Tikehau Capital (TKO) Earnings Call Transcript & Summary

Good morning, one and all. A quick word of welcome. We are delighted to welcome you here for those of you who are here and remotely, I'd like to point out that we shall present in English today for all group employees in our 14 countries and all our partners and shareholders listening to us remotely. I will leave the floor to Antoine Flamarion and Mathieu Chabran, Co-Founders of Tikehau Capital and Henri Marcoux, who is Deputy CEO, who will go through the main achievements of Tikehau Capital in 2022. We will be happy to take questions after the session, either from the room directly or through the dialogue box on the webcast. So don't hesitate to send over your questions. So let's go, Mathieu and Antoine, the floor is yours.

Thank you, Louis. Hello, everybody. Thanks for being with us live and listening as well. We'll try to make it as usual, fast and clear and also welcome. So welcome to this 2022 earnings presentation. I'll start with a few slides with a lot of numbers, as you know. So it's a strong 2022 year with several milestones achieved. We are executing our strategy and delivering on our commitments we selectively continue to deploy capital across our funds, across geographies and across asset classes despite turbulent and change in market. We've been creating value clients, our LPs and our shareholders through an increased realization in 2022. We disposed more than 20% following last year of asset. We raised a record level of capital in our private clients and private market strategies at EUR 7 billion following a EUR 5.5 billion last year. So it's 27% more than last year. And as you can see on the right side, we made strong progress to private clients through various channels. So as you know, when we raised money, we raise institutional money and private client money. Now more than 20% of AuM are coming from private clients directly and indirectly. So many progress on these various fronts. As you remember, we IPO-ed the company in 2016. A few KPIs which illustrate our growth journey. And as you know, we are entrepreneur in the financial industry, and we'll continue to grow and more important, become more profitable. So in 2016, we managed EUR 10 billion. Now it's EUR 38 billion of AuM above our 2020 target, which stand at EUR 37 billion. Our AuM revenue were EUR 39 million are now EUR 304 million. Our fee-related earnings, which is the recurring income from the asset management has moved in the last 6 years from nothing, i.e., EUR 3 million to EUR 97 million. And then more important, because at the end of the day, that's the dividend. I mean from the net income. Net income was EUR 125 million and is now EUR 320 million. As you know, we have 4 main strategies, and we've been expanding on the 4 strategies during 2022. The balance is well diversified, which continue to be important and relevant for us from a revenue mix, but also obviously from a diversification point of view. So we have built across the strategy, value-add and yield. We used to be mainly invested in yield strategies. As you know, the value add, which are more private equity are recent for us. And as you see the mix between '21 and '22, we raised more money in the value-add strategies, which will generate more asset management fees and more profits. The value-add strategies also are fairly tied with what we call the mega trend. So we continue to develop our climate platform, continue to invest in our energy transition, in our cybersecurity. As you probably saw last week, we managed to successfully exit one of our energy transition companies through an IPO in Italy despite a closed market. So we are fairly convinced that our diversified investment, our mix of product and geography enable us to continue to grow in a more profitable manner and at a probably a quicker pace than before. As you know, we have a strong balance sheet. And balance sheet is invested more and more into our funds. So now close to 80%. And if you remember, the guidance was 75% of the balance sheet invested in our fund. 79% is invested in our fund, again, in a very diversified broad of fund. We have now EUR 3.1 billion of equity, which is part of the DNA of the firm. We're seeing that a very strong alignment of interest with our investor is key and critical especially when the markets change. So we have now EUR 3.1 billion of equity. And lastly, we decided to propose to the next AGM a EUR 0.70 dividend per share, which is up from EUR 0.60 last year. If you remember, we paid EUR 0.60 last year. plus an exceptional EUR 0.40, thanks to the realization of DWS and Eurazeo, and we increased the recurring dividend to EUR 0.70. And I will pass on Mathieu.

Thank you. Thank you, Antoine, and good morning, everyone. Good to be back in person after 4 years of digital, nothing replaces 3 dimension, I guess. So I'm going to a bit further into our operating review and what Antoine just covered. So I'm now for those following Page 8. So let me start by reviewing the key operating figures of 2022 and I will start with our Asset Management business and our 3 pillars. First, to selectively deploy capital; second, to dispose and showcase realized performance; and third, to maintain a strong fundraising momentum. So first, in terms of deployment, we selectively invested EUR 6.9 billion in 2022, of which around 2/3 were in our private debt strategies. As you can see, we did not compromise at all on selectivity, and we turned down 97% of the opportunities with screen during the course of 2022. We remain very disciplined across the platform when it comes to deployment, I hope that will not surprise you. We are, first and foremost, investors. And as you know, we are not just deploying our clients' money, we are also deploying our own capital, Tikehau Capital's balance sheet money alongside our clients, and that clearly pushes us to be laser-focused on selected opportunities. The second pillar is the level of realization exit. It's good to make an investment, but the return is only when you dispose of the investment. And we sold for EUR 1.8 billion in 2022. This is a 20% uplift compared to the level of 2021. There, again, a very solid year across asset classes with robust realized performance across our funds, and I will come back to that in a minute. But last but not least, the fundraising and to untouch base on that. This is a consequence of what I just described. Client demand remained strong, and net new money stood at a solid EUR 6.4 billion in 2022. This is the second year in a row that we're achieving this level of EUR 6.4 billion, but the asset class mix needs to be considered, and I'll come back to that in a minute. It is much more favorable in 2022. So across the board, allow me to say it was a very strong year for 2022. Moving on to Slide #9, where I wanted to highlight the selectivity we mentioned earlier. We have built a solid multi-local platform with 14 offices globally and certainly more to come. It is critical to originate opportunities for our fund, this platform is critical since I like to say, and you heard me many times, good deals have no wheels. Where we like to differentiate ourselves is also in our capacity to embark industrial partners who bring operating excellence, differentiated knowledge of value chains and industrial expertise. And all of that is critical for our funds. That is the case in a number of verticals in which we operate. You remember energy transition with TotalEnergies, [indiscernible], with AXA, Unilever, we'll come back to that, or aerospace with the key leading players in that industry. Finally, at the end of 2022, we still have EUR 6.1 billion of dry powder of cash across our funds to tackle opportunities moving forward, advantage based on the change in cycle, and we'll have the opportunity to come back on that. So as you can see, the Tikehau platform keeps growing with EUR 6.9 billion deployed in 2022 and that across our funds. And yet, I repeat extremely selectively, as we disclosed, this 97% we discussed earlier. So moving on to Slide 10. What does that mean in terms of exposure? How is our portfolio deployed? First, dry powder EUR 6 billion is 16% of our total AuM. This is available capital to save future opportunities. Now looking at investments. Our strategies are deployed across a great variety of sectors. We like having this granular exposure and limited reliance and having no reliance on a single sector or a single industry. And you can see on this pie chart on the left, that the top 15 sectors account for 46% of our asset base. There is no individual sector that accounts for more than 7% of the total, and the rest is actually extremely diversified across sectors. Of course, real asset is a material component of our platform, and we'll get back to that in detail in a minute. I want need to illustrate as well the geographical split of our assets on the right part of this slide on the pie chart on the right. France accounts for a bit more than 40% of domestic and historical market and Continental Europe, is now our second turf with close to 30% invested. U.K. remains a limited portion of our assets and North America represent a growing portion, which ramped quite nicely with the differentiating strategies that we've been launching in the region. So if I move now to Page 11, a quick focus that I was saying on real assets. So real assets, real estate and infrastructure. In terms of geographical exposure, more than 50% of our assets are located in France, a market we know extremely well; 22% in Continental Europe and as you can see, the rest is very granular. So we are in the market where we think we have not only a very strong expertise, but also which are more appealing when it comes to the country risk. On top of that, our dry powder stands at 13% for the real estate practice, which is EUR 2 billion. This is a critical resource to sale opportunities going forward here again. Another key feature of our real estate platform is that our AuM are very risky. 30% of our AuM stands within traditional closed-end communal funds with long duration. We have permanent capital with 2 listed REITs, 1 in Singapore and 1 IRET and 1 in France, and then we have 50% of our real estate exposure to SCPI, which are funds managed by Sophie. It is a very granular business with more than 5,000 assets rental units for a total of EUR 8.7 billion. So if you make a quick back of the envelope, you see that, obviously, this EUR 8 billion, EUR 9 billion divided by 5,000, it's EUR 1 million to EUR 2 million per asset. So we don't have like a huge concentration towers or a difference or anything like that. The fee structure and the limited liquidity options are also really supporting the long-term stickiness of our AuM. And we stick to our conviction that real estate is obviously not liquid asset class, and that's very important to treat it as such. It is not a liquid product. So we are very cautious in the asset liability management as we are, by the way, across the whole platform, it goes without saying. We want to stay away from redemption risk in front of illiquid assets. So here also, we try to remain extremely disciplined. In terms of track record, because obviously, performance is critical. Sofidy flagship fund, has delivered a 9.4% IRR since inception in 1987, 35 years across cycles, and with an extremely limited leverage, a gross LTV of 16% and it's even 9% of LTV, if you take it net. Moving on to Page 12. Let me go a bit further and provide you with evidence to illustrate the definitive features of our portfolios. Typically, we think that private debt is an asset class that has a very appealing return profile in the current environment. Cécile Cabanis with us today will be leading the practice for 12 years now. For instance, the financing instruments we are putting in place our floating rate instruments secured with covenants. So it means that when interest rates rises, since environment we're in, the performance of the fund arise as well, mechanically. But on top of that, we're also very conservative when looking at the leverage level across the companies we finance. As you can see on this slide, the average leverage of the portfolio company we financed is 4.6%, and that -- sorry, 4.6x. And that compares extremely favorably to the average of the market in Europe since 2017, which has been on average between 5 to 5.5x. Regarding the use of leverage. Once again, we've been also applying the same discipline when it comes to real estate or private equity funds, a very limited LTV and the companies we've been financing private equity. Likewise, you can see here 3.7x. We're not in the LBO world, we're not leveraged joints were financing entrepreneurs or family companies, Antoine mentioned this very successful exit at EuroGroup. So across the board, we remain extremely disciplined once again. And even when interest rates were at 0 or even negative, as I said, we did not become leveraged, if you all met the expression. We remain extremely conservative in our entry multiples. You have some evidence here, less than 10x, 9.8x on our private equity portfolio. And so bottom line, we've been able to deliver strong performance and edible normal year funds, but the balance sheet of Tikehau Capital to compound and perform. I'm now on Page 13. And I wanted to illustrate some of the exits and realization I was mentioning earlier. This level of realization in 2022 increased by 20% to EUR 1.8 billion. We had some strong exits with, for example, the first exit of our private equity funds. Remember that private equity is the most recent strategy we launched in 2017 and both in the growth equity and the energy transition with exit multiple close to 2x on average in infrastructure as well, which is a very recent practice we added in North America, we started seeing the first realization, you can see some administration here, very sound and robust performance. Antoine briefly mentioned the IP on EuroGroup and allow me to come back to that for a minute. On Page 14, so you may have picked up in the news last week that we successfully completed this IPO of one of our company in our private equity portfolio, EuroGroup Laminations. It is an extremely interesting case study for European private equity energy transition strategy. So EuroGroup is an Italian company, family on historically that specializes in the manufacturing of stators and rotors now for the electric car industry having pivoted from the traditional automotive industry. We invested in September 2020, 3 years ago now, less than 3 years ago. And since then, the order book, the turnover has increased by 3x and EBITDA was multiplied by 3 as well. The value creation was very compelling with a 3.1x multiple and a 55% IRR on this investment, and we retain part of the -- of our ownership in the company. So that bodes very well for the success of fund. We're launching our second fund of energy transition on a global basis now with the North American presence called TDF2, which will be launched in the course of 2023. And this landmark transaction is an example of what we've been investing in, and this track record of the portfolio and our team will be critical to the fundraising of the next vintage. Moving on to Page 15 and the third pillar of the model that our ability to capture client demand. So 2022 was a very good year that respect fundraising, and we managed to generate net new money of EUR 6.4 billion, which is an amount equivalent to the 1 rate last year at would say. So clearly, it's material step-up when you compare the 2017 to 2020 average, which stood at the time area of EUR 4 billion. But what is interesting to explain here is the mix within the EUR 6.4 billion of net money in '22 versus 2021. As you can see on the middle chart on this Page 15. We had benefited in 2021 of additional EUR 800 million inflow above our private market fundraise, which stood at EUR 5.5 billion to get to the EUR 6.4 billion. This year, we raised a record EUR 7 billion private market strategies and effectively were subject to some outflows, redemption on our capital market strategy. But this additional raise of EUR 4.5 billion across our private market strategies, long duration, higher fees is 27% higher than the amount of 2021. Our strategies are capturing a growing share of client demand, and that performance validates positioning, our track record and the relevance of our multi-local footprint. I would also stress the increasing amount of capital coming from international investors. And as a matter of fact, moving to Page 16, I'll give you a bit more details. You can see on that slide that for our investors, the non-French investors account for 37% of our AuM at the end of 2022. That compared to 35% at the end of 2021. It is in euro terms, more than EUR 14 billion, and it's an important milestone in our development. But in terms of flows, what's interesting to notice is that more than 70% of what we have been raising from third-party investors came from this international investor base. The EUR 14 billion AuM coming from those foreign investors is 17% higher compared to last year and more than 7x since our IPO. I guess this is a testament to the relevance of our platform, and you heard us many times in the past, insisting on that and the payback of our international development, obviously, across Europe, in Asia for the past 8 years. And now in North America, more recently where some of you know are now based. We made just as an aside, we made vast progress in North America with an increasing share of our AuM coming from North America across our CLOs, our private debt secondaries and of course, the Infrastructure business, I was referring to earlier. We plan to keep increasing this footprint, opening new offices to capture local demand, and we might have some announcements to make in the foreseeable future. If I can move to Page 17. Another important focus of our strategy. It's to capture the private client, the private wealth channel flows across alternative demand. And this is a massive channel of growth for Tikehau. It's an important part of our strategy. You can see some numbers here, and we've been very active in innovating and designing more importantly, bespoke product for the customer base. And when I say designing product, I really mean that we have to be cautious in the way we are addressing this type of clients, cautious in the way we address liquidity, cautious in the way we educate these investors and, of course, cautious in assessing the asset liability management. So in terms of inventory at the end of December '22, more than 20% of our AuM are coming from private investors. It's around EUR 8.4 billion. If we look at third-party inflows here as well, more than 30% were coming from private investors in 2022. So we are making great progress there, in particular, thanks to Sofidy, which raised EUR 1.5 billion in 2022, our crowdfunding platform, the Homunity, which now manages close to EUR 400 million, but also the various products we've been designing with our partners. And if I can name a few insurance companies like MACSF or more recently, [indiscernible] unit-linked offering, private banks with dedicated Fidus fund, for example. More recently, in 2022, we signed also a partnership with iCapital to distribute globally to financial investors. And last but not least, and you'll hear more and more about that, the launch of our own digital platform, Opale Capital. Let's move to Page 18 to discuss a key theme at Tikehau and now for some years, sustainability. You should know by now that this is critical, and it's been critical for us and embedded in all our actions and across all our business models. So just a couple of KPIs to start with. 60% our AuM of fund classified Article 8 or 9 as per the SFTR regulation, which is material. 20% viable compensation is linked to social and climate goals. And finally, around 2/3 of the debt at Tikehau Capital level is linked to sustainability criteria. Those are, if I may, very objective examples to show you and the market, how we are integrating sustainability within Tikehau. So all in all, as we speak, we have across our funds, EUR 2.3 billion dedicated to climate and biodiversity. We are on track virtually halfway through our target to reach more than EUR 5 billion by 2025. On the recognition front, we're also happy to have a very strong ESG rating by Sustainalytics being within the top 4% of our industry and for the second year in a row within the top-rated players. And so moving on to Page 19, but I'm no longer controlling. We are switching 1 slide because there is a typo in the coming slides. So sorry for that. So on Slide 19, as well a time line of what we've been doing. As you can see, we launched a number of new strategies dedicated to climate and biodiversity. One of the key announcements we made in 2022 was our regenerative fund, regenerative agriculture, launching partnership with AXA and Unilever once again, strong partnership with industrial players. Looking forward, we're in the process of launching the second vintage of our decarbonization fund. I mentioned that briefly during the course of this year and this will be the success of fund of our flagship strategy, T2, EUR 1.2 billion fund with additional co-investment opportunities, which was a quite sizable amount for our first vintage. The second vintage I mentioned we invest both in Europe and now in North America, leveraging the strong track record we've been discussing. So with that, let me hand over to Henri, who will cover the financial review for 2022. Thank you, and Henri, the floor is yours.

Thanks, Mathieu. Good morning, everyone. Thanks for attending this presentation. So maybe we'll start talking about first, fee-paying AuM. Fee-paying AuM is a key feature to consider when it comes to revenue generation because it is actually the basis of or management fees. As you can see here on this slide, fee-paying AuM amount to EUR 31.4 billion at the end of 2022. If you do add actually the additional EUR 4 billion of future fee-paying AuM, this will lead you to EUR 35.4 billion of AuM which either are currently paying fees or who will be paying fees in the future. This is actually a 14% increase, a strong achievement versus the year 2021, which has been driven mainly by I mean, robust from fundraising, as just mentioned by Mathieu, but as well by the sustained pace of deployment all around the funds around the platform. Maybe a quick point now on this EUR 4 billion of future fee-paying AuM. So those are AuM, which are currently not yet paying management fees. We'll generate revenue in the near future when they will be deployed. This is actually an additional EUR 40 million of revenues that will apply through our profit and loss when those AuM will be invested along our fund. One last KPI to be mentioned on this slide is actually the way our closed-end funds are currently structured. A key important point to be noticed is that more than 94% of our funds are actually for closed-end funds have life duration over 3 years. This is important KPI, just to provide you that our investment solutions are quite sticky. We have long-dated tons of providing long visibility as far as revenue generation are concerned. So how does that translate into the revenue of Tikehau Capital? You do have here on the slide, the management fees and other revenue. These have been increasing by 11% in 2022 compared to 2021, reaching EUR 294 million. Few things to remind you as well related to the year 2021 on which we had some one-off effects, notably some catch-up effect on our private equity funds as well as some structuring fees related our real estate business. One additional point also to keep in mind are the outflows that we have just mentioned by Mathieu on our capital market strategies, which have been an important feature. And I would say that despite those strong effect in 2021 and the outflows in CMS in 2022. We did achieve actually an increase of 11% of our management fees and having a look back over the last 6 years, it's 40% CAGR of increase as far as management fees are concerned. Maybe a quick word on performance-related revenue, which are actually the green part of the revenue. They contributed to a little bit more than EUR 10 million for the year 2022. That was linked to the strong performance of some of our midsized funds, notably in private debt and private equity. Something to be noticed as well is the contribution of our SPAC #2, which has contributed on its business combination with FL Entertainment, just mentioned by Mathieu, a few minutes ago has contributed for EUR 4 million to our performance-related revenue for the year 2022. Also, one last point to be noticed is effectively the contribution of this performance-related earnings for the year '22, which is somehow quite limited as we speak as the majority of our funds are relatively used are young. And remind another additional this is also the methodology we are adopting as far as revenue recognition is concerned, for the performance-related earnings. We only book them at the end of the life of the fund. We do not accrue any performance fee, which could link to potentially some negative revenue. So maybe a word on Page 23, which shows actually the evolution of our management fee rate since 2017. This slide is quite self-explanatory. The weighted average management fee rate end of 2022 actually reached 98 basis points. This is a 27 basis point increase since 2017. That increase was mainly driven by the evolution of our mix towards higher paying fees strategies, notably in private equity, notably in real estate, also some kind of mix effects within our private debt business with more direct lending contributing to this higher mix effect. Such evolution has also been driven by the country strong contribution of Sofidy and in the context of the strong fundraising that Mathieu was describing a minute ago and notably the contribution from the subscription fees that have been generated through the Sofidy platform. Higher basis, I did mention that a minute ago, but higher basis of comparison for year '21 where we had also the special effect related to the late on our private equity and real estate deal in 2021. Maybe last point to be mentioned. You can see here that if you remember well, during our Capital Market Day in late March 2022, the hypothesis we have provided you in terms of management here for our strategic orientation through 2026 was 100 basis points. So we are fully in line with that assumption as we speak. So moving to Page 24 and have a look at our fee-related earnings. So as far as 2022 is concerned, our fee-related earnings amounted to EUR 96.5 million which is a 32.9% margin. The evolution of the fee-related earnings mainly reflects the management fee growth that I just described a few minutes ago, which was somehow partially offset by an increase in our operating costs. So this is something we alluded to during our half year presentation in July, but I wanted to remind you a few data points on that to effectively clarify how does that handle in 2 figures. First point to keep in mind is the full year impact of this catch-up effect we had post-COVID. Remember, 2021, we had this hiring freeze. Post COVID, we decided to effectively reinvest notably in staff cost into the platform in the context of new funds, we were about to launch. So that's the first effect. And second one is also the fact that we've been reinforcing notably our impact platform and strengthening our overall asset management infrastructure, once again, to effectively support launch of new strategies in the current cycle. So that being said, if you look on the right part of the slide, you can see that our fee-related earnings margin has actually jumped to 36.2% for H2 '22. So reflecting, I would say, a strong operating leverage once again with efficient cost management. Our platform actually scalability will continue to be clearly a powerful driver of our growth going forward. And this is why, clearly, as we speak, we are definitely confident with our target, our capacity to deliver an FRE margin mid-40s the year 2026, which we had set up initially in March 2022. A word on performance-related earnings. A very important feature of our business model. So talking about the main figure here, you can see on the slide that performance figure in AuM eligible to carry interest have actually increased by 21%, reaching EUR 16.9 billion at the end 2022. This increase is actually higher than the increase of our AuM, which means that when we are actually having client demand, we are focusing more on strategies, which are actually benefiting from which is a key nature of our AuM. Second point to be clearly mentioned here is out of the EUR 16.9 billion actually invested. We are talking about EUR 12 billion and how much are currently above the hurdle rate, which is actually EUR 7.1 billion, which is increasing by 38% versus the previous year. So here, once again, demonstrating you the strong potential of this revenue into the coming year. Once again, depending on the performance of the funds. This is what Mathieu had been describing and insisting on the strong performance of our funds currently. Maybe I would have 2 specific feature on that is once again the cautious approach we are adopting as far as performance-related earnings are concerned. Remember you that 100% of our capital market strategies are eligible to performance fees on a yearly basis. And as far as our closed-end funds are concerned, 53% of the carried of our closed-end funds are actually allocated to the listed at of Tikehau Capital, first point. Cautious approach in terms of revenue generation, which I did describe previously. And final point on that is, I would say, the shareholder-friendly allocation of this carried interest stands actually at 53% allocated to the listing entity, which is one of the most shareholder-friendly allocation comparing to our peers. So we've been going through the main KPI as far as the asset management perimeter and business is concerned. Now moving to our investment portfolio at end of December 2022, you can see that the amount of our investment portfolio carried out by our balance sheet stands at EUR 3.5 billion, which is to be compared to the EUR 2.7 billion at the end of last year. The main movement over the year have been obviously all investments that have been carried out by the balance sheet during the year amounting to EUR 1.4 billion. Out of that, EUR 1.2 billion was actually invested within the funds we are managing, once again, this concept of strong alignment of interest, to be noticed that approximately 1/4 of that amount relates to the LP interest related to our private debt secondary business. Remember, we had communicated on that in Q1 last year, which is, I would say, a strong demonstration that illustrates perfectly how we can perfectly use our balance sheet to say the value-creating opportunities and to, I would say, create a home for good investments before onboarding third-party LP into those interests. Second item to be mentioned here are the exits and realization for the year. They amounted to EUR 600 million here, you do have included in that caption, the effect of our collateralized fund obligation that took place late December. And then last point to be mentioned are the market effects and appreciation of our investment portfolio, approximately EUR 1.1 -- EUR 0.1 billion for the year. As a result of that, you do have actually the split of this investment portfolio amounting to EUR 2.8 billion. And you can see here that the split between our different asset class is actually pretty well balanced between real assets, private equity and private debt. So now having a look at this investment portfolio, important to notice what are the revenues attached to that investment portfolio. So here, once again, you can see that the investment portfolio has actually been delivering strong revenues for the year, generating EUR 298 million of revenues, which is actually a 14% increase year-on-year. If you exclude for the year '21, EUR 125 million that we have generated in the context of our disposal of both Eurazeo and the DWS stake. How does those revenues are actually seeing into a different nature? So First nature to be noticed in dark blue, our investment into the Tikehau strategies, remember, full alignment of interest, our balance sheet within our funds. Here, you can see that the revenues attached to the investment within our funds have actually increased by 5%, reaching EUR 171 million, which is an increase, a strong increase over the year. And those revenues are actually representing 57% of our portfolio revenue, which was 42% a year before. Second contribution in terms of portfolio revenue, which are the ecosystem and direct investment carried out by the balance sheet. You can see here that for the year 2022, they have generated EUR 127 million of revenues. Those revenues are mainly concentrated on 3 assets. First one, our co-investment in Univision, which is the largest Spanish language media company in the United States and notably following the merger with Televisa, the Mexican TV giant. Second effect generated by co-investment in Voyage Care, which is a private provider of specialist care in the U.K. alongside Duke Street; and third effect to be mentioned, our investment in Claranet, which is a company specialized in hosting and outsourcing services. So overall, taking into account the 3 investments you do have here approximately between 75% to 80% of impact related to these revenues. Another way to look at those revenues are actually to split those revenues between realized and unrealized revenue, which is a different breakdown. So big impact that you can see here are realized revenue that amounted to EUR 194 million, which is a sum of the EUR 182 million and EUR 12 million, representing actually 65% of our portfolio revenue for the year. And this has been driven by a strong increase, notably in our growth in dividend coupon on distribution coming from notably the funds in which the balance sheet invested. Here, once again, important point to be noticed is the effect driven by the our investment within our Tikehau funds. Tikehau funds have contributed EUR 139 million for out of this EUR 182 million. Second nature of revenue are the unrealized revenue in gray on the screen amounting to EUR 104 million over the full year and which actually did include some positive change both in fair value related to our funds and to ecosystem investments carried out by the balance sheet. So you do have here now our simplified consolidated P&L for the year '22. If we kind of wrap up a little bit what we've been going through today, what are the main takeaways of that. First one, an improvement in our fee-related earnings going to EUR 96.5 million and despite an acceleration in the asset management platform and as well as a high comparison for the year '21. Second point to be noticed, resilient investment portfolio. And despite here again, a high basis of comparison in 2021 with the disposal of Eurazeo and, a decrease in corporate expenses and nonrecurring items to be noticed here, the 2022 level results from actually higher corporate expenses linked to the acceleration of the group in brand building efforts, partially offset by a positive euro-dollar effects that took place during the year, slightly positive financial results, mainly due to positive changes in swaps or for fair value, partially offset by higher interest linked to the U.S. private placement that was issued in February 22. And finally, net results group share reaching EUR 322 million increase versus the previous year 2021. Overall, to be noticed as well, the return on equity reaching 10.2% for the year '22. Few KPI on our consolidated balance sheet here, you can see that once again, our business model is supported by strong financial means, EUR 3.1 billion of shareholder equity, short-term financial resources, EUR 1.3 billion; and an amount of cash amounting just above EUR 500 million for the year. The evolution of cash does actually reflect the significant investment that I was mentioning previously, notably within our funds during the year. Keep in mind as well that we are benefiting from an undrawn RCF amounting to EUR 800 million. That was actually increased in both in terms of size and maturity in March 2022. As you may recall, we have been assigned an investment-grade credit rating by Standard & Poor's, BBB- with stable outlook was last year, which was confirmed, which is actually confirming the strength of our business model and the strength of our financial structure, Fitch Rating has also reaffirmed recently in December of '22 our rating. And finally, as you know, talking a few data points on sustainability that was mentioned by Mathieu, but here in terms of investment, but also in terms of level of group financing, as such, following the issuance of our inaugural sustainable bond in March '21, following the pricing of our USPP earlier last year, ESG-linked debt accounts for 65% of our debt compared to actually 30% at the end of December 2020. So strong improvement as well on that. So shareholder return we are before handing back to Antoine and Mathieu, let me conclude maybe on the strong value creation that has been presented today across our business model in 2022 allows us actually to propose to the next general meeting the payment of a dividend of EUR 0.70 which actually represents an increase by 17% compared to the 2021 reference dividend. This is actually fully in line with our policy to distribute more than 80% of our asset management to our shareholder. Thanks for that, Mathieu and Antoine, Back to you.

Thank you. A few slides on outlook. As you know, we've been developing this company for 18 years in an entrepreneurial way. We stick to what we do. We've been innovating in a fast-changing environment 18 years ago, financial industry was mainly banks and insurance company. I used to say that when I was at Belmont, Blackstone was a small client of Goldman Sachs and the market cap larger than Goldman Sachs. So the trend is changing very fast. And if you want to create and to build a global leader, you need to make sure you keep innovating, you keep being disciplined. And we think that the global macro environment is changing and has changed. We used to be in negative interest territory with Central Bank throwing money everywhere and that has changed. You probably all noticed that yesterday, the 10-year swap is now above 3%. So the environment is changing. And in this environment, you want to be nimble and agile, have strong resources. That's what we described earlier with our dry powder in the asset management, and we keep raising and fundraising money. The balance sheet is super strong. As already described, we have $1.3 billion of dry powder in the balance sheet, and that's before announcing on the third slide coming a new partnership. So we have strong resources. We think we are well positioned in terms of sector, and we described that as twofold, some offensive and some defensive. I start with the defensive as markets change, you start seeing a lot of opportunities coming from stress or for seller. So that would be, for instance, our Tikehau special opportunities practice, buying, stressed and distressed credit. As you know, from New York, we launched a fund, which was fairly innovative a few years ago. launching now the new vintage about buying secondary private debt. It's about buying LP interest in some private debt fund. So you benefit from people looking for liquidity. So that's what we call defensive and downside protection. And on the other hand, you want to continue to be offensive. And offensive will be, for instance, sector specific. As you know, we have, for instance, 15 investments in cybersecurity through our [ TAC 3 ] fund. We have also balance sheet investments alongside that. Same thing for energy transition. It's not like we wake up in the morning and say, "Oh, let's do some energy transition. Our first vintage before investing the balance sheet has been raised in 2018, it's EUR 1 billion program. We are about to launch the next generation of energy transition. On the back of few exit, we discussed Euro Group last week, but we had already 2 exits in the energy position. So we feel like in the challenging environment, having the value strategies being offensive and defensive will probably help us continue to find the right opportunities because at the end of the day, it's about delivering performance to our investor and as a consequence to our shareholders. We are not changing the outlook we gave last year during the capital market in London. So still EUR 65 billion AUM at the end of 2026, EUR 250 million FRE and mid-teen return on our equity. And despite the fact that the environment is changing, we feel like that there are a few things which are helping us. There are structural tailwinds in the industry. People want more and more to invest in private assets. So despite change in regulation, changing mark-to-market for some insurance company or pension fund, we continue to see strong demand around the world. And I think it's important that you describe the platform, but we invest a lot in the platform. So we still continue to invest a lot in people, offices, IT, which obviously cost some money. But at one point in time, there would be an inflation point and that will generate more profitability in the asset management. I think the strategy we put in place, which, as I said, have been fairly innovative. It takes time to build. For some of you who remember, when we start doing direct lending in 2007. Needless to say that direct lending in Europe in 2007, people keep telling us direct lending is done by banks, not investment company or funds or asset manager. So it takes time, but we think that having on the forefront of innovation is now start delivering some performances. And maybe the next slide, as you know, TKO has a long story of building the firms through partnership. And I think we build the firm by various partnership we have partnership with Corporation on the back of the [Panama] we partner with Airbus, Dassault, Thales, Safran to launch our Aerofund. When we initially launched our energy transition practice, we launched it with Total, which is, by the way, 1 of the largest player globally in the energy transition space. So we partner with people, with industry, with families, with corporation, and that's been helping us to grow around the world because it's not so much the money, but it's the expertise, the network, and I think we'll keep doing that. So as some of you have already noticed, we announced this morning a partnership with SFI, which is going to become the largest shareholder of TCA when the transaction is completed, and that's enabled them to become indirectly 1 of the largest investor in Tikehau Capital, your company because post this transaction, they will own 9.3% of Tikehau Capital. So they invest in TCA become, as a consequence, 1 of the largest investors in TC, they will be sitting both board. So Alexandre Vandamme will be sitting on the TCA Board and Maximilien de Limburg Stirum will be sitting on the Tikehau capital Board after the AGM if the AGM vote positively. And for us, it will give us several things, a partnership with some very talented entrepreneur and some of you are probably familiar with the construction of AB InBev, and it's an entrepreneurial journey, and they've been replicating that in other sector. Coffee will be another example where they help building the #2 in the coffee sector globally. So they are entrepreneurs. They bring this DNA to us. They invest a fairly large amount of money to start with because EUR 400 million is a very large amount of money. They bring a global footprint. They've been invested around the various geographies in North America, in South America and in Asia, which for up -- for us, obviously, is fairly relevant because we started the journey in France, we build in Europe, and then we expand globally, but we are fairly excited about this partnership. We'll tell you more, obviously, as it evolves, but we thought it was a good moment to announce that at the same time of our annual results. As you know, we've been fairly quick, but that's enable you, and I think there are close to 200 people online to ask questions. Thanks for your time.

Quick housekeeping point. We'll take the question from the room first, and then I will list the questions from the webcast. First question from Geoffroy.

Geoffroy Michalet from ODDO BHF. When you announced this morning, your partnership with SFI there is 1 saying that came to our mind. Short term, the stock market is a voting machine. And long term, it is a weighing machine. Do you believe in stock market for the long term?

We decided to lease the firm 6 years ago because we consider and some of the firm may have different vision, but we consider that being listed is helping you to build a global champion. And that's what we're going to try to achieve because stock market is giving you visibility, transparency, it help you to build the brand. Number two is give you a currency if you want to do acquisition. Number three is give you the ability to compensate people. And as you know, we are in a people business, and I think better to do transaction or to be compensated in listed instruments rather than in private instruments. Fourth that's enabled you to access capital markets. And as I said this morning, nobody realizes that the markets are more and more difficult, private and public. And if you are listed, that's enabled you to borrow money, and we've been using the capital market, as you know. So we don't have any more bank debts at the listed company level a part of the RCF, but we issued bonds. We issued long-dated bonds, including 12-year maturity in dollar term early 2022 at a very low cost. So being listed gives you at least these 4 elements, and we decided to be listed as a lot of you know, the management did not sell share quite the contrary because we are reinvesting and we announced also this morning that the management alongside Financière Agache is buying Peugeots more out of TCS. So that means that we keep reinvesting in the company. So we are a strong believer in the stock market. We are building our firm. What mattered to us is making sure that we deliver performance on our asset management, on the people who invest in our funds, and that generate profitability. And we know that we issued the company, sorry, at EUR 21 per share. It's now trading at EUR 26. So the capital market journey has been slow, let's say. Also, when you know that market changed last year, we've been the best performer in the peer group, all the peer group has been negative. So it takes time, but we are fairly convinced that's being listed give us a lot of opportunities to grow rather than the other way around.

Arnaud Palliez, CIC. I have a follow-up question on the investment made by SFI, the EUR 400 million. Is it going first to be used for buying back the Peugeot Invest stake in TKO capital. And then if -- are there some other type of investment that will be allocated to this EUR 400 million.

So 2 questions. Thanks for your question. Number one, I mentioned, we are buying Peugeot Invest, which has been an investor at TCA level with us for 6 years, and they are an investor in our funds, and they are also an investor in Tikehau Capital. On top of that, Roberto Quagliuolo sitting is sharing and is still sharing our governance committee, and that's still live. So for various reasons, there is no reason we decided to buy them out, and we've done that with Financière Agache, as I was mentioning earlier. So that's 1 transaction. And another transaction is a share capital increase of EUR 400 million by SFI. SFI has nothing to do with the Peugeot transaction. So they will contribute EUR 400 million to help us grow the business. And for the time being, we are not commenting on the use of proceeds. So that means that we have an additional EUR 400 million sitting on the TCA balance sheet.

Maybe just to add one point to your first question and tying back to yours. Some feedback we can give you now that we've been public for almost 6 years in March is the key component and contribution to that to the franchise building. We are in a people and a performance business. So performance is about delivering as we try to illustrate. People is about, as Antoine said, attracting talent, but attracting partners. We illustrate that with SFI, we did that along the way. And now being on the other side, and we started from scratch a few years ago. We did the same thing in Asia, in the Pamplona City here has been in Singapore for 8 years. One should not underestimate the journey of building the franchise prior to converting into raising revenues, FRE, net income. And the contribution of being publicly traded meaning that you're fully transparent, fully open. It's not a private partnership or effectively the 3 of us, we raise a fund and try to raise the new front. It's a journey where in the corporate building, the public listing is critical. I mean that has been our experience, and we intend to capitalize on that.

And I have 2 more specific financial questions. The first one is on -- can we have a split between management fees and subscription fees? And was there a significant evolution in this mix in 2022? That's the first question. And the second question is on the EUR 7.1 billion of LEG -- of assets that are eligible to carried interest. Can we have an indication about what could be the due date, the due years for this carried interest?

So as far as subscription fees are concerned, we effectively do not the amount of subscription fees. However, I would say that the difference between '21 and '22 is roughly something amounting to EUR 4 million to EUR 5 million increase during the year. So the effect is not that important. It's effectively linked to the business of Tikehau and specifically Sofidy notably all through its subscription agreement being paid by LP and customers when they do subscribe into the fund. As far as carried interest are concerned, I would say that you do have for the year '23, '24, some effectively midsized funds that will mature and will generate some carried interest. However, the big size, notably, I think 1 of the next 1 should be Tikehau direct lending number for. We should expect significant contribution to come more, I would say, early '25 and '26 coming years after.

Okay. Maybe taking a lot of questions we have been asked on the webcast. I will them by order of appearance, so not by any other kind of selection. So first question from Tom Mills from Jefferies. First question would relate to the credit quality in the direct lending books and how it's holding up? Second question about the fundraising pipeline and provide some guidance and color and how the fundraising sequence is supposed to look like during the year between H1, H2 typically. And finally, if we see any kind of slowdown on the real estate business in demand following what Tom described as noise at 1 of our U.S.-based peers.

I might start on the credit quality of the book, maybe are on the fund raising on the real estate. Obviously, there's been an increase scrutiny on the on the credit quality of the borrowers partly on the back of the slowdown last year, I won't come back to the 2022 events. And on the one hand, with the macro deterioration. And then with the interest rates evolution that surprised some. I was surprised that so many were surprised when you've been operating in a negative interest rate world. What I would say, the first objective point is what I was describing earlier on average, our direct lending book is at 4.6x leverage at closing. To put a bit of perspective, we started doing direct lending in 2007. As I said, the team became really institutional more than 10 years ago. We're now at the fifth vintage of this strategy. And what we have developed, thanks to the team under the leadership of Cécile is a very pan-European footprint and going back to the franchise and the importance to be able to effectively look at 100 transactions to invest in 3. That the 97% I was referring to earlier. So we don't have to invest. We are in a position where we can selectively choose and underwrite the companies we invest with the families, the entrepreneurs we back, the sponsors we've been doing business with, and we have a history of doing repeat -- we have one thing, which is only the business with people you know and that has proven to be a very rational approach. So overall, the book -- and remember that the if I may, for Tom, people are reacting over the next -- on past years on last year's event, but that was only 2 years after COVID when the world was coming to an end. And so we had the opportunity already to prove the robustness of our approach, dealing with management teams at the portfolio company level. I would also remind everyone that it's not a bilateral face-to-face relationship when we finance company, we sit side by side, whereas stakeholders with the sponsors with the private equity funds, with the management teams we tend to be in any or in most of our company, Board of servers. So we don't get the news 60, 90, or 6 months after the fact, but we tend to be very proactive. As a matter of fact, very live experience last weekend, I was on the line with Cécile and Laura, our partner talking about 1 very specific situation, that we wanted to present and address. It's a very active approach. The bulk of our book is in Europe, not to say at least on the direct lending, obviously, the secondary private debt is much more skewed towards the U.S. And I'm saying that because there's been a number of mechanism to effectively absorb the volatility of last year. So overall, Tom and happy to follow up on the questions maybe with the team if you want. You would say that very vigilant, obviously, about what has been happening but the underwriting at entry is proving to be the best protection to a downside scenario.

Well, on the fundraising, obviously, things have changed over the last 12 months, the environment in terms of inflation, interest rates. So far, we are confident in our capacity actually to continue our fundraising exercise towards our path for 2026. All I can say on that is that our business model is relying on diversification, which is key diversification of asset class, we are positioned on different -- a very differentiated asset class, bringing lots of added value. Lots of diversification as well on geography, which is a key feature of our business model. We have here today, 1 of our team member, Peter, coming from Singapore. He has just been finalizing a strong investment from a Chinese investor within our platform. So this geographical diversification is key in our business model. And third point, the diversification as well from the nature of our LP either institutional either private investors. So all these diversification around asset class product and nature of LP is clearly a key feature and it helps us in the current environment.

Thanks, Tom, for your 3 questions. As I said earlier, we think the cycle is changing, and we start seeing [covalence] here or there. Obviously, when interest rates are going up. There is no doubt that there will be some adjustments in the real estate field. A few things we noticed so far First of all, various players have been buying real estate for 15 years with a lot of leverage, and you see that from institution, family office REITs from around the world and also various fund have been created with a lot of leverage. Obviously, when you've been borrowing at 3% or 4% or 2% to buy building at 3%, where interest rates are going back to 5%, there is no doubt that there will be a value adjustment. So real estate is going to change. And I think we start seeing in various parts of the world. For instance, in Europe, you start seeing some value adjustment in the Nordics, in the U.K., in Germany and in Austria. And I think that will probably continue. The second trend in real estate is that post Pandemic, obviously, there is a different trend towards real estate. So office suffered probably more than residential for obvious reasons. So the entire sector is changing. The ESG component is more and more important in real estate as well. So when it comes to us, as Mathieu described earlier, our real estate portfolio is 1 highly granular in terms of assets. So we've got more than 8,000 assets, including a lot of residential assets and units. One of the last transactions we've done is buying 5,000 units in Portugal from the Portuguese bank at EUR 9 per square meter. So EUR 9 per square meter doesn't seem big. It's not great flat. But at the end of the day, that's what we've done and at close to 7% yield. When we look at our largest tenant, our largest tenant, our very large corporation ranging from Decathlon to EDF, which are 2 largest tenants. So we feel like that both in terms of asset diversity, asset diversification, geography, diversification we are well positioned. On top of that, Mathieu highlighted, we carry our real estate with limited leverage. So overall, we can say that we have less than 20% loan to value on our real estate which is very rare if you compare us to peers. So we see real estate more as an opportunity for us than a threat. We've got close to EUR 1 billion of dry powder in real estate. We are launching new initiatives to raise additional money. Our real estate team is fairly strong because we have more than 200 professionals doing real estate. And usually, alternative asset management company are externalizing the bulk of their human resources. So they keep acquisition and the externalize the asset management of the real estate asset. At Tikehau, we keep that internally. So it's a very long answer to the real estate question, but we feel like we're going to be well positioned in the next cycle, and there is no doubt, there is a next cycle for real estate.

Thank you. May be following up on next question from Arnaud Giblat from BNP. The first question would relate to the FRE and explain the EUR 97 million compared to consensus of EUR 100 million. The CLO issuance market has slowed materially across the industry in '22 and how is that affecting our views and outlook. And the third question is reminding the liquidity options for Sofidy investors and what's the outlook for that?

Thank you, Arnaud, for your 3 questions. So I'll take the first and the third and Mathieu the second on the CLO. Obviously, we are following various KPIs. So fundraising, net income performance of the funds, which are probably more important than other net income, which seems for shareholders is probably the most important. So following your question of EUR 97 million FRE versus a consensus of EUR 100 million, it seems a very important question. So as we said, we are building the group. So we continue to hire people despite the entire industry is doing the contrary. We opened 2 new offices during 2022 both in Israel and is Switzerland with fairly significant success so far. So we consider that we're going to continue to invest in the platform. The most important thing for us is to make sure we deliver recurring revenue, as I was highlighting earlier, in 6 years of our FRE came from EUR 3 million to EUR 97 million. And on top of that, we continue to deliver strong net income. And we see obviously more progress coming in our FRE. If you remember the slide where I was highlighted what we call the value add versus yield. The value add will be more private equity special situation. We are adding more fund with more, let's say, 220 structure in terms of fees. So obviously, as we grow that, that will deliver more FRE. For instance, as I said, we are launching the next generation of energy transition. If you raise a $3 billion fund at 2% management fees, it's more or less EUR 60 million revenue. So I'll let you calculate how it translate into FRE, but the trend is fairly down.

Happy to comment on the CLO business. So just a quick reminder. The CLO is a security, which is sold by a bank. So we work with bank here and where we're packaging leveraged loan, which is private -- which are private debt instrument and distribute that and manage them to some institutional investors. We started our CLO platform in 2015. Actually, we priced our very first deal on June 7, 2015. It's been 7 years. We're about to launch our ninth program out of London. So that will get us to EUR 3.6 billion, EUR 3.8 billion of assets under management, very successful, a very solid team integrated within our overall credit research platform headed by Rodolfo Caceres, who's been with us since 2007. We've been through cycles together. And we expanded the platform last year a bit 15 months ago. Now the first deal we priced in the U.S. was November 2021, very natural extension of the platform under a single leadership today where we can cross the intelligence on the credit side, but more importantly, open up new dialogue with new investors in the U.S., and that has been the case for the past 12 months since we already priced 3 transactions. As a matter of fact, the last 1 in December was upsized from EUR 400 million to EUR 500 million. So it's a $1.3 billion that we have raised in a matter of a year there in line with kind of the issuing path we had indicated at the time. And to my big and positive surprise, Arnaud, what I'm seeing in the U.S. is a much more concentrated investor base. When you need a book of 20 or 30 investors in Europe, you would have a much more concentrated book in the U.S. some of the investors, insurance companies, U.S. bank, treasury department to name a few, the JPMorgan, the Goldman Sachs have been extremely active their Standard Chartered, for example, an called 1 of our deal, become some 200 million, 300 million investors in those programs. And we -- it has enabled us as Tikehau as a franchise coming back [indiscernible] to my franchise, comment to initiate very important critical relationship with people, investors who might not have looked at some other private strategies, but here you open the dialogue. So the slowdown you were referring to was twofold. One, at the beginning of the summer, you had, remember, a fully shutdown leverage loan market on the back of the macro environment, the fact that banks were carrying a backlog that they were struggling to sell down. Obviously, the Twitter deal made a lot of the headlines. And rest assured that this is not a loan that we bought into at Tikehau by no means. And so the primary issuance was slowing down. Interest rates were raising, but remember that CLO benefits from both an asset and a liability, which is a viable floating rate. And as a matter of fact, as the market reopened in January and actually has rallied having locked in some very long-term liability for us at attractive terms, plus the fact that our assets -- the asset side of the CLO having been ramped at a wider spreads is generating a very favorable arbitrage. So as much as this market, the CLO market, can open and shut down pretty rapidly. Remember after the GFC. I know that for many now it sounds like history or prehistory, but this market was shut down for 3 years from 2009 to 2012. And this is when we started developing our own platform in London into 2 years to ramp it up from a regulatory standpoint. But it's a very interesting adjacent strategy for us for the overall platform. I will also add Arnaud and as a matter fact, BNP just led the last deal that we closed in London is a great way to maintain the dialogue also with the sell side and with the banks and to capitalize on this relationship, where it's no longer just about the distribution, but it's also about being a partner, and we've experienced that with many of our underwriters. And so you should see this business line keep increasing.

And on your third question, Arnaud, I think I start answering it on real estate. So what we start seeing, there is no doubt the real cycle change. We'll start seeing some funds where liquidity has become or could become an issue. Obviously, we are not commenting, but we start seeing difficulty in some German fund was to close redemption. Same in the Nordics, same in the U.K. Obviously, there are the 2 well-known situation in the U.S. from 2 of our large peers and partners. So there is no doubt that we start seeing that. As I said, we seem fairly protected on our side for a series of reasons. First of all, we've got, as Mathieu described, a permanent capital fund -- and we've got 3 of them, the 2 listed REITs. And on top of that, we've got a private real estate investment company. We've got long-dated real estate fund, for instance, our opportunistic fund, our 10-year fund plus extension. And then on your specific question on Sofidy, we've been managing the funds with a very strong buffer of liquidity. We have close to EUR 700 billion of cash in our real estate fund at Sofidy, which is a fairly large amount. And we are probably the only player at least on the French market because CPI is a domestic market having such level of some peers decided to do a little bit different, especially very large asset manager owned by banks or independent. So that's first answer to your question. And the second answer also, there is some specific liquidity mechanism because our French CPI are I would say in French, sorry for the non-French speaker, capital variable or viable capital. So we feel fairly comfortable on that.

We're going to take the next question from Christoph Greulich from Berenberg. First question maybe for Henri regarding the more color on portfolio revenues in H2 on the Tikehau strategies. Second would be to describe PRE expectations? And if and when TDL3 is about to kick in, in terms of carried interest. And third question would be on the CFO. Are we planning on launching more CFOs or was the December CFO one-off?

Thanks, Christoph. On your first question regarding investment portfolio revenues, if you have a look precisely deep dive on H2 contribution, you do have a strong contribution from realized revenue, which is actually 1 of the most important I think we are looking at. It's a contribution of [ 115 ], and you do have a contribution, a negative contribution of unrealized revenue related, I would say, to the fair market value adjustment over H2. That mainly concerns, I would say, some Tikehau-listed REIT and some small listed residual investment alongside our front in the ecosystem, which have had those impacts in H2. Your second question on SRE, is that...

PRE Carried and TDL3.

Okay. PRE and TDL3. Clearly, we will have little contribution in 2023 and should clearly pick up in the years after, but not related to the year '23 depends. There are still 2 exits actually. So could be in '23, but more likely to be next year. And your third question on CFO, do you want to take it.

Yes, maybe I can comment on this one. So once again, a new innovative instrument, CFO for us, and for collateralized fund obligation. That's a technique that was developed pre-GFC very specifically and which is basically a way to refinance our balance sheet, the Tikehau Capital balance sheet, by giving access to new investors to some of our own funds, which is what we did. So this first program of EUR 300 million was exclusively focused on our private debt owned funds and benefited both from the direct lending, the secondary private credit we mentioned. And the third very important co-investment we had raised. And so by transferring these 2 -- these 3 sorry, strategy into a vehicle that gave us access to talk to a very large North American Northeast U.S. insurance company. For the very first time. It's a EUR 220 million investment that they made alongside us, so very significant new relationship. Together with also -- ironically one of our partner, which happens to be another asset manager, one might say a competitor. But actually, when you come with a differentiating product, you can work together while retaining ourselves an interest in our own fund, albeit leverage reducing of the return. And so we decided to launch that on the private credit having followed and what I did very successfully, Temasek, our shareholder and partner. Temasek is a very large private equity LP across global GPs And they've been using this program, this technique, sorry, through a program called Astrea in Singapore by effectively selling down through the retail network in Singapore this technique of CFO. So here again, trying to create, not compete, if I may say. So you should not see that as a one-off, Christoph. We'll be very selective. Once again, it's not about repackaging and selling assets we don't want quite the contrary, retain an interest and all the more levered. So we saw asset and strategy we're actually comfortable with, but more importantly, opening up new dialogue, new relationship with global investors who wouldn't be talking to otherwise.

Thanks. Just at this time, we'll be taking maybe the last couple of questions on the webcast. So first 1 is pretty straightforward, and I think we're pretty quick from Ella Hughes from Credit Suisse on the fundraising pipeline, which we already talked about. But more specifically on debt, how we see private debt demand and fundraising in 2023.

Thanks for your question. I think the direct lending market, and I discussed Europe, U.S. and Asia, is fairly new in Europe and totally new in Asia, more mature in the U.S. So from our point of view, what we do is that in the U.S., we're going to be active in secondary private debt market. So we launched successfully our first vintage, which was a EUR 400 million fund, but a EUR 1 billion program with co-investors. So we deploy already close to EUR 1 billion with a very strong IRR. The IRR of the fund is close to 30%. So we will be launching the next generation of secondary private debt U.S.-based with our U.S. team, it's global, but the bulk of the market is really U.S. So we are launching that this year. And we expect some strong demand because secondary investment, both on private equity, private debt. And I should add real estate, which is also something new makes probably a lot of sense. Then in Europe, we are launching our TDL 6, which is our sixth generation of direct lending. The previous program was a EUR 3 billion program. So that's the second set of opportunities. And third, not last but not least, we are launching with a well-known Singaporean bank private debt fund in partnership in Southeast Asia. So for us, we think that we will be launching new opportunities as we speak. And then when it comes to the market, there is no doubt that interest rate going up, banks retrenching opportunities for direct lending will be very appealing. There is no doubt. And I give you a figure, which is a public figure. But the French insurance company granted some funds to a selected number of asset manager yesterday. And the guidance to lend to companies, and I mentioned it's many companies are not LBO, it's between 6% and 8%. So in the previous cycle, unfortunately, it was more difficult to achieve such return. So the second part of your question is we think that there will be very strong opportunities to deploy capital in the private debt market, both primaries and secondary but at different stages around the world.

Maybe last set of questions from Nicholas Herman at Citi. First question would relate to the leverage consideration at group level to which extent we could see leverage increasing and what's our view for potential acquisitions financing. Second would be the pipeline of realizations and the sequence of carried interest generation. Other question on TDF 2, the decarbonization and the number of new strategies in the pipeline. And final question on the FRE margin outlook following 2022, where the cost investments have been realized.

Memory exercise, so 5 questions. I will take the first one. I start with the group leverage. So as you -- and you can have 3 layers of leverage, if you want to be precise. One is, do you have leverage in the asset management business. A part of the CLO, which by design, have leverage to buy senior loan. We have limited or no leverage in our fund. When it comes to private equity, as you know, until now we've been doing mainly minority or close to control, light control, but we have not been involved in LBO. So when we invest in private equity, so far, we've been bringing money to company to help expand them. So the example offshore group that we -- IPO last week is exactly about that. We invested money in Euro Group in during the pandemic to help them grow their business. And as a result, their EBITDA has moved from EUR 20 million to EUR 100 million in 2 years. So that's what we do in leverage in private equity. In real estate, I think we cover that. We have less than 20% of leverage in our real estate portfolio. So it's 3 layers of leverage at the fund management level, very limited leverage. At the listed company, as you have been seeing on the figure at year end, we have a little bit more than EUR 500 million of cash on the balance sheet. We have an EUR 800 million RCF that we increased from a little bit more than EUR 700 million. And the only debt we have is the bond we issued. We have a slide which illustrate that, but we have EUR 300 million to repay or to refinance in 2023. And then we have EUR 500 million in 2026 and then EUR 500 million in 2028. So we feel like that our leverage structure is fairly relaxed. We are probably 1 of the few firms in the area having this kind of financial structure, i.e., limited leverage, and long-dated leverage and at a very cheap cost of funding and a very strong source of liquidity. And then if you go at the controlling entity we used to have, and it's not a public information, but more or less EUR 400 million of leverage with a EUR 400 million of share capital increase that gives you the level of the controlling entity, the level of leverage, sorry, at the controlling entity, which is close to 0. So we feel like that despite 15 years of very strong leverage everywhere. We are in a very safe and comfortable situation and more in a mood to put leverage if we want rather than the other way around.

There is a question on realization, obviously, which is 1 -- yes, we are -- we have ongoing realization notably on our private equity business and notably on our real estate business. Now difficult to comment that what will be the schedule like depending on market condition obviously. But clearly, there is a path to that. I'll take maybe before TDF 2 question, Mathieu may answer. I'll take your question on FRE margin. Once again, we have a clear path to 2026 as far as FI margin is concerned. We mid-40s. We know where we are going. If you do a helicopter view on that, that means that roughly, we need to increase our revenue by 15% per year and our cost by 10% a year, okay? But we are not managing the company on a daily basis, having a look at our FRE year-by-year. We are building the franchise, fundraising, making our fee-paying AUM growing management fees and then providing resources in the businesses and in the regions where we think those resources are needed. So clearly, we do not comment on 2023 FRE margin. But clearly, we see the path to our midterm guidance, mid-40s by the year 2026.

Your third question was on TDF, which is TDF which is Tikehau Decarbonization Fund. As I was mentioning before, we are almost fully invested in our first vintage of energy transition, which was a EUR 1 billion program. So we are about to launch the next generation with exit. And as I said, we are probably the only firm having exit in our energy transition practice. You start other famous realization in infrastructure, but this fund is mainly investing in companies. So it's a energy transition fund. There is obviously a very strong appetite and demand from around the world, and that's really from around the world. So Asia, Middle East, North America, and obviously, Europe. So we're seeing that we are well positioned. Obviously, fundraising is always an exercise, as I may say, but we are about to launch this fund in the coming weeks.

Maybe 1 final very last question from Carlo Tommaselli from SocGen on M&A. Could you remind us the mindset and the area of priorities, asset class geographies. And if that has changed following recent market evolution and several capital management moves in Europe, in France and elsewhere.

Yes. No, sure. Great question. I mean, as you know, we've been extremely selective on our nonorganic growth, to name a few -- we started when we acquired the private debt business of Lyxor here in Europe, in London 6, 7 years ago. More recently, ACE management that was a catalyst to developing our aerospace, private equity franchise. Sofidy, obviously a game changer in our access to retail investors and real estate 5 years ago and more recently in the U.S. Star America and infrastructure business that was very complementary to what we had. When it comes to M&A, obviously, we always focus on 3 key make or break aspects. First, is it complementary in terms of our strategy. Very unlikely, we'll see us top up on some strategy where we really have a great market share. Second, is it financially accretive, obviously. And our track record in acquisition was -- and we disclosed in many of these details, extremely accretive because we paid each time less than 10x EBITDA or FRE at the time. And I mentioned that because for the past 3 years calls, remember, there was very strong increase in multiple on the public market. I mean one may say, coming back to Antoine's comment that Tikehau may have been impacted, but by what some people saw as a weight, which was the balance sheet. Ironically on the way down, that has proven to be a ballast in this repricing as a consequence of the merit of the balance sheet. And this balance sheet for M&A has become an extremely appealing feature of the TKO structure. When it comes to M&A, you've got a lot of people doing some defensive move. So typically, the GP stake that has been developing, many of you have been following where you've got some market players taking a minority stake in a company basically monetizing some partners' capital. That's not what we do. The SFI example is a good example where effectively it's exclusively primary capital and no secondary. And on the other hand, you've got some very offensive move, just to mention one, I was catching up with them last week in the U.S. If you think about the move that MSD Michael Dell, private credit family office did with BDT Byron Trott who happens to be 1 of the historical partner of Warren Buffett. They combine 2 very synergetic like-minded teams to effectively take the development to the next level. Hopefully, what we've done in Tikehau and what we intend to do is the same thing not to aggregate assets to the risk of deteriorating performance and profitability, not to create some market share for the sake of it, but having these 2 critical aspect. And the last one. We're in the people business, it comes down to culture. And many competitors, peers friend might be doing the same job, but not with the same approach. So we will only keep on doing M&A if we have this cultural match, and we have identified a few and by effectively raising additional resources that we already had on balance sheet it's getting ready for next phase of expansion.

Thank you. Apologies for the people online that -- for the question of who we were not able to address, we'll revert on a one-on-one basis and the IR team, of course, remains available. Gentlemen, do you conclude?

Thanks for your time and support. And as we keep saying, we are continuing the journey and building the firm. Thanks for our partnership, our performance, and thanks to you.