber and so on. but you need to make sure that you identify the trend, but you deliver and delivering is always super complex, and you need to deliver on the fundraising, but more important on the performances and as we said, the cycle for the last 10 years has been really crazy, probably due by Central Bank intervention, interest rate declining. And we think that's coming to an end. So we don't want to be over-pessimistic because, as you know, we are very optimistic, but we feel like it's going to be probably bumpy in this industry. But that will lead us to a lot of opportunities and hopefully, we are going to accelerate. When you look at the figure, our CAGR have been more than 100% for various KPIs, you see that the plan to deliver above EUR 250 million of FRE is a 25% CAGR. So do you think we wake up in the morning saying, oh, we are going to grow at 25%? The answer is no. There is no doubt. So we're now going to continue to make sure, while maintaining a strong discipline, we remain ambitious. And to be frank, we don't think it's ambitious. Some people will probably consider it's ambitious, hopefully not internally, maybe externally. But we started with EUR 4 million and nobody realized that EUR 4 million is nothing. So now it's, as Mathieu said, it's beginning of Chapter 2. The only difference is that we manage EUR 34 billion. We've got 700 people. We've got a strong balance sheet, a strong track record. We've got partners and friends all around the world. There are not so many firms having strategic investor as Morgan Stanley, or Temasek or Financière Agache, for instance. So in various parts of the world, we've got strategic partnership. And I think we're going to continue to leverage that. You see the trend with corporation. We partner with various corporates. We are going to continue doing that, and we'll announce something in the coming days, as I said, which is going to be very innovative again. And you should expect us doing that. I'm going to stop there.

I mean I just want to add, Antoine talking about the team. Today, you saw 6 or 7 of us and many on stage and many of our partners in the room, but don't underestimate the 700 people working 24/7 across the 3 continents now that we have because as much as we may still be impatient to take the company to the next phase. We're also very conscious of the journey that we've been through.

I'm interrupting my partner because we arrived on Monday, and we found that the city was pretty empty. So what people are telling you, well, Monday are like the Fridays now. Nobody is working in the city. And Mathieu mentioned, we are working 24 hours. The team are very committed. And I think -- the financial services industry is changing fast, and people are more agile, nimble and entrepreneurial, we'll benefit from that.

And I think they're working 27 because we're across 3 continents. That's what I meant. But no, I mean that I think it's important to stress, also to stress in all the work that has been done by the Investor Relations team to get us together back in person. Thank you, Louis Igonet and all the team. But yes, it's about taking perspective. I mean this CMD, it was 3 years ago now because of the pandemic, the type of exercise, we want to do to maintain contact with you, hopefully give you a little bit more vision, direction than what we can do on an earnings call every quarter. But things are changing. I mean what Henri just said on the screen as much as we are optimistic Don't know what the -- knock-on effect spillover will be of the overall situation. A month ago, we were being interrogated on the interest rates, right? And now it's -- obviously, the war situation. Tikehau was born on the back of the tech bubble, let's say, 2004, a few years after 2001. We entered our children phase with Lehman Brothers. Many of our partners who are today running businesses, heading some businesses were with us, at the time -- and obviously, all these crises have enabled us to grow. So as much as we're not trying to time the market because our job is effectively to invest across cycle. It's important that now we can also rely on the team that's been together for some of us, 17 years, 15 years, 10 years, have been investing across the cycles, like a good sports team. We don't have to look at each other to understand what the other one is thinking. And that has a lot of value that obviously, you cannot visualize in an exercise like that. Antoine said and you know us in -- particularly over the past few years, yes, we remain extremely ambitious, but we are trying to give Tikehau the resources for this ambition. And so it comes back to this discussion that we've been having about the infrastructure, about the capital resources. And it could be just a way of getting to cruising altitude and effectively doing what Henri was saying, you take a fund, you scale it up, you do the next vintage and you start again and again. Effectively, we are trying to open up these adjacencies a strategy that will become the differentiators 5 years from now because the world is not stopped. I mean private market 20 years ago was on LBO that's what LBO was and real estate somewhere. And the way it has evolved across asset classes by giving access to such a different and wide investor base. We touch base on that over the past few hours is a massive opportunity to -- massive opportunity to grow. So hopefully, you will see us in the coming years as motivated and I should say, convinced by the opportunity ahead of us. Hopefully, you found this exercise today useful. We're going to take Q&A because it has to be an interactive and that's also a message for the people maybe on the webcast, don't be shy, I think Louis, we can send some questions on the webcast. But with that, it's up to us to thank you for your time and your presence today.

Let's get some questions and then we can have a drink. Mr. Giblat. This gentleman right here with the hand up.

I've got a couple of questions that are a bit more short term. I mean given what's happening and your history about communicating quite cautiously about investing. I'm wondering how you're seeing the investment outlook right now. Have purchase price multiples come down yet? Are you seeing a good pipeline of investments? Or are you going to be deploying that on invested capital on the dry part of -- that you talked about? That's my first question. And secondly, could you give us an update as to how your funds have performed year-to-date given the market volatility?

Happy to start with the pipeline. As I said, we're not trying to time the market. And we've got a number of strategies that can address some investment opportunities across the cycle. So one could expect that on a special opportunity strategy, which is not a distressed play. It's really trying to take advantage of either a dislocation on the public market or a shortage of liquidity in the private market where we can provide some bespoke solution I mean, obviously, this is a time in the cycle where one would expect that effectively to grow, right? Now we've been debating the DCM landscape right now and effectively a number of transaction that should have gone the public route, either through a leverage loan syndication, the bond, are a little bit on hold, and that's where our private strategies can step up. You may have seen over the past few weeks some jumbo private financing being underwritten. I'm talking Europe, U.S. obviously different dynamic write-down. On the real estate, I mean, as always, there is all this beyond the past few weeks, okay, I would say, more post-pandemic what Thomas was working through all the play around the repositioning of real estate, it's very much sort of an opportunity for us. So there is a short-term play. Our capital market strategy colleagues, I mean, obviously, have been able to take advantage of some market volatility because they buy securities every day, I would say, and it's liquid. On the private side, like we had in 2020 in different circumstances and obviously in 2012 and in 2009. It generally it's a great time for bespoke capital for nonpublicly syndicated or distributed securities. And then what we are trying to anticipate and trying touch base on the exposure to this region is how much of the, as I said, knock-on effect are not yet priced in. We tend to be extremely cautious on that part. The teams have been -- the whole weekend that past year -- the beginning of the year, we really tried to understand what was happening with banks. We went through the Lehman moment. We know that a company can be a AA on a Friday night and be defaulted on the Monday morning. And so we spent a lot of time here without being too technical and bore you, but try to understand what the "ease the cancellation" and swap termination meant. Was there a lot of exposure out there that was not into the balance sheet? And could we have some kind of a domino effect. So we're trying to understand what we can assess and measure and then obviously, we had no crystal ball as to how things unfold. So bottom line, it's -- I think it's a pipeline that should fill up naturally because the public market are drying up or actually closing for some time potentially. And generally, in this time of the cycle, we've been outperforming, let's say.

But I had one of the few things would change the landscape and Thomas touch based on the 3 mega trends from a macro point of view, which changed the interest rate increase will create trouble and opportunities. People buying core real estate at 3%, and we are not doing that. There are a lot of insurance company, pension funds who have done that for the last few years. As we speak, 10-year U.S. is at 2.4%, and it was at 1.4'% January 1. So I think the interest rate increase will probably create turbulences. There are a lot of companies, people, funds operating with a lot of leverage. And I think that will create refinancing issues, probably decrease in valuation. So too early to tell, but we've been tackling and making sure we can seize the opportunities when they are there, and the cycle for the last 15 years have been very easy. And nobody realized that, we may be wrong, but it has been very easy. And we start seeing things changing. Chinese real estate, Eastern European investments, tech in the U.S., all that changed already. Nobody realized that and especially people operating in a private market they consider that LBO fund A is selling LBO fund B, which is selling to LBO fund C. Everybody gets carried, management package, all that is continuing. It's the big party. We're seeing it's changing. And we'll see. We may be wrong. So we start seeing not dislocation, but we start seeing future balances. During the pandemic, for instance, we start doing real estate financing in the U.K. We never have done that before. So I think we did 5 real estate [ and we used warrants ]. Why that? Because people are carrying real estate with a lot of leverage. And it's been easy so far, but I think it's changing. So there is no precise answer. You want to make sure you have the right team, you have the right resources and the dry powder and you have to be ready invest because at the end of the day, our job is to take risk, and we are investing.

Yes. And if I can come back to what Thomas was saying, what should we be avoiding it things were to hit the fan, is duration and over leverage, so duration in what we do is being mitigated because on private credit, everything is viable. It's flowing rate. On the real estate, it's sometimes a perfect hedge because all the leases tend to be indexed on inflation on private equity, we don't do buyout, as Antoine was saying, so we don't have some portfolio companies that may be 7x levered and 30% drop in their EBITDA because of pandemic and because of the crisis. So at least we are immune from that. It doesn't mean that our portfolio won't be impacted, but not having that to manage give us much more leeway to focus on the opportunity.

A couple of questions in the room, maybe gentleman right here who didn't have the opportunity to ask a question and then over the right. So first, this gentleman over here, please. Thank you.

It's Nicholas Herman from Citigroup. A couple of questions from my side, please. Just kind of a follow-up on I guess on the last one, I like to ask about a follow-up on the private debt and direct lending, please. And just ask you to kind of push you a bit further on how you might expect private debt and to perform in a deteriorating macro environment, I guess, particularly direct lending. But I guess that goes also for TKO but also the broader market as well. And so which players maybe we should be thinking about in a downside scenario, and we should be cautious about? I mean my understanding is that direct lending is typically lending to more highly leveraged parties and weaker credit quality borrowers. It's an asset class that's grown very strongly post GFC. So -- and I also did note the low historic loss rate that you have posted so thank you for that disclosure.

I was about to pick up on that because rather than words, at least these numbers with a benefit of 12, 15 years, I mean, our first fund is in 2007 now. So I don't know if 15 years is a cycle, but we leave a number of outside events there. So -- and I think that thanks to the discipline in underwriting, Henri pointed out a very important things. Despite our growth in AuM, we still managed to maintain this selectivity rate in our underwriting and in our deployment. And that's thanks to, again, the investment we made in broadening the origination platform and making sure that we were at 5%, 6%, 7% of transformation rate. So when you're managing EUR 100 million and you're doing 10 deals a year is not the same thing as EUR 10 billion. And that's something, again, that we've been very obsessed with because we don't want to be the biggest, and as I said, deploying at any price and to go back, yes, we have to -- the scalability. But the best as some of us have been repeating, the best Chief Risk Officer is ourselves because there is a significant commitment of the balance sheet in these strategies. So I think my main answer is that we've been through a couple of cycles. Now I'm looking at Cecile,'07, '08, '11, obviously, 2020, the blip in the credit market in 2015. Credit is about diversification. It's unfortunately, in a credit-profitable construction, unlike equity, if you have 0, it impacts your performance in equity, you can have 20x to make up for the performance. So that's the best answer I can give you.

I mean, sorry, we put this slide in addition, which is by vintage, the average leverage of the portfolio company. And you see that even TDL-V, on average is a little bit lower than TDL-IV. And I think we've been very disciplined. Some of the competition has been lending over 6, 7x. We try to be disciplined. We can be disciplined because we are a very large local team, and we have huge sourcing capacity. So, so far, that's illustrating what we're seeing.

And given that private debt solvency is where -- private debt is seen sometimes as bear market capital. Have you seen a change in client demand in that space?

I think what's happening right now is that a lot of clients are trying to assess their exposure to Ukraine and Russia, do you have a factory, a plant, some people? Then do you have investment there, direct? And then do you have indirect investments. We've been through that and we probably are lucky, but we don't have people in Ukraine or in Russia. We don't have any direct investments. We have a few direct investments, which divided by the way, in 2 category again. You could have companies exposed to raw material where there is huge inflation. So if you have to buy titanium, 50% of the titanium is coming from Russia. So there will be inflation there and the question, can you pass that to your clients. So we have a little bit of that. We are buying, for example, we have an Italian company called EuroGroup, company producing electric battery, main client are Tesla and Volkswagen, a very successful company. They are buying 13%, 1-3 of their steel from Russia. So obviously, will have to buy steel elsewhere. So that's one leg of indirect. And you can have companies whereby they have assets in Ukraine or Russia. For instance, EREN has a few wind farm in Ukraine. But for us, it's pretty limited. But I go back to your question. So people are trying to assess that, pension fund, insurance company, family office. They are trying right now to see what's their indirect exposure. And probably, they've been a little bit more cautious in the past few weeks. Also, it takes time because the way it works is that institutional investors that say, okay, I'm allocating EUR 10 billion to private market next year, EUR 5 billion prior equity; EUR 5 billion, real estate. And then they have their plan already for 2022. Are they changing that? Not so quickly. So that's one. And two, you can discuss later with Fred, who is there running our sales and marketing. But we've been pushing very strongly on retail. And the retail demand is super strong. And especially in an increasing interest rate environment, we see this demand continuing to be strong. But it could evolve. It could evolve.

That's helpful. And then the second question I had was just about growth and the FRE margin. So you clearly have a lot of white space on the growth opportunities you can expand into. Just curious how you're thinking about, how you prioritize those opportunities for -- and these expansions? And in that context, given so much on investment, so many launches. Can you talk about the expectation on the evolution for the FRE margin? Is it just a steady grind up? Or is it kind of just a bit flattish and then more of a j-curve towards the end?

I mean -- and it relates to your question earlier on competition. We really feel like that the space is really a blank space. There are tons of things to build and to be done. Because, as I said, very simple trend, more and more savings from around the world. And all the saving has to finance all the transition, digital transition, energy transition, cybersecurity, agro-regeneration. There are tons of things to do. And if you are creative, I was just looking at a pitch at lunch, which is -- I'm going to make it very brief, but Tikehau purchased a large insurance company in the U.S. It closed a few months ago. And now they are raising a sidecar to co-invest with the insurance company, okay, pari passu. So they just invented a new business. A sidecar co-invested with the insurance company. So for the people smart, on-the-go, reactive, creative, there is a huge space, and we feel like -- I'm not even sure that we know all the opportunities we launch will tackle. But you should expect us being creative again. And so that's mean that less competition and probably more whitespace. At least for now, that's what we see.

And the FRE margin, the combination of more profitable strategies as Thomas detailed. The fact that we've -- we are invested, we've front-flowed in as I tried to explain, the infrastructure. And so you've got the operating leverage kick in. And so it's fairly mechanic. We'll have to add some people, obviously, marginally. But you have this effect. And if you start -- if you benchmark us and you see where we're coming from, you can see it's even.

Next question was from Carlo over here, then...

Actually, I have a follow-up and 2 questions. So the follow-up is on the interest rate scenario and retail clients. I was wondering what are the geographies you see more opportunities. You actually have agreement with Fideuram and Banca March, which are very geared to interest rate scenario. So I'm wondering if you are thinking about other geographies, in particular, or to further extend those specific geographies. The second question is regarding the client diversification, I'm referring to Slide 46 -- 47. Private investors and family offices are 20% at the end of '21. Where do you expect to land in '26? And if I may, a question on ESG. Actually, this is more a secular trend. So I'm curious about your view in this respect. Clearly, there is a lot of debate about the performance of ESG funds. Do you expect most of your peers to become impact companies? Where do you think to land about Article 8, Article 9. We don't know about the evolution of the regulation, if there will be another article later on. But the question is, do you expect in '26, '26 will be 100% ESG AUM?

So maybe on the first question, you mentioned Fideuram and Banca March. I mean, a couple of points. Number one, you want to do repeated business with your partner. So that's one option. But I'm telling you that we are talking to probably all the large financial institutions, ranging from Singapore to Abu Dhabi, to Canada. But this federal structure takes some time to put together. So we have a lot of discussion open but it takes a lot of time. But you should expect us in the coming years, launching a new product like that to tackle retail clients through private banks. We've done that in the past, and we're going to continue to do that. Now the platform is bigger because you've got -- you can navigate with your 13 offices. So I think you should expect us doing more of that. And then the retail, obviously, which is part of that, when we listed, we had 1% of money coming from retail investors. Today it's 20%. Are we giving guidance to the 2026? The answer is no. Too early probably, but we expect that to grow because there is more demand from retail investor. And I think we put together a strong team, Mathieu and Thomas described our private wealth efforts. We have already a lot of strong European and Asian families invested with us in some specific strategies. And we like spending time with private clients because they invest money. They've got expertise. They bring ideas. They bring deals. So you should expect more on this front coming from us. And some cross-selling coming because the 20% is already a chunky part if you benchmark to other managers. And that thanks to a number of platform we own or have developed like Sofidy on the real estate, which has 50,000 or 60,000 individual investors, we mentioned Homunity. We effectively give access to 40,000 investors. So -- and then when you start cross-selling that, and it's really retail defined as a very modest investment. We're not talking large family offices or private bank distribution or all the platform. Antoine was talking about the high capital platform and others, which will be incremental. Now keep in mind that the overall pie, as I said, will keep growing. And we still have a focus on institutional money. So if it stays to 20% when we get to EUR 65 billion, that will be a significant step in absolute term for retail. But that's not in terms of proportion. We're thinking but very much how can we embrace the overall -- the total addressable market, let's call it, like how France do in the growth equity space. Cécile, do you want to maybe pick up on ESG?

Yes. On your question regarding impact and regulation, what you can take as an assumption is that indeed, more and more strategies will be [ 8% or 9% ] and certainly 100% when it comes to private equity. And on a broader picture, I think the ultimate goal is that, one day, we don't talk about impact anymore because it will be totally embedded and routine. And so this word will hopefully disappear.

So a question for the gentleman over here, Mandeep, go ahead.

The balance sheet portfolio is a key pillar of the new ROE target. So the returns on that -- for the balance sheet portfolio, you've had a target of internal rate return of 10% to 15%. Are you able to provide what the return has been historically or when we can expect it to reach the target range? And does this target range allows for the increase in value-add strategies that are expected over the next few years?

Yes. Happy to start with that. So there are 2 things as Henri and Antoine walked you through, the fund investment, which have been increasing from 30% to 75%. And the fund investment, you should really think about that since we're invested in everything we do, we will be in some 5% target return strategies. I don't know that some corporate lending, the TGA, for example, fund. And all the way to 25% in private equity in special ops in some of the real estate business. So if you blend that in the allocation we're making, it is designed to return at cruising altitude effectively once you've mitigated the j-curve that Henri was saying, would be 10% to 15%. And then there is the ecosystem part that Antoine walk you through and which tend to be primarily equity investment. It's designed to be more effectively in the upper part of the targeted return. And so last year, it was at 10.1%, I think, that we reported last year. And so as you get a more mature fund portfolio and portfolio in itself, that's how we construct the balance sheet. And we tend to think it's the return on equity. We'll be debating amongst ourselves, whether we should be creating another KPI, which would be the KPI telling you, okay, I use [ 100 ] from the balance sheet. The investment is designed to be making mid-teens. But by using this capital that will also generate the fee component over 10 years, let's say, margin plus a PRE, that in returns will create some kind of return on capital employed return. So we said we're going to keep things simple. And because we've been developing in the last few years, our thematic private equity and our opportunistic real estate, which are supposed to deliver or designed to deliver more than 20%, and we are investing more of the balance sheet into these strategies, we are fairly confident that the return on equity or the return will be probably higher, thanks to that. Because if you invest only in your senior loan fund delivering 4%, you can only deliver 4% at best. So -- and we've been switching already that.

Maybe just something to add your question. Within our value-add strategies, our funds are already recent, really young. And so typically, some of them still in the investment period. So that's why the ramp-up is going to be gradual. But as this strategy matures, that would increment their portfolio returns going forward. Any other question? From Tom over here, yes.

If I could just come back to the rationale for the balance sheet. I'm just joking. I don't want to get chucked out this close to the drinks. I -- what I wanted to ask you about is -- you've been really successful at winning kind of governmental mandates, large governmental mandates. It feels like some of the strategies that you're running on the kind of aerospace and defense side and on the energy transition side are super relevant for particularly European governments are going to be looking to do over the next few years. Do you see scope for material new mandates get awarded over the next couple of years? And given your kind of relationships and experience so far, I mean, generally feel quite well placed to kind of win those if they do come?

I mean, there is clearly a trend which is probably good for the transition and the economy of having government money, and that's during the funding of EUR 750 billion plan in Europe, but now there is a new plan coming. So it's people with the right resources, the right expertise will probably benefit from that, and we've been benefiting from that. This trend is accelerating. There is no doubt. I mentioned the EUR 200 billion from the German government into defense. So we'll see more of that coming. Are we pursuing that? It really depends. We're going to pursue that if it's the right opportunities, return and economics because you want to make sure that if you raise specific strategies, it's going to help you deliver the right FRE and PRE. But there will be probably more of that coming. Is it a good news? Partially. Because for all of you, it's a bad news because taxes will increase massively in the coming years. There is no doubt. So I'm not sure that we want more European plan and actually global plan. So we've been granted by the Belgian government, by the Spanish government and by the French government, mandate. It's also highly competitive. You spend a lot of time because it's prestigious to manage money from the governments. And for instance, in Belgium, it helped us a lot to grow the profile. So you have ancillary points or brownie points, as I said. So we continue to pursue these opportunities. It's not a business per se. So I don't know if that answer your question, Tom?

Yes. If I can add, Tom on that because beyond -- it's not the prestigious aspect, the strategic aspect because when you get 2 things, let me step back. We want most of this mandate because we invested significantly in the fund. And that's a fact. 12 years ago, we won in France, the first direct lending mandate on the back of the euro crisis, I remember. And we were -- some of us at the beauty contest. And then we told the people we were allocating money, which was a public money. And by the way, we want to invest side-by-side with you. And remember that we're looking at [ an issuer like you. I mean we're not looking for a hedge fund. We're looking for an asset manager. 10 years later, we want these funds because we invested significantly. The Aerospace fund, it's [ EUR 200 billion ] from the French state, it's [ EUR 200 billion ] from a combination of 4 large strategic corporates, and it's [ EUR 230 billion ] from us. So again, it makes a difference in winning because they can effectively represent that they're not giving public money to someone else who's just trying to make money with public money. So that's step one. The second step is when you win mandates in Spain, Belgium and France, and then you start talking to a public pension fund in Korea, in Japan, in Canada, in Australia, it's a bit of a track record. You have to show that you've been effectively doing that already. So it's very important for the brand building, the brand awareness and the brand promotion.

Just kind of take one question from the webcast because most of them have been addressed. And then I'll leave you too. Two questions for the price of one, if I may, because the question is about how about M&A in the private client space or wealth management space, it is something that you're considering, looking at or not?

It's a good question because it's -- you've got assets and liabilities. Where do you invest and where the money is coming from. We discussed retail. And obviously, some of our peers are looking at private bank distributor. So as always, we are looking at such. We are not sure that's something we'll pursue. It will really depend on the opportunities. Because at the end of the day, this distributor, it's very difficult to see the value chain. Some of them have been very successful. Some of them became less successful. But we have to look -- and by the way, the market is very different in each country. So I don't know in the U.K., you can buy a combination of IFAs or private bank, and then it will be very different in France, totally different in Italy, very different again in the U.S. So we're going to look, but probably same approach as M&A in a very opportunistic manner and very disciplined in terms of price.

You had a question, Nicolas?

Sorry to come back on the balance sheet investments and on your portfolio. You reached 75% of our investment within your funds and you actually commit to increase that by roughly EUR 500 million per year. I wanted to know the 75% should be seen as the floor from now? And just to follow up, you have EUR 180 million, I guess, indirect investment from private equity legacy. Should we expect this to disappear? Or is it something that you might use going forward as a seed for new strategy?

I think the 75%, it was a previous guidance. We are 75% invested in our funds. As we said, we're going to continue to do that. There is no doubt, not because we need it, but because we consider we are very strong specialty team, real estate team, direct lending, private equity. So we generate return through that, and we're going to continue to do that. Because at the end of the day, I know that we are -- nowadays, people are looking at IRR, multiple of turnover. But at the end of the day, you need to make net income, and that's enabled you to receive dividends. And for shareholders, I think it's good and at least for the management and the employee, dividend matters. So you need net income to generate the net income. We're going to generate net income coming from the asset management but coming from the balance sheet as well. The balance sheet investing in the fund create more recurring revenues, more diversified. So we get previously the 75% guidance from the balance sheet invested in the fund. We are 1 year in advance there. I think we're going to continue to do that and probably increase a little bit. We keep some flexibility to potentially, as Henri described, do M&A or launch new initiatives. We've been very strong at using the balance sheet to launch new strategies and energy transition is a good example. I think I mentioned 3 times, but I think now it's -- we are about to sign agro regeneration. It's another example where we invest the balance sheet. So we want to continue to use the balance sheet. Now we've got this legacy portfolio, and we call it legacy portfolio. All these investments are super successful so far. They will be disposed from time to time. A few of them are really larger than other, and we have a lot of them because when we were small, we invest EUR 1 million in a fund or we co-invest EUR 1 million in a real estate deal. Are we going to do that? The answer is no because it's large management time reporting. And so I suspect that we're going to reduce the number of investment of the balance sheet probably.

Thank you. Maybe if there's no question in the room, maybe one question from the webcast when it comes to how you see going forward, your -- the asset class mix evolving? And potentially the room to add strategies, which are not yet in the prospects, which are typically Europe infrastructure or mention other kind of asset classes we could consider tackling in the future. if you want to take that?

Well, if we take a bit of perspective, when we listed in 2017, it was EUR 10 billion AUM and 50% was private credit, direct lending for some time. And we said that we wanted to rebalance. To rebalance the business mix and we said partly towards real estate and equity -- private equity, let's say. So if you fast forward 5 years, we've managed to do that. We broadened the real estate into real assets. Effectively, we added back to the question about the M&A. I mean, Star America was EUR 400 million AUM business, a team of 20, some very engaged founders with a bit of transition for one of them and a great platform to build on, fast forward 18 months, it's EUR 1 billion AUM. And as we said, in terms of valuation, it was royalty for us. We can build with this expertise, we have granted based in the U.S., but 1 of the 2 foundries, European, it happens to be French. It's a pure coincidence. The day we think that the opportunity to expand into infrastructure in Europe that we haven't seen so far on a risk-adjusted basis, we can do that. We can take a few steps to do that. So the business mix is very much -- is not about having 4 different businesses equal. It's very much about the -- first of all, the market opportunity for us to invest. I don't think you heard us saying that we were moving into some cryptos or anything like that because we have no conviction. And I'm sketching a bit. But if we have no investment conviction, we will not propose an asset management strategy. So that's first. B, it has to be effectively a scalable and profitable business lines. We've had some discussion in the past about some real estate debt, infrastructure debt, I mean some strategy, which require much more volume, but are much lower margin. I'm not saying it's a bad business, but if you get into this business, you have to be able to scale it. That's the CLO business. CLO is, let's say, 50 bps. But the underlying operating margin of CLO is 55%. So it's a lower management fee, but it's a higher operating margin. So it's always about doing this balance. And then it's about the opportunity. As we said, if tomorrow, if next Monday, wake up and it's another end of the world, I mean we know that some of the industry consolidation has happened in some adverse times. And if we can take advantage of that, we will certainly do that.

But innovation, no doubt, but scale as well. And I think we are getting some scale in some of our businesses and then that will create more operating leverage. And real estate, for instance, it's a good example. We've got EUR 12 billion of real estate. So we are one of the largest real estate asset manager in Continental Europe. I see we're going to scale that. We've got the team, a very strong track record. We've got 200 people doing real estate. Inflation is there. So there will be client demand. There will be some declaration on real estate. So we're going to try to scale that in a very significant manner while being disciplined as well.

I mean the good news is that we are 7 minutes ahead of schedule for the cocktail. So that's, I think, is going to be my final words. Thank you very much, gentlemen. Thank you to the Tikehau team. Thank you [ Theaudareau ] and the IR team. Thank you all the technicians and everyone. So thank you so much. Let's go have a drink.