Tikehau Capital (TKO) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Tikehau Capital Half Year 2022 Results Conference Call. [Operator Instructions] Today, I am pleased to present Mathieu Chabran, Co-Founder; and Henri Marcoux, Deputy CEO. Gentlemen, the floor is yours.

Thank you. Thank you so much and good evening, everyone. Thanks for joining us on this Tikehau Capital H1 2022 Results Conference Call. I'm Mathieu Chabran, Co-Founder of the company, and I'm joined effectively tonight by Henri Marcoux, Deputy CEO; as well as our Investor Relations team with Theodora Xu and Louis Igonet. We'll go through a brief overview of the results, and then we'll be more than happy to take your questions. So starting with the slide show maybe on Slide #4 with a couple of highlights I wanted to put forward. First, H1 2022 has been a strong H1 for Tikehau. We have seen our dual model clearly playing out and leading to strong performance across the board, ultimately translating into material net income growth for the first 6 months of the year. Second, on top of our fast-growing asset management activity, our investment portfolio delivered strong revenue growth in H1, mainly driven by our own strategies. Indeed, the Tikehau Capital funds, in which we are investing a vast majority of our balance sheet, are delivering increasingly predictable and growing returns. Third, we delivered strong fundraising. Client demand remained strong for our strategies, so we managed to increase the pace of fundraising in H1 2022, despite the uncertainties linked to the geopolitical and economic environment, with an acceleration in Q2 compared to Q1. In addition, we kept a strong deployment pace without any compromise in terms of selectivity. Fourth, we have invested in our asset management platform. After a period marked by COVID, during which we had slowed down in terms of OpEx, we accelerated since H2 2021 in platform investments. That means staffing, reinforcing our teams and our infrastructure to support new strategies and secure future growth. We view this active hiring and OpEx investments as very timely in order to make sure that our platform is at full capacity to seize opportunities linked to future dislocation caused by rising interest rates and the return on inflation. Now let's be clear, from now on, in H2, we will be more selective when it comes to hiring and OpEx investments. Finally, I mean, obviously, we're happy to, of course, to confirm our 2026 outlook, the one we gave you at the Capital Market Day a few months ago. And we'll get back to that a bit later with that. So maybe before we go through the various achievements of the first half, a word on the current environment and our position. I'm now on Slide #5. During our Capital Market Day, our Deputy CEO, Thomas Friedberger, explained in details our approach when it comes to investments and our positioning in the private markets industry. We think that in the context of rising rates and return of inflation, we have built a resilient setup. We can navigate the current environment. And as such, we've been incorporating cycle change within our operations and anticipating the end of what we think was not sustainable, unreasonable valuation, complacent financing conditions and high leverage. I think we've been very consistent on that, and you have heard us delivering this message repeatedly over time. First, we are typically, as we've always been, very disciplined in the way we're investing our own funds. I remind you that the line of interest is at the heart of our model and that our balance sheet is invested in priority in our funds alongside our clients. And so we have been keeping a very strong approach when it comes to investment selectivity. Second, we are positioned on complementary asset classes tackling specific verticals that provide investors with a compelling risk-reward balance in the current environment. We prioritize downside protection, limited leverage, focus on long-term megatrends, nurture a contrarian mindset, not necessarily embracing mainstream trends that you may have seen in the industry during the past 2 years and which we've been leading to excesses. Third, we remain convinced from the discussions we're having with clients that long-term allocations have not been met yet and that healthy demand for alternative assets is set to remain strong. We'll get back to that. Even through the current cycle, you may see converging decisions that can take more time. That's a more cyclical situation. I would say that on a more structural note, we don't see any change in client appetite for our products, actually quite the contrary. If I move now on to Slide 8. Starting now with our capital deployment momentum, which was very strong in the first half, during which we selectively deployed EUR 3.3 billion across our asset classes. This is 1.8x what we deployed in H1 2021. And there, my first comment will be that this step-up in deployment is, in fact, representative of the growth and expansion of our platform globally. Because what is important to bear in mind is that even though we're deploying more capital, we are maintaining a very high level of selectivity and discipline across our funds, and this is evidenced by the 97% average exclusion rate recording during the first half. We've been consistently maintaining over the years an exclusion rate of above 95% even though the number of transactions we've been analyzing and reviewing through our funds has increased dramatically. So it's less than 5% of everything we look at that eventually gets done. As you can also see on this slide, private debt accounted for the majority of H1 2022 deployments, followed by private equity, in particular, our energy transition and aerospace strategies and with assets with mainly the deployment made by Sofidy over the period. You see here on this slide a couple of examples of the deals that we've been concluding so far, very high-quality companies on strong verticals that we've been supporting across our asset classes. Last KPI maybe on this slide and an important one is that we have EUR 5.8 billion of dry powder at the end of June 2022, which is down from the 6.2 level at the end of December but stable compared to end of March, meaning that we've been raising capital, but we've also been able to deploy capital selectively, and once again, without compromising on asset quality. This dry powder will allow our funds to size opportunity that will arise in the current context. No doubt that we will see dislocations in the market. And we view our strategies as very well positioned in the current space, as I said before, be it in private debt or private equity or obviously with our special opportunity funds. Moving on now to Slide 9 on realization, which are another interesting part of our model as well since it shows our capacity to exit some investments and crystallize value for our clients. First, a preliminary comment on that. As you know, most of our closed-end strategies are rather young and still in their investment phase. Second, our closed-end funds have long durations, so we currently, we're happy to hold on to these assets. We're not forced seller of anything. So we're delivering performance when we can exit assets in good conditions, but we're also happy to hold on to assets for longer, if necessary. Third, we're very cautious in the way we book carried interest in our P&L. There is no carry interest accrual, so we do not rely on short-term realizations to grow our profits. In private debt, obviously, this is where the realization for is probably the largest, accounting for 52% of realization in the first half, followed by real assets and private equity and tactical strategies. A word on private equity. We've been delivering strong performance for investors in this asset class, and we have started to divest in good conditions. Typically, with the exit of our investment in Assiteca in Italy, we -- which we already announced, and it generated a 2.6x multiple and 45% IRR. Also, I'm happy to share with you, you may have picked up over the news flow of the day, that we just signed 2 additional exits by our energy transition fund in July 2022 with a partial disposal of our stake in GreenYellow, a leading French developer of smart energy solutions, which crystallized a 1.9x multiple and 18% IRR to date. We will be partly reinvesting in the company to support the shareholder recomposition alongside our friends at Ardian. We also signed an agreement for the disposal of our stake in Groupe Rougnon, specialized in energy efficiencies of building, and this investment generated a 1.9x multiple and an IRR of around 25%. In our Real Assets division, our infrastructure business in the U.S., disposed another asset from [indiscernible] with a 2.8x exit multiple and a 22% IRR for our LPs or limited partners or investors. Finally, in February 2022, our Special Opportunities fund divested a real estate credit investment in the U.K., generating a 1.2x multiple invested capital, MOIC, and 17% IR. So as you can see, even though we do not have a huge realization flow given where we are in our fund cycles, yet we are able to generate strong performance on exited transactions. Moving on now to Slide 10. We think it's important -- it's an important one to give you an idea of the granularity and the resilience of our AuM and our exposure across asset classes. Needless to say that we had many questions on the back of the past few weeks, the past few months and the macro situation. So we wanted to pause here and walk you through this granularity. As you can see from this slide, the top 15 sectors across our assets under management are accounting for 42% of AuM. And we are talking about a very granular and well-diversified exposure. As you can see, we don't have any single sector accounting for more than 6% of the total. And when it comes to real estate, which accounts for around 1/3 of our AuM, well, as you can see on the right part of the slide, 2 things. First, Sofidy's exposure is very granular with more than 4,500 assets owned through a very small-scale granular approach. Second, across the board, we also have very high-quality tenants. We listed here our top tenant at group level, and that's very important because we always want to do business with high-quality partners, whatever the asset class. And with that, we are able to generate consistent and sustainable performance. I also want to remind you that we're investing our own capital within our fund and that is prompting for an extra layer of caution when we are deploying capital across our funds. Moving on now to Slide #11 to give you more proof points on the discipline and selectivity I was referring to. So basically, in private debt, we tried to emphasize a very important KPI. We see the leverage of the companies we are financing across our direct lending funds. We're standing today at 4.4x leverage, which is the ratio of debt to EBITDA, which is down basically compared to the previous vintage, which was closer to 4.7x. So there again, strong discipline in asset selection. Despite maybe a more complacent market, we at Tikehau managed to actually reinforce the downside protection on this financing. Second thing is that we are exposed at 82% to first lien debt instruments, the highest-quality senior section of the capital structure. Third element is that we have completed stable valuation across our funds compared to the end of December 2021. So strong resilience and caution when we are deploying in private debt. In real assets, a couple of stats as well to illustrate the selectivity. First, starting with rent collection rates in the first half of 2022, obviously, which stands above 95%. It has been consistently maintained above 90% even during the COVID crisis. The occupancy rate is still very high at more than 80% in H1 2022. And finally, the asset appreciation across our funds stands at mid-single digits over the first 6 months of the year. So here again, resilient valuation and rent collection. In private equity, we wanted to provide you a couple of stats when it comes to portfolio companies across our energy transition or growth equity strategies. Over the last 12 months, they grew their revenue by more than 50% and multiplied their EBITDA by more than 1.4x, 1.4x. On top of that, we have seen appreciation by mid-single digits year-to-date in these strategies. Finally, a comment on our Special Opportunities fund. We have a similar mindset and discipline as evidenced typically by the level of secured investments and the high selectivity rate, which is in line with the group's average. So here again, what you need to remember from this slide is that with discipline when it comes to deploying capital, we are selecting high-quality assets, positions on strong megatrends, and that translates into robust valuation across funds and performance generation for clients. Moving on to Slide 12. I was just talking about clients, and all that I just described is strongly supportive of our fundraising initiatives. If we are able to increase our fundraising pace and to keep a very strong level of client demand, it is because we're generating performance, and it is because we have the capacity to remain selective even as the platform expands. And so in H1 2022, we raised EUR 3.2 billion for our funds, and that is a 36% increase compared to last year. Maybe a word about the comps here. In H1 2021, I mean, last year, our capital market strategies raised around EUR 400 million, whereas in the first half of 2022, they experienced outflows of EUR 256 million. So at the end of the day, net new money coming from our private market strategy specifically amounted to 3.4 -- EUR 3.5 billion, sorry, in H1 '22 compared to EUR 2 billion in H1 last year, which is a significant 77% step-up year-on-year. That has been driven by private debt, obviously, with our flagship fund, TDL V. I'm happy to announce tonight that we have finalized the fundraising for that strategy for a total of EUR 3.3 billion of commitments, which is an impressive 57% uplift compared to the previous vintage. This demonstrates the quality of our teams and the recognition of our expertise in private debt. Let me also add that TDL V received very strong support from high-quality institutional investors globally with more than 35% of commitments received from LPs based outside Europe. In addition, TDL V has attracted capital from LPs which were already present in the previous vintage and which increased the commitment by close to 60% in these strategies, which is a huge success. Also, real assets, they're contributing significantly with EUR 1.4 billion raised on the one hand from Sofidy, and on the other hand, through our European value-add platform, which attracted close to EUR 600 million of commitments within an evergreen mandate and the first successes of TREO II, our second vintage of Tikehau real estate opportunity. Finally, fundraising for private equity was driven by the first closing of our green asset strategy for close to EUR 100 million and co-investment for our energy transition and growth equity strategies. All in all, it's a very strong fundraising momentum that is experienced across the board. So now a quick word on our client base on Slide 13 to illustrate a couple of things: first, the diversity in terms of geography; and second, the diversity in terms of client type and how our client base is evolving. On the left part of this slide, we wanted to show you that international investors today account for 38% of our client base. That's around EUR 13.4 billion, and that's a 32% increase compared to H1 2021 a year ago. So we've been expanding the platform. We opened Israel in Tel Aviv earlier in 2022. We opened Frankfurt last year, and we've already recorded fundraising successes in those regions. So we'll keep expanding our platform in the future. An important stat as well for H1 2022 is that 55% of third-party client commitments came from international investors. So this is clearly validating our development model abroad and the scaling of the platform. On the right part of the slide, another angle to look at the client base is how private clients are growing within our AuM. They account for 21% of our AuM at the end of June and for more than 25% of the net new money with the first half, in particular, thanks to our dedicated real estate and unit-linked private debt solutions. I'm now on Slide 14. An important feature of 2022 and which is at the heart of our growth strategy is the expansion of our impact platform. We talked about that during our Capital Market Day in London, and our Deputy CEO, Cécile Cabanis, delivered strong messages around that. We've been pioneers in the private equity space, launching the first European energy transition strategy back in 2018. And by the way, it is not on this side, but I remind you that we are already invested in energy transition since 2011, with several investments from the balance sheet, like, for example, EREN. And since then, we have studied how we could expand our impact platform across asset classes, and that's through both our Climate Impact Center but also all the sustainability themes strategies. And you can see here, we've been massively expanding the range of strategies that are dedicated to climate, biodiversity and sustainability. For example, typically, the Tikehau Real Estate Opportunity Fund II, TREO II, this strategy is transitioning to an impact strategy, so we have the capacity to also convert existing strategy to impact-dedicated strategy on top of our flagship impact fund. we also announced new innovative strategies like the Regenerative Agriculture Fund launched in partnership with AXA and Unilever, or the Decarbonization Fund with TotalEnergies in North America. Finally, on Slide 15, a word on the recognition of our sustainability strategy. First, with a very strong rating for Tikehau Capital was signed by Sustainalytics of 12.0, which positions the company in the top 1% of its peer group. And also, we've been recognized as a responsible lender of the year by private debt investors. We are not implementing an impact strategy or launching impact-dedicated funds just to get awards and ratings. But we understand that they can be useful to help investors better understanding and validating the relevance of our initiatives and all the efforts that we are putting here. Moving on now to our investment portfolio. I'm now on Slide 17. First, starting with the way the portfolio has been evolving over the first 6 months of the year. Our balance sheet investment portfolio reached EUR 3.5 billion at the end of June 2022. This compares to EUR 2.7 billion at the end of December. So over the first 6 months of the year, we have been investing in priority in our own strategies, investing around EUR 900 million in and alongside our funds. Around 1/3 of that amount is linked to the acquisition of an LP interest from a leading Asian financial institution in a direct lending fund managed by a leading U.S. alternative manager alongside our credit secondary strategy. Let me add that we are currently in the process of bringing in some co-investors on this position, and it illustrates perfectly how we can use our balance sheet to seize value-creating opportunities, create a home for good investment before onboarding third-parties, LPs in the strategies. Typically here, through this specific transaction, we've been doubling the assets under management for our private debt secondary strategy. Back to the slide, we have been performing around EUR 300 million of realizations, including returns of capital. We have had positive changes in fair value for around EUR 140 million and positive ForEx impact to an extra EUR 56 million linked to the euro-dollar exchange. And Henri will get back to that in the financial review. So at the end of June, as I said, EUR 3.5 billion of investment portfolios, and 80% of that amount is invested within our own strategies and 20% in the ecosystem and direct investment. Maybe focusing now on Slide 18 on the specific composition of our portfolio on Slide 21. As I said, 80%, so EUR 2.8 billion of the portfolio, is invested within our own strategies. That includes mainly the investment within our funds, which are, in fact, pretty well balanced between our private market strategies, roughly 1/3 in private debt, around 25% in real estate, another 25% in private equity. On top of the capital we invest into our own funds, we're also sometimes co-investing alongside them, and we've been also sponsoring 3 SPACs, one of them which has successfully completed its first business combination last month. So a very strong portfolio, a diversified exposure, and Henri will walk you through the revenues that this portfolio has been generating in H1 and which are very robust. With that in mind, I will now leave the floor to Henri for the financial review of the first half. Henri, the floor is yours.

Well, thank you, Mathieu. Good evening, everyone, and thanks for attending our call tonight. Let me start maybe by a quick word on our fee-paying AuM. I'm actually Page 20, which is, as you know, a key metric to actually consider when it comes to revenue generation for our asset management business. Fee-paying AuM have increased by 25% year-over-year, reaching EUR 30.5 billion at end of June 2022. This solid growth has actually been driven by very robust inflows recorded over the first half, combined with a sustained pace of deployment across our strategy, notably on private debt strategies for which, as you know, management fees are actually charged on invested capital. It is actually worth noting that our fee-paying base has been growing faster than the overall asset management AuM since 2019, generating a CAGR of 21% per annum over the period. At end of June, 86% of our asset management AuM are actually fee-generating. And if you focus more specifically on our closed-end strategies, 91% of AuM have a duration of about 3 years, providing us actually a strong visibility on revenue generation since actually, our solutions are sticky with client committed along us over the long term. Let's have a look now maybe our asset management revenues on Slide 21. So management fees and other revenues have increased by 15% year-on-year, reaching EUR 139 million and representing 97% of our asset management revenue. Maybe let me start by reminding you that in H1 '21, management fees benefited actually from the positive contribution of late management fees for our energy transition strategies as well as our management fees for co-investments in our real assets business. In addition, the level of management fees generated over H1 this year reflects the outflows recorded for capital market strategies mentioned by Mathieu previously, for which actually fees are change on any. So we grew management fees by 15% in spite, I would say, of this high comparable basis. Maybe a word on performance-related revenues. They actually contributed EUR 5 million to asset management revenues, driven mainly by the strong performance of both long-dated private equity and private debt funds for which are gradually actually maturing and as well several UCIT funds, which contributed during the semester. Performance-related revenues still have a limited contribution to our asset management revenues given the relative use of our funds as well as the cautious approach we have to recognize carried interest into our financial statements. Turning to Page 22, for which we are showing you the evolution of our management fee rates in 2017. Well, once again, I guess this chart is quite self-explanatory. The average management fee rate for the last 12 months ending end of June was maintained at a high level, standing at 103 basis points. This actually reflects the positive evolution of the group business mix towards private equity, real assets, which are charging management fees above the current group average, but also the favorable mix in private debt with more direct lending specifically this year. I would mention that maybe such evolution has also been driven by the fundraising momentum for Sofidy, with a growing contribution from subscription fees that are generated in line with Sofidy's fundraising. As a reminder, the management fee rate for the period fiscal year '21 benefited from the positive contribution of late management fees linked to the closing of our private equity energy transition strategy, which took place, if you remember well, in Q1 last year. We are quite satisfied by the way our management fee rate is progressing. And not only we are increasing the fee-paying nature of our AuM, but we are also compounding that with our capacity to maintain the average fee margin at high level, which is actually translating positively into our revenue generation. Moving into next slide. Let's have a look at our fee-related earnings. For the first half this year, we generated FRE of EUR 40.7 million, representing a margin of 29.2%. The evolution of FRE mainly reflects the management fee growth that I just described a minute ago, which was actually partially offset in H1 by an increase in our operating costs. Let me here mention that staff costs are representing a bit more than 2/3 of our cost base. And this increase in our operating cost is actually driven mainly by 2 effects. First one being a catch-up in terms of platform investment since H2 '21 following the hiring freeze and the postponement of several projects during the COVID pandemic. Second, during the first half this year, we've been reinforcing our impact platform and strengthening our overall asset management infrastructure to actually support notably the launch of growth initiative ahead of the cycle change. Maybe one important point to mention here, as you can see on the chart on the right-hand side, is that the second half of '21 already factored in the catch-up in platform investment. OpEx were actually up 7% in H1 this year compared to H2 last year. As a long-term asset manager and investor, we do not manage our business on a half year basis. Our platform scalability will definitely continue to be a powerful driver for our growth going forward. And this is why we are still very confident on our capacity to actually deliver FRE margin in the mid-40s area by 2026. Yet, as well, I think you need to keep in mind that we tend to hire ahead to support our long-term growth ambition while remaining very selective in any hiring decisions. We now operate with a strengthened platform, which actually allows us to navigate the current context with confident and safe, attractive investment opportunity. Maybe turning to our performance-related earnings potential on Page 24. Let me remind you that, actually, performance fees and carried interest are representing in our business model a key earning generation engine for Tikehau Capital in the coming years. As you can see here, AuM, it is able to carry the interest, keeps growing at a high pace, reaching actually EUR 15.8 billion at end of June '22, and showing a 26% year-on-year increase, and therefore, growing faster than our asset management AuM, which means that we are actually raising capital in priority into strategies eligible to carry interest, which is set to become a strong revenue and profit engine once again. One important point to mention on the total AuM eligible to carry interest, EUR 12.2 billion were actually invested and EUR 7.1 billion generated IRR above their hurdle rate. And that figure is actually up 82% versus a year ago. As I mentioned earlier, I would remind you that our revenue generation in asset management is today more geared towards management fees. Even though our large funds are still young, we are expecting to start generating more material performance-related revenues when our first flagship fund will actually mature. Also keep in mind that we've been pretty cautious. We've been adopting a pretty cautious approach when it comes to recognizing performance fees. We only book them when we are certain that we can actually going to realize them. As such, we are not exposed to any clawback risk or negative performance fees into our P&L. And finally, I would like to mention, but I think I already highlighted this before, that we have very much a shareholder-friendly approach in terms of allocation of carry and performance fees. 100% of performance fees and 53% of carried interest are actually allocated to the listed company for the shareholder. Maybe moving now into our portfolio performance on Page 25. As you can see here, our investment portfolio delivered robust performance over the first half, generating actually EUR 275 million of revenues, representing a 9% growth year-over-year. This growth has actually been achieved despite the significant change in our portfolio and with the disposal of some of our listed investments, which generated more than EUR 100 million of revenue last year. So as you can see here on the slide in dark green, Tikehau Capital asset management strategy, including Tikehau funds, co-investments alongside our strategies and SPAC sponsoring, actually contributed EUR 132 million to H1 '22 portfolio revenues, representing actually 48% of the total and which is actually a 77% growth compared to last year. This revenue stream will actually continue to grow as the group's balance sheet invests in our own asset management strategy. In addition to that, as you can see on the slide, ecosystem and direct investment generated EUR 144 million of revenues, reflecting, in particular, the positive fair value change for our co-investment in Univision, which is actually the largest Spanish-language media company in the United States, following the merger with Televisa that took place, the Mexican, the TV giant. We actually made these co-investments alongside ForgeLight, which is an investment company focused on the media and consumer technology sector, which was founded by Wade Davis, which was most recently the CFO of Viacom. Finally, H1 '22 portfolio revenues included EUR 56 million of positive ForEx effects due to the appreciation of the U.S. dollar against euro, which I will comment in a second. We are on Page 26. And as you can see here, the unrealized revenues amounted to EUR 196 million over the first half this year, representing the bulk of our portfolio revenue generation. This amount actually reflects 3 main elements to be considered: first one, the positive mark-to-market in our own strategies given the strong performance of our funds, notably described by Mathieu previously; second, the positive fair value changes of our ecosystem investments, including our co-investment I just mentioned a minute ago in Univision; and third point to be mentioned, the positive ForEx impact linked to the appreciation of dollar against euro. As for our realized revenue, they remain stable over the semester with the contribution of Tikehau funds, which was up 20% year-over-year. And they were mainly driven by the continued increase of dividend, coupon and distribution. We highlighted as well on the top of the chart, actually, the level of return generated by our own portfolio, which is calculated by dividing annualized revenue by the average portfolio, fair value between end '21 and end of June '22. And as such, at the end of June '22, portfolio gross return amounted to 18%, which was actually a level stable compared to H1 last year. So maybe let's wrap up by looking at our profit and loss for the first half of this year, Page 27. The main takeaways are actually the following. So overall, a stable level of asset management EBIT despite high level of comparison for H1 '21 and despite the catch-up and acceleration in platform investment to support our long-term growth; then a resilient investment portfolio, generating 18% of gross return; to be mentioned, group operating expenses increasing in H1, in particular, due to a number of one-off expenses linked to the acceleration of the group brand-building efforts globally; financial interest, reaching a profit of EUR 9 million, mainly due to positive changes in swap fair value, which were partially offset by higher financial interest linked to the U.S. private placement, which we completed this year in February '22; nonrecurring items, which had a positive impact of EUR 20 million, including notably some positive euro-dollar additional ForEx effects; and finally, a net result group share, which has reached EUR 277 million compared to EUR 176 million last year, representing actually a 58% increase year-over-year. Well, before handling over to Mathieu, maybe moving to Page 28, and to be mentioned, the key figures of our robust balance sheet. Our model is supported by a strong financial means with EUR 3.1 billion of equity and short-term financial resources of EUR 1.2 billion, of which around EUR 450 million of cash. The evolution of the level of cash compared to end '21 reflects actually the investments carried out over the period as well as the payment of our dividend of EUR 1 per share. We also benefit from an -- our undrawn RCF, which has increased over the period to EUR 800 billion in March '22. And we have as well an extended maturity to July '27. As you may have seen as well, important point to be mentioned is that we have been assigned an investment-grade credit rating by S&P, BBB- with a stable outlook, confirming once again the strength of our business model and our financial structure. In addition, Fitch Ratings has reaffirmed our investment-grade rating earlier this year. Finally, as you know, sustainability is at the heart of our DNA, whether in terms of investment, as previously mentioned by Mathieu, but also at the level of group financing. And as such, following the issuance of our inaugural sustainable bond in March '21 and the pricing of our inaugural sustainable USPP earlier this year, ESG-linked debt accounts now for 65% of our total debt compared to actually a level of 0 at the end of December 2022. Maybe Mathieu, back to you for concluding remarks.

Thank you. Thanks, Henri. I think that we have the opportunity with many of you to discuss over the past few weeks, if not months, our positioning and the way Tikehau and the whole partners were looking at the whole situation. I mean, needless to say, we've entered a new cycle, and happy to address some of that during the Q&A. But we couldn't be better positioned to effectively tackle and face this new cycle. But that for many of us and certainly many of market participants has been unseen in terms of this raising interest rates and the inflation that we are operating with now. So before jumping into the Q&A session, let me address on page -- on Slide 30 a couple of points in terms of outlook with our perception of the market currently and how we're going to navigate the current cycle. First, as I said in my introduction, we think that investor allocation remain well oriented. The structural tailwinds supporting the long-term growth of our industry are still very much there, such as demographic growth and investor need for excess return to serve their long-term liabilities. LPs have not yet reached their allocation targets. We are definitely benefiting from the secular long-term trends and the capacity that private markets have to generate overperformance and sustainable returns is absolutely critical when it comes to drive future client demand. Second, and we've been repeating that over time, is that we have built at Tikehau Capital a resilient setup in order to navigate rough economic conditions. For a moment now, we've been talking about this excess in leverage in the system. We've been talking about our disciplined approach in response to that. We've been talking about how we wanted to stay away from unreasonable valuation or just [ followers' trends ] and how we are willing to operate with a strong and liquid balance sheet, I think that -- and we reinforce this at this point, and I would like all of you to keep that in mind. We think that this setup in the current context is critical. In addition to that, I would add that we are positioned on a variety of asset classes that offer compelling risk-return for LPs and especially in the current rising rate environment. Direct lending with floating rate instruments, real assets with rents or concessions, index and inflation, strong megatrends in private equity, U.S. mid-market infrastructure, et cetera. So that's -- and all that, again, let me insist on that with very limited leverage across the board. So we are entering H2 2022 with a reinforced platform. We invested in the platform, as Henri said. I mean, we've developed our staff. We launched some growth initiative and adjacencies that require additional staffing and support. And that's important, in our view, to do that as the cycle turns. I mean the market, our industry are going to enter an area of turbulence. I just alluded to that. And so to capture dislocation and to save these opportunities, we felt that it was the right moment to accelerate platform investments. For those of you who've been following us for some times now, I think you will give us credit that we've never been as good as navigating adverse cycle and moments, I can think of 2009, or 2012, obviously, '16, more recently with the COVID that we all got dragged into. So I think that this environment will be much more discriminating for investors, for asset managers. That's what LPs and investors will be rewarding. And once again, we believe that skin in the game, alignment of interest will discriminate the performance. So to wrap up, Slide 31. Of course, we are confirming our 2026 target. There is no doubt about that. Let me remind you that we are targeting over EUR 250 million of FRE by 2026, and an FRE margin in the mid-40s region. We're also targeting mid-teens return on equity, driven by both our asset management and our compounding balance sheet, and this first half is another evidence to the benefit of this dual model. Finally, obviously, the capacity to keep scaling our strategies and more than double our AuM. I think we're very well positioned to deliver that. Let me thank all our team and all our colleagues, partners who've been weathering this fairly adverse past few months. And with that, we're opening the floor to questions. So operator, please open the floor. Thank you.

[Operator Instructions] The first question comes from the line of Nicholas Herman from Citi.

Three for me, please -- or rather, 3 things. Just firstly, on debt and credit. Can I just ask if there have been any changes to what -- effectively what you're assuming in terms of CLO and lending support rates going forward and if there have been any changes there? And as part of that as well, could you just remind us, please, what your -- on the direct lending side, what the kind of the portfolio company average interest hedge duration is, please? So that will be the first bucket. On fundraising, I hear what you're saying about no change to investor preferences and long-term allocation, but we have seen some institutional investors slow their allocations. So could you just talk about the -- I'm just trying to marry those 2. And similarly, should we be thinking also about fundraising being more front loaded this year given the close of TDL V? And then finally, just on the costs. Look, I totally agree with you, and I understand the -- this could be the right moment to invest. But I guess the obvious question is then, are there still significant more investments to come this year?

Thanks, Nicholas, maybe I'll start. And please, Henri or Louis, please jump in. So on the credit default rate assumptions, I mean, maybe to point on your question, I mean, if we're looking at the leverage loan market and the way we're addressing that, either through our unlevered, leverage on funds or through the CLO, effectively, we've been stressing our own underlying assumptions. I mean, you know I mean that. [Audio Gap] Constant default rate, sorry. And clearly, we are stressing our own base case. And remember that we tend to be principal investors in our own strategy. We just closed our second CLO in the U.S. last week in a fairly adverse market. We are in the market now with a CLO #7. And so we're stressing these assumptions, once again, not to squeeze the extra return on the equity. We tend to be the main equity holder, and our targeted return is what I just reiterated, some mid-teen returns. So we want to have a very conservative underwriting approach. I mean we're not buying the market. You know how the CLO market is structured. It's easy just to be gobbling up whatever comes out of the investment banks. We're extremely selective. We have an in-house credit committee that -- where we share all this -- where we share also all views, both in London and New York, but we've been stressing that effectively internally more to a 4%, 5%, which is our underwriting case. It's our cleanest view of the world. That's for the leverage loan market. Obviously, the market has been a little bit congested lately, which is actually a very good timing to ramp up and take advantage of significantly discounted loans in the market. On the direct lending, obviously, it's really different. I think we highlighted in the slide show the fact that the current portfolio that we are managing today in direct lending is actually on the return at a lower average net debt-to-EBITDA ratio of 4.4% than we had in the previous year, which was more like 4.7%. So that's an evidence, that's a KPI because obviously, our portfolios are extremely granular, and any credit is specific. But it's a good illustration of what's -- of the approach we are taking on the direct lending. We've been having many discussion with our direct lending team starting a few months ago when the public market started to trade down. And clearly, we couldn't be in a position, unlike some of our competitors, to effectively... [Audio Gap] publicly rated public market we're trading at. So that's where our special ops funds have been effectively stepping in and increasing the investment pace. But as the inventory cleans up, we see a more healthy environment for effectively a direct lender to generate attractive returns on this new vintage. And that's why, as I mentioned, we're very happy to announce the final close of this strategy at EUR 3.3 billion tonight. That is effectively dry powder that we have to start investing in what is a new cycle. And the last question about the fundraising, I mean you mentioned effectively, we are closing today, I mean, actually, or announcing the close of the strategy of direct lending, but we keep raising some dedicated SMAs, some dedicated funds for some investors. So we're constantly in the market discussing with investors for this strategy. And what we've been saying lately is that people are readjusting their risk target returns. So if I'm sketching a bit, the people who are navigating the tech venture world, hoping to make 10x in a year, today are effectively asking us to deliver 10% for the next 10 years. And that's where Tikehau is highly positioned with the platform to be this gateway into yield products, regardless of the cycle. We're not here to time the market. We're here to invest across cycles. And I will lead you with our Special Opportunity strategy, which obviously is key and core to the Tikehau platform and DNA. We're right now in the market with the strategy with fund #3. And needless to say that there is a very significant appetite and interest for investors to be able to take advantage of this cycle.

Maybe one last point maybe as far as your question on cost is concerned and maybe more specifically on cumulated earnings. As I mentioned previously, we have basically invested into the platform, notably on the second half of '21. And as far as the full year expectation are concerned, I think we -- the target that we had set, which is an FRE over EUR 100 million for the year, is still valid, and we are confident with this target.

That's really helpful. Sorry, apologies, the line cut out on my end. So did you just sort of guide to the portfolio company average interest rate -- sorry, interest or loan hedge duration or I just missed?

We'll come back to you...

No. I was about to say, on the loan side, obviously, we're an asset taker, so we're not in the discussion with the borrowers. On the direct lending side, on the mid-market, I don't know if, Henri, you have this number handy. Otherwise, we'll get back to you.

We'll come back to you in a second with the duration of the instruments within our latest vintage.

The next question comes from the line of Tom Mills from Jefferies.

I just had a couple of questions, please, and also touching on the kind of fundraising outlook. Could you just give us an idea of maybe what's in the pipeline in terms of new product launches in the second half of the year? Just to get an idea of that. Can you give us an idea how much of TDL V is already included in the 30th of June AuM and how much is to follow? And then finally, just on fund performance or portfolio performance within the direct lending strategy. I think Ares was saying earlier that their European direct lending performance was up 2.6% in terms of gross return in the quarter and up 11% over the last 12 months. I mean, are those kind of figures that you'd recognize as being relatively similar for your own strategies? Or better? Or worse? Can you give us some idea how you're tracking versus that?

Sure. Thomas, maybe I'll start, and please, Henri, jump in. Thanks, Tom, for the question. First of all, on the direct funding, you're picking up on Ares. I would stress that maybe unlike some of these competitors, we're not positioned exactly on the same part of the market. As you've seen, those competitors have been stepping in to effectively clean up part of the public market inventories as the past few weeks or months were effectively struggling when our investment landscape remains in European mid-market. So maybe the segment of the market is slightly different, and we can come back to that. So if the numbers you're giving the compounding of the underlying coupon quarter-on-quarter, and effectively, if you annualize that, you have to reach it from leverage. That's probably what I would flag. I don't know if those returns are reported on a levered or unlevered basis. And as you know, particularly, we have very limited embedded leverage in the various funds. So any performance we're reporting is net of this leverage. On the fundraising and the pipeline, and I will let -- maybe, Henri, you have the answer of how much TDL V makes up at the end of June 30. I will let you comment in a minute. But on the fundraising in the pipeline, Tom, in fact, if you go through the various strategies, on the private credit taken as a whole, obviously, the flagship TDL fund is disclosing here, but I said there are many side vehicles that we are constantly discussing. I mean special ops is the second big leg of H2, and know what we call special ops at Tikehau is by no means distressed. It's very much bespoke, direct, downside protected, contractually high-return type of financing that we can do both on the public and the private market. That's one coming. We were talking about leveraged loans. Obviously, our CLO platform keeps issuing, and that's one thing where we have allocated more resource. It's something that we can scale significantly. A general comment I would make is, as you've been witnessing over the past, let's say, 5 years since we went public, we're constantly looking for adjacencies which are hopefully the next big megatrend... [Audio Gap] project, new proposal for investors, then the keys to scale up. And what we just demonstrated, if you come back to TDL, for example, which, as you may remember, of course, vintage, go back to 2008, so 14 years, is exactly that, is to come up with this adjacency that we can then scale up and be a full-steam contributor to the overall P&L of the group. So if we get into real assets, real estate and infrastructure. As we mentioned, we're coming out with the second vintage of our Tikehau Real Estate Opportunity fund. That's one you're going to see for the next -- for the second half as well. We closed on the fund #2 of the infrastructure fund in the U.S. And on the private equity, which is the most recent "strategy" of the overall platform, but that is running probably the fastest now, not only -- we're still, I think, paving the way and showing -- keeping the lead in these megatrends, such as the energy transition, we discussed that. Regenerative agro is another one that we announced a couple of weeks ago. And all those strategies will be critical, not only in the next [ year ]... [Audio Gap]

Well, Tom, maybe to come back to your question effectively on TDL V...

And coming back to the overall Tikehau platform being additional contributors to the overall profitability of the firm. Sorry, Henri, you wanted to answer the June 30 or something here?

Yes. Correct, as far as Tom's question is concerned. So we have an additional 50 -- we had a little bit more than EUR 150 million that are not booked in our AuM at end of June, and that will be booked actually in July AuM. Maybe to come back as well on the previous question as far as the duration of the hedge of our portfolio companies. So our portfolio company within our direct lending portfolio are actually hedged at an average duration of 3 years.

Can I just ask a quick follow-up on the CLO fundraise that you've got going on? And obviously, you guys have been active -- regularly active fundraising in that market. I guess there's been -- there's obviously a lot of press reports that the leveraged loan market is completely frozen up at the moment. Is -- as you're raising these new funds, is there a kind of product to put into them straightaway of high quality? Or will you need to see that market kind of switch back on a bit before you get some more deal flow coming through?

Sorry, Tom, you cut off on the second part of your question. I hope you can hear me all right. The comments I wanted to make on the CLO, which is a very scalable strategy for us, is the fact that over the years, we've managed to... [Audio Gap] with our equity investor approach, the fact that we are very much debt-friendly managers. And despite the fairly adverse environment over the past few weeks, what we've managed to do both in the U.S. on the recent pricing of our CLO #2 and what we're trying to do in Europe right now is to leverage this relationship, these institutional relationships when it comes to, let's say, AAA has been one of the challenging part of the cap stack recently. We've managed to effectively leverage the whole platform, our institutional relationships, so that we're no longer a price taker and an asset gatherer, but we're very much in partnership with the management. We're doing both for debt investors and for the equity investors. So that's one thing that despite the relatively more modest FRE -- or management fee contribution, I should say, to the CLO platform, on an operating margin basis, you've got a very nice runway here because of the operating leverage of the product and where we're trying to effectively to dedicate the whole Tikehau platform to maximize pricing and fundraising despite adverse conditions.

Next question comes from the line of Nicolas Payen from Kepler Cheuvreux.

I have 2 questions actually, please. The first one will be on the FRE margin and costs more in general. I can't help but notice that actually, it's fourth semesters in which the FRE margin is decreasing. I completely hear you regarding the front-loading of investment. And I wanted to know how much of front loading you have made actually in this semester and how much was catch-up investments in order to get maybe a new run rate regarding your cost base in the asset management business. And the second question would be on the -- your performance in your investment portfolio, which for me was actually much more than resilience, was actually very good. And how much of this was due to Televisa-Univision maybe to give us a more precise view, granular view on the performance?

Thanks. Well, not sure to fully be in line on your comments on the decrease -- fourth quarter of decrease in the FRE you mentioned because I think we've had increased on second semester last year. Once again here, effectively, we had a catch-up during the first semester as far as operating expenses are concerned as far as full year FRE expectation are concerned. Once again, I should repeat that we had a guidance for the year '22 in term of FRE, which was to achieve a number above EUR 100 million. And this guidance is still actually alive, and we are confident that we can achieve that guidance, not -- for the full year '22. Now your question on the revenue is how much was the impact of Univision. Correct?

Yes. Correct.

Okay. So the impact of Univision within the portfolio revenue is actually EUR 72 million within our portfolio revenue for -- during the first semester.

The next question comes from the line of Joren Van Aken from Degroof Petercam.

I had 2 questions, but the first one is already answered. The second one, also just coming back to the FRE margin that it's a bit lower because of the investments, I understand. But should we then expect a nice improvement in -- of the FRE margin into H2, let's say, to the level of 2021? Or is that too fast?

Clearly, the path to the target that we reiterated of mid-40 by 2026 is not linear, obviously, because it depends on the increase in fundraising and effectively the conversion into revenues. A private equity fund pays on committed capital when direct lending fund pays, for example, on invested capital. So you've got this kind of stairs effect towards this mid-40 target that we're reiterating. And effectively, by not only front-loading all these expenses, we spent a fair bit of time on that, and I reiterate what I -- the comment I made earlier on, not only are we going to be much more selective on new investment, on new platform investment, on new hiring, but also a much more disciplined cost management, which obviously will be a drop through into the margin. Maybe, Henri, you want to add?

No further comment on that. I think we mentioned in term of FRE margin for the year '22 expectation already on that.

I'll just, if I may, illustrate. Because you've got -- what are your expenses? They're mainly effectively people, but then it's effectively the structure and the infrastructure. When we decided to go ahead -- and this year was about Israel and opening an office in Tel Aviv. Our 2 colleagues, Rudy and Asaf, who joined us, that was a blank page. It's a blank page. It's an office. These 2 people we've been knowing for some times. And fast forward 6 months, that's probably one of the most promising launch we had in some years. So you've got some -- in terms of fundraising, I'm talking in terms of fundraising in a new geography where we had a selective number of relationships. So that's why I'm saying it's -- all that is not linear, but it's really about maximizing the platform, and all that creates a drop through on the operating margin, which remains, as I said, one of the key KPIs we are monitoring and giving you guidance on.

And let me remind as well on top of that, that H1 '21 actually benefited from more than EUR 4 million of catch-up fees on our energy transition fund and an additional EUR 2 million of fees on our real estate investment platform as well last year, one-off effect. So...

The next question comes from the line of Christoph Greulich from Berenberg.

Three from my side, if I may. Yes, first, a follow-up on the fundraising, and apologies as I missed some of the previous answers. But just when I look back at the seasonality of your fundraising over recent years, it was typically skewed towards the second half. So given the strong performance in H1, is it reasonable to assume that the seasonality this year will look different to previous years? And then on the corporate cost -- the group corporate costs, so they have gone up by about EUR 10 million compared to last year H1. I think you mentioned there were a number of one-offs related to brand-building. So maybe if you could just provide a bit more color on what were these initiatives? And is it fair to assume that we will go back to the level of previous year as of H2? And then lastly, regarding the carried you mentioned during the presentation. Obviously, there will be a step-up in the carried generation once the first flagship funds mature. So maybe if you could remind us which year we can expect that [ trend ].

Thanks, Christoph. I may start on your first question and let Henri comment on the carried or the PRA. But the fundraising, as you know, and we discussed you and us at length, this is always dependent on the strategies, the vintage but also the expansion of the platform and the investors we're talking to. So I was giving this example about Israel. That was an area where we had [Audio Gap] also about Germany, we discussed that and so on and so forth. And all those investments that we made because needless to say that when you open an office, you have to pay your rent, you have to pay the salaries and yet you don't have a single investor or a euro of management fee or revenues, and then the operating leverage kicks in. So we've got our core domestic market, defined as wider Europe. We have wider discussions in Asia. We celebrated a few months ago our fifth anniversary in Seoul, Korea, which has been a tremendous contributor to many of our private debt strategies. As you know, we're expanding in North America. We've been having a number of dialogue in some part of the globe where we're not present yet. And so all these additional dialogue are paying off so that you're not saturating your LP base. When I keep reading some of our competitors mainly on the private equity talking about the congestions of the fundraising environment, that's if effectively one given investors is being shown every day, every week the same strategy by many managers they've been allocating to in the past. But if you're opening new relationship, if you're effectively convincing this relationship of the Tikehau model, which is very singular and very particular in the skin-in-the-game approach, then that's bode extremely well for a continued fundraising. So the seasonality will certainly remain. Obviously, the past few weeks, you had a little bit of a pause moment because people were panicking. Sometimes I'm a bit surprised to see people that surprised. There's nothing that we could not have predicted in this rising interest rate environment. But we feel very comfortable not only to confirm this target and outlook. But as you know us well to do whatever it takes to outpace and outperform these targets.

Maybe one additional comment as well on that. I think that -- I hear your comment on fundraising H1 versus H2. I think it also depends as well on when we are closing the fundraising of the strategies and when we are launching a new strategy. And for instance, this year, we actually completed during H1, the final close, including July of TDL V. And we are launching some new flagship strategies. Mathieu mentioned TSO III or [indiscernible] during H2. So it also depends on that. I'm not sure that we can always replicate effectively seasonability -- seasonality from H1 to H2. Christoph, as far as your question is concerned on corporate costs, effectively, you do have included in the figures for H1 approximately EUR 4 million to EUR 5 million of one-off cost on communication and travel for this first semester and an additional communication effort that was carried out by the group, which are actually one-off effect. Maybe to come back as well on your last question on carried interest. Well, definitely, no surprise on that. It's -- it will be linked to realization and notably, as far as private debt and real estate is concerned. So we have -- as you can see, the figures for the first semester with EUR 0.6 billion of realizations. So once we will be progressively exiting, notably on TDL III, on our real estate mutual fund as well. We've started some exiting plans in the current context. So as this [ exist ] will materialize in '23 and '24, we will have carried interest generation coming into the system.

That's very clear. Maybe if I could just ask one more question with regard to the U.S. dollar strength because you mentioned the impact on your balance sheet portfolio. I was just wondering given that you also have asset management activities in the U.S., yes, was there a meaningful impact from the U.S. dollars on your management fees and the cost and asset management?

Well, it's not that significant as far as operating costs are. It has effectively an impact on our cost, but not that significant to be mentioned.

And what -- if I can just add, Christoph, one other milestone of the year was to start diversifying our funding sources. You may recall we issued our first long-dated U.S. private placement. So we're also now diversifying our -- not only our investor base but our dollar funding through that route.

Next question comes from the line of Mandeep Jagpal from RBC Capital Markets.

Two for me, please. The first is on TDL V. I think given the fund size was around 60% larger than the previous vintage and I was interested in whether there was any change in the strategy for this fund versus historically. For example, will the average ticket size remains the same? Or will Tikehau need to focus on more companies at the larger end of the mid-market categories? And then the second question is on deployment. You said that you remain selective. But I'd be interested to know how you've changed your thinking this year around which sectors are attractive or unattractive given the current landscape, in particular, given the ongoing energy prices in Europe. And then as a follow-on to that, I know you have granular exposure, but do you have any concerns for any of the current portfolio companies? And are there any actions that you can take to help them through any difficulties that they might have?

Thanks, Mandeep. I will start on the direct lending. The answer is no. No, we're not going to be changing the strategy by moving up to larger company. I think I alluded to that earlier on. I mean we're coming out of a very, very complacent public market environment. I will not come back to that. And when I see private lenders competing shoulder to shoulder with public markets which had been extremely complacent, my question has always been, where do they have to compromise to be competitive since the price, the structure, covenants was already extremely loose. While on the contrary, the mid-market, which is core to our development, which is where you're effectively financing the real economy is where you can make a difference not only by providing funding to some companies who would not access otherwise in the public market or the broadly syndicated in the loan market, but also to investors -- to our investors, we've got fiduciary duties. And we are, most of the time, the largest LP, as you know, effectively a risk-adjusted return that generates a very nice arbitrage. So there is no intention to move over the spectrum here, I mean, very tactically or right now because effectively, there is a broken public market, if you allow me the expression. Obviously, we will take advantage of that through our Special Opportunity strategy. But we don't want to lose track of what makes the Tikehau difference in providing this type of financing. So you should see us extremely constant here while being even more selective, as I said, in deploying this additional dry powder. On the industry, I mean, we've tried to be -- in the slide we were showing you earlier, we tried to be extremely granular to show effectively the very low dependence to any given sector or industry. I mean some of them are obviously megatrends that we keep on investing a lot into, particularly in the [Audio Gap] extremely -- you've been extremely adverse toward the tech or even more so in venture play that had been very crowded places, and that has been probably the most impacted by the recent downturn in the market. So we keep on trying to identifying some mature company or some profitable company need to scale, again, with this filter of the trends we want to be exposed to. But you should not see us just to run around like a headless chicken just to take advantage because there is one part of the market that is broken at any given point in time. We try to stick [Audio Gap] risk management is the fact that ourselves our first and foremost principle through our balance sheet, through the partners and the team capital. And that has been [indiscernible]. That's why, hopefully, this set of results is illustrating this approach. And as far as concern in the portfolio, we keep on having our portfolio review valuation, not only the investment team but with the external auditors. And I would say, it's business as usual in monitoring the operating metrics of these companies. What may have changed are effectively more the exit valuation or exit assumption that sometimes controlled buyout firms have been making in their underwriting. But we're not that much into this market, obviously, our private debt compounding strategy. So are real assets strategy through rent, concessions, coupons. And our private equity strategies are very much expansion capital, where we provide growth capital to entrepreneurs to scale and massify the solution they have to provide. And this environment in the country could be a great way for us to take advantage and consolidate. That's what we've been demonstrating through our aerospace strategy through Tikehau's Capital, extremely active in being [Audio Gap] very much what we're trying to do.

Next question comes from the line of Carlo Tommaselli from Societe Generale.

I have 3 questions, please. The first one is on the asset class mix. In terms of value-add AuM evolution, it was 22% at the end of 2021. Could you give some visibility on the current level? The second question is on the ESG-compliant AuM. In the first half, in terms of Article 8 and Article 9 breakdown, can we have also the evolution compared to the 2021? Final question is on the real estate -- real asset margin, which posted a spike at 116 basis points. I hear you when you say that it was supported by fundraising momentum at Sofidy. I was wondering if there is any additional impact supporting it and if the level is sustainable going forward.

Well, thanks for your questions. So maybe I will start by your second question while on ESG. And as you know, we were at EUR 1.5 billion end of last year classified under this classification. We had targeted EUR 5 billion. At end of June, we are actually EUR 2.1 billion as far as this KPI is related, so moving from EUR 1.5 billion to $2.1 billion. [Audio Gap] Well, then to come back on your third question on management fees, this is definitely the 103 basis points that we are achieving for this first semester is definitely the level that we can sustain. We know -- we remind you that during the Capital Market Day that took place in March, we said that our hypothesis for our plan 2025-2026 was to remain at such level. So we had not anticipated in our guidance of FRE at EUR 250 million. We had not anticipated any increase in this level of management fee. But when -- everything we see, and notably as far as fundraising is concerned and coming back to your question in term of mix and notably, as far as all the -- your first question, but all the flagship strategies that we are actually -- that we'll fundraise during the coming quarter, would that be on the real estate as far as our new value add fund is concerned? Would that be on our special ops funds? And all the other projects we are having, definitely, we see a level of management fees which is at least in line with the level we have achieved over the last quarter, semester and years. To come back precisely maybe to your first question as far as the percentage of AuM in value-add, we currently stand at 25% at end of June '22.

Sorry, you said 25%?

Yes. Yes, correct. Yes.

25% from '22? Okay.

Yes.

Next question comes from the line of Nicolas Vaysselier from BNP Paribas.

I'll have 3 quick questions on my side. Sorry for the first one to make you repeat, actually, one of the question my colleague previously was one of mine, and their line has cut a bit, so I didn't hear your answer. On the real estate management fee margin, the step-up we have seen to 116. I was wondering if it's mainly due to the strong fundraising of Sofidy as well or if it's something that can be maintained. And then on the 2 other questions I had, should we expect the run rate of H1 cost at the -- operating cost of the management fee -- the management company level to be more or less what we are going to see in H2 '22? I appreciate that you have front-loaded the cost and now you are going maybe to slow down on cost growth on that side, but you would be able to know if that's more or less the run rate for the rest of the year. And thirdly, I was curious as well on the fundraising for the remainder of the year. What are the next big events besides -- after, sorry, the closing of TDL V?

Okay. Thanks. Well, coming back maybe to your first question as the level of management fees is concerned for real estate. So several issue to -- it has moved up effectively at 116 basis points for the last 12 months measurement. Several points to be mentioned. First, effectively, you do have the impact of the strong fundraising momentum at Sofidy, but I think actually this is a structural point the way the level of management fees and subscription fees are actually set up at Sofidy. We've been benefiting strongly from that, and notably since 2018 and the acquisition. Remember that AuM from Sofidy have moved from less than EUR 5 million to over EUR 7 million, so very strong fundamental, good dynamic. Maybe an additional point to be mentioned as well is as far as our new generation of value-add fund we are launching, we are effectively -- we are modifying the level of management fees, which was actually previously charged on invested capital, and that will be charged now on capital committed. So this is actually an additional change we are implementing actually in our new strategy. Your question on OpEx run rate and so on, I think we've already answered to that question. But if I may come back maybe on a few figures. Actually, FRE for the year '20 was standing at EUR 70 million, 35%; '21, the FRE was sitting at EUR 94 million with a 36% margin. So we have increased for the year '21 our FRE margin. As far as 2022 is concerned, we are expecting over EUR 100 million of FRE, and we will have actually an improvement or a stable at least FRE margin for the year '22. And you can effectively have a look at the semester, which actually does not make sense. And you can see the evolution. Let me remind you a few figures that FRE was actually EUR [ 50 ] million in 2019, 30% margin; then EUR 70 million, '20 with 35%; EUR 94 million with 36% in '21. So clearly, the trajectory is set. We will be once again over EUR 100 million FRE for the year '22, which was our previous guidance. And [ organic ] is clear and confirmed for 2026, which is over EUR 250 million and mid-40s margin. So that's where we are clearly going. Then to come back on your question on fundraising, maybe I can reiterate what we said earlier. But I mean the fundraising pipeline for H2 will be quite different from H2 last year or even from H1 this year. We've just finalized vintage of our direct lending fund. So we have now several flagship strategies that are -- that will actually raise with their successor fund. I can notice our real estate mutual -- real estate fund, [ TRO2 ] or special ops fund III. On top of that, we have strategies that will be fine -- that will finalize their fundraising. I can notice that TPS in the U.S., impact lending and AeroForm, which is still open actually until the end of the year. And then as we mentioned, third part, we will have adjacencies in line with our decarbonization strategy, which were launched in 2022: Tikehau Green assets, North American decarbonization and Regenerative Agriculture fund.

And if I may just ask an additional quick one. On the income component of your investment company revenues, so the interest and dividend, the income you receive every semester, was curious to know if you could tell us where -- what's the kind of yield you are achieving on average on your portfolio? Is it more closer to 5%? Or what kind of guidance you can provide to us?

Well, overall -- the revenues overall in the portfolio stands actually at 18% for the first semester.

[indiscernible] Michalet from ODDO BHF.

Just one question on the liquidity of the stock. We've continued to new share and you have extended your share buyback [indiscernible]

Well, I think we've been cut [indiscernible], are you still on the line or -- can you hear us? [Technical Difficulty]

Apologies for the disruption. We currently lost connection to some of the host lines. Please stay connected whilst we rejoin. We have now reconnected the line.

Thank you, Geoffroy. Are you still on -- with your question, please? Okay. Sorry about that. I think so we will now end the call. Thanks for participating today to this half year presentation. Happy to take any further question off-line or by e-mail, either with Louis, Mathieu or myself within the team member. Thanks for participating. Take care.

Thank you. Thank you all. Bye.

Thank you for joining today's call. You may now disconnect your lines.