Tikehau Capital (TKO) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to Tikehau Capital's Half Year 2025 Results Conference Call. Today, I'm pleased to present Antoine Flamarion, Co-Founder; Henri Marcoux; and Thomas Friedberger, Deputy CEO; and Vincent Picot, Group CFO. Gentlemen, the floor is yours.

Thank you very much. Good evening, everyone. Thank you to attend our first semester results presentation. We'll try to be brief. We have 32 slides, and we'll be happy to answer all of your questions. I will probably start with a brief description of the environment. The landscape we are facing today is marked by complexity. But for entrepreneurial companies, it creates a lot of opportunities, both in terms of fundraising. Europe is becoming more and more attractive, but also in terms of investment. Geopolitical developments continue to drive market uncertainty, requiring vigilance and adaptability. At the same time, macroeconomic trends are encouraging a cautious stance as investors weigh risk and reward carefully. We also noticed, across sectors, increasing divergence in dynamics, highlighting the importance of understanding specific industry trends and major movements. For instance, in real estate, complexity is there. It's a rebalancing phase, and we decided at Tikehau to take advantage of that. Finally, market dispersion reinforces the need for selectivity as identifying the right opportunities becomes more critical than ever. Our global footprint and our 17 offices across the world enable us to seize the right opportunities at this particular moment in the cycle. I move to the next slide. This first semester has been exceptional in terms of operating and financial performance. It's the first time in our history, in our 21-year history that we have over EUR 10 billion gross inflows in the last 12 months, which translates into EUR 5 billion growth for this semester and EUR 4 billion net, reflecting the growing investor confidence in our brand, in our track record, but also our differentiated and high conviction investment strategies. We remain well positioned in this cycle with a very strong footprint in private credit and in specialized private equity with, for instance, our very strong defense and sovereignty practice. Robust progress in private equity with a record inflow in the first semester, EUR 1.3 billion raised, doubling our AUM in just 3 years. Our global and diversified client base continued to expand with more and more appetite across geographies and promising opportunities in Asia. I move to the next slide. Just to highlight a few achievements in this first semester. First of all, we conducted a landmark EUR 1 billion transaction for one of our portfolio companies. It's the first time we bring on board a very strong international LP, bringing over EUR 1 billion of equity in this very successful Egis company. ADIA, Apollo and Neuberger Berman invested over EUR 1 billion of equity to help the company grow. It illustrates what I will mention just before, our AUM in private equity doubled, very important for the firm to continue to expand in our specialized private equity to create more margin for the firm. The second example we'd like to highlight in this first semester achievement is on the fundraising side. We continue to be ahead of the curve with more than 30% coming from retail investors. We launched a second unit-linked product for sovereignty and defense. As you remember, we launched that on private credit and our unit-linked in private credit raised over EUR 1 billion and continue to attract money. So it's part of our retailization effort across our strategies. And the third thing I'd like to highlight, we decided to tap the capital market just before the tariff, and we successfully issued a EUR 500 million bond, enabling us to raise more money and more important, to extend our average debt maturity for the year. After this introduction and to look more into the detail, I pass it over to Thomas, who will take you through our fundraising achievement for the first half of the year.

Thank you, Antoine. Good day, everyone, and thank you for being with us. Over the past months, Tikehau Capital has achieved record inflows, reflecting the strength of our platform and the growing confidence of our investors. As such, as Antoine mentioned, gross inflows reached for the first time EUR 10.1 billion over the last 12 months. This is a 15% increase compared to the previous period. The highlights -- this growth highlights the relevance of our strategies position on long-term megatrends. It also highlights a more global and diversified client base. And obviously, this would not have been possible without a solid track record. Net inflows, which correspond to gross inflows less redemptions and outflows totaled EUR 7.7 billion over the same period, representing a 17% increase year-on-year. These results underscore our ability to deliver value to our clients while expanding our global reach. Now entering into more details on Slide 10. In the first half of 2025, we also achieved a record level of net inflows driven by credit strategies and record inflows also for our private equity expertise, EUR 5.2 billion in gross inflows and EUR 4 billion in net inflows for H1 2025. All our asset classes contributed to this performance. First, credit strategies were one of the drivers of inflows with additional commitments to the sixth vintage of our direct lending strategy, reaching EUR 3.5 billion in assets under management and the second vintage of our credit secondary strategy. We also continue to see strong momentum in our CLO business with EUR 8.5 billion in assets under management as of end of June 2025. Additionally, we launched our first semi-liquid private debt fund, Tikehau European Private Credit, to capture opportunities in the growing private wealth segment. Second, in private equity, we saw strong demand for our high conviction thematic strategies, including the second vintage of our decarbonization strategy, reaching EUR 2.1 billion in total commitments. As a key highlight, the successful capital raise for Egis, as Antoine mentioned, through our first private equity continuation vehicle, exceeding EUR 1 billion of assets and backed by a consortium of leading global investors. We also registered additional commitments in our aerospace and defense and cybersecurity strategies that are topical themes on sector encompassing high growth. Third, on real assets. So real assets also contributed to our success with, among other things, the oversubscribed placement of IREIT's inaugural green notes, raising approximately EUR 60 million to finance the Berlin Campus transformation. Looking ahead, we anticipate executing several large club deals in the coming quarters in real estate. And finally, capital market strategies continue to deliver strong performance, supported by a consistent 5-year track record of outperformance relative to benchmark. With regards to geographical split of this fundraising effort on Slide 11, we continue to witness the globalization of our client base, reflecting the growth of the international attractiveness of Tikehau Capital's investment strategies. Those inflows highlight the strength of our multi-local and diversified platform, also the partnership with Amova Asset Management in Asia, the new name of Nikko Asset Management and also our ability to deepen relationship with existing clients as well as our success in onboarding new investors globally. We spent a lot of time over the last couple of years developing those relationships, explaining what we do, why we do it, how we do it, and those efforts are starting to pay off. 80% of net inflows came from international investors with the most represented nationalities being the United States, United Kingdom, Spain, UAE, Japan, Israel and Luxembourg, showcasing the truly global reach of our platform. The share of international clients within our AUMs keeps increasing to 45% of our total assets under management, growing by 20% year-on-year and reaching EUR 23 billion. For the quarters to come, Tikehau Capital is ideally positioned in a context where Europe is regaining appeal among global investors, thanks to attractive valuations, reasonable levels of leverage and renewed policy focus on industrial resilience, energy transition and defense. These results underscore our success in expanding our global footprint, diversifying our client base and building a brand name in more geographies, reinforcing Tikehau Capital's position as a trusted partner for investors worldwide. Now let's focus on private investors, Slide 12. In the first half, Tikehau Capital accelerated on making private markets accessible to a larger audience through targeted new product launches, tapping into the significant growth potential of private investors while remaining highly disciplined and conservative, and this is important in how these products are structured and distributed. As you can see on the left-hand side of the chart, private markets are expected to double in size by 2030 with the share of private investors projected to grow even faster, reaching $5.8 trillion. This reflects a market opportunity estimated at $3 trillion by 2030 just for private investors. So in H1 2025, approximately 30% of our third-party net inflows for Tikehau were raised from private investors totaling EUR 1.1 billion. This reflects the increasing engagement of private investors in our strategy with successful fundraising for our private debt unit-linked products and for Opale Capital. As Antoine mentioned earlier, we continue to broaden our offering to private clients with the launch of a semi-liquid fund in credit designed to finance the growth of profitable midsized European companies. Also in private equity, we introduced a new unit-linked product dedicated to European defense and security available through life insurance. These initiatives highlight our commitment to expanding access to private markets for individual investors, offering innovative products to meet their evolving needs and preferences. Moving to Slide 13. About some of our flagships. In the first half, we continue to make solid progress in fundraising for flagship strategies. In European direct lending, we have successfully scaled our vintages, as you can see, with Vintage #3 raising EUR 610 million a couple of years ago, Vintage IV reaching EUR 2.1 billion and Vintage V achieving EUR 3.3 billion. For Vintage VI, we are targeting EUR 4 billion to EUR 5 billion of assets with EUR 3.5 billion already raised, supported by a further internationalization of our client base and a robust fundraising pipeline. Notably, investor demand from Asia continued to grow with a clear acceleration of their interest for highly performing European strategies in the current macroeconomic context. In private equity decarbonization, Vintage I for the record raised EUR 1.4 billion, including co-investments, while Vintage II is progressing strongly towards its EUR 2 billion to EUR 3 billion target with EUR 2.1 billion already secured. This success is reflecting, on the one hand, the success of Egis continuation fund, but also on the other end, an intense commercial effort across approximately 38 countries, resulting in a robust pipeline of LPs currently in due diligence phase. Importantly, the scaling of our flagship strategies enable us to source larger transactions, which in turn, supports the attraction of larger investors and further strengthens our market positioning. Slide 14, as a practical example of this, we are proud to highlight a landmark EUR 1 billion transaction for our portfolio company, Egis, a global leader in architecture, consulting, engineering, construction and mobility services. This transaction underscores our ability to perform exits in a complex environment, delivering significant value for our investors. Since 2022, Egis has achieved remarkable growth, doubling its EBITDA with revenues exceeding EUR 2.2 billion in 2024. So this exit generated significant returns, 2.7x gross MOIC and 34% gross IRR. These results showcase our strategy of driving operational excellence and unlocking growth potential in our portfolio companies. Importantly, this transaction has enhanced distributions for our clients with approximately EUR 450 million to be distributed to LPs in H2 2024 -- 2025, sorry. Finally, the success was backed by global co-lead investors, including Apollo, ADIA and Neuberger Berman, demonstrating the confidence of leading institutional investors in our strategies. This transaction is a clear example of how we create value, deliver strong returns and maintain our leadership in the private equity decarbonization space. I'll now hand over to Henri, who will discuss our thematic positioning in private equity and provide insights into our transaction activity in H1 2025. Thank you.

Thank you, Thomas. Good afternoon, everyone. Let me spend a few minutes maybe on a couple of megatrends we are focusing on as far as our private equity business is concerned. I'll start with a focus on decarbonization. For over a decade, we've been actually pioneering decarbonization-focused private equity. And as end of June this year, we have EUR 3.3 billion of AUM dedicated to decarbonization and regenerative agriculture, where we are currently supporting 27 portfolio companies in these areas. Our key decarbonization strategy is focusing on 3 pillars: first, addressing the accelerating global energy demand through electrification, then investing in low-carbon solutions to decarbonize our economy; and third, leveraging Europe as a global lab for decarbonizing business models. Meanwhile, a few words on our regenerative agriculture strategy, which has around EUR 500 million of AUM at the end of June. This business is driven by solid macro tailwinds with the sector expected to grow approximately 10x by 2030, a projected 70% increase in food production required to feed the population by 2050 and supporting the paradigm shift towards a resilient and sustainable agri-food sector. On this business, our value-creating exits have actually returned EUR 1.1 billion in capital to investors, achieving a 2.6 gross MOIC and 35% gross IRR for realized exits. We definitely want to be the capital provider to finance the transition to a low-carbon economy, and we have the capacity to actually identify the best player in those fields. Jumping to the second focus on Slide 16 on our private equity business with aerospace, defense and cybersecurity. Here, again, building on nearly 2 decades of experience in the aerospace sector, Tikehau Capital continues to invest in economic resilience and technological innovation through its aerospace, defense and cybersecurity private equity strategies. End of June 2025, we have approximately EUR 2 billion of AUM dedicated to these strategies, supported by a team of 22 dedicated professionals, 16 operating partners. Our portfolio includes 65 companies. As one of the most established private equity investors in European defense and security, we invest in scaling up Europe's industrial base, supporting several manufacturing capabilities and capitalizing on long-term growth in air traffic. As far as cybersecurity is concerned, we are focusing on protecting critical infrastructure from escalating cyber threats driven by data proliferation. In H1 '25, more specifically, we entered into exclusive discussion for the acquisition of ScioTeq that will be completed in the second half of the year. This will actually mark the first investment under the second vintage of aerospace and defense strategies and the 15th portfolio investment since the strategy was launched back in 2020. On the exit side, we have carried out our first exit in these strategies with strong value creation, achieving a 2.7% gross MOIC and a 45% gross IRR for Aerospace and Defense and 35% gross IRR as far as cybersecurity is concerned. Now maybe I will take you through our transaction activity, jumping to next slide. Starting with the deployment, we have been remaining focused on our commitment to disciplined deployment, leveraging on our proprietary sourcing of transaction. In H1, we deployed EUR 2.9 billion across our closed-end funds and that representing a total of EUR 5.7 billion deployed over the last 12 months. To be noticed here, we've been maintaining a high selectivity rate of 99%, underscoring our rigorous investment approach. To provide you a few data points maybe by asset class, starting with direct lending, where our momentum actually has remained robust, leveraging our pioneer position in the European market. We've been focusing on supporting portfolio companies through add-on financing, follow-on transaction while maintaining stringent documentation standards and carefully managing leverage levels. Additionally, here, we've been diversifying investments to be noticed across geographies, including Spain, Belgium, Italy and of first investment in the Asia Pacific region through our partnership with UOB-Kay Hian. On the CLO side, we maintain an opportunistic and cautious stance issuing new CLOs, but as well resetting older vintage to capture more attractive financing terms and enhance return. This approach actually reflects our ability to adapt to market dynamic while delivering value for our investors. A few words on private equity, which has accounted for EUR 100 million of deployments across notably Germany with FTAPI, TTSP as well in Germany and in Spain with Juan Navarro García investment. Once again, this investment reflects our conviction-led approach across strategies and dedicated verticals. I would like to add here maybe an additional point is that we actually have a strong pipeline for H2, several large deals in the pipeline. Some of them were announced, SioTeq in Belgium, EYSA in Spain for our decarbonization fund. And once again, here, this strong pipeline demonstrates our ability to capitalize on long-term structural thematics. A few words on real assets, which has contributed EUR 600 million, supported by our pan-European platform, local expertise. Here, again, we target high-quality, well-located assets, conservative use of leverage. sourcing compelling off-market opportunities. To be noticed here, we completed the acquisition during the first semester of one of the largest shopping malls in the Netherlands located in Zoetermeer through our Sofidy activity. Looking ahead here, Tikehau Capital is well positioned to capture attractive investment opportunity with more than EUR 7.8 billion of dry powder end of June. Shifting to the next page and to provide you a few data points on realization. We've been achieving a robust level of value-creating exits in H1, here again, reflecting our disciplined approach to portfolio management. In H1 '25, we realized EUR 1.5 billion, bringing the total to EUR 2.7 billion over the last 12 months. Our capacity here once again to realize assets allow us not only to crystallize value creation, but also to return capital to our clients. Here, we've been distributing EUR 1.8 billion in H1 '25, setting up a solid foundation for the next fundraising cycle. A few words on the exits by asset class. Credit strategies led the way, accounting for 83% of total exits with EUR 1.2 billion realized. This has been driven by financing repayments across direct lending, corporate lending, tactical strategies as well as activity for our CLO platform, including the liquidation of European CLO #1. Real assets has contributed EUR 200 million, representing 15% of total exits. We strategically disposed granular assets, including retail park, residential assets in Iberia and individual sales of light industrial assets in France. And finally, private equity, which has represented 2% of total exits for H1. To be noticed, the completion of the disposal of Enso, a leading bioenergy platform in Spain for our decarbonization strategy. While the Egis transaction is set to be accounted for H2 '25, we are benefiting from a healthy pipeline of planned exits, positioning ourselves for further realization in the coming quarter. A few words maybe on our portfolio metrics and our defensive portfolio. Our private equity and real estate strategies continue to deliver attractive portfolio metrics with embedded downside protection, showcasing the strength of our asset selection and value creation approach. I will obviously not go into all the details which are on this side, but I just want to say that the solid metrics you are here are actually reflecting our commitment to investment discipline, reinforced by our strong skin in the game. We remain conservative on valuation, leverage ensuring robust downside protection while being offensively positioned to invest in high-growth company aligned with thematic supported by the powerful megatrends I just mentioned a few minutes ago. This dual approach allows us to capitalize on transforming opportunities in sectors driven by long-term structural shift while maintaining a prudent and disciplined framework that safeguards actually value creation for our investors. That being said, I will now hand over it to Vincent, who will take you through the financial review for the first semester.

Thank you, Henri. Good evening, everyone. Let's go to Slide 21, and let's have a look at the continued growth in fee-paying AUM, which remains a key KPI to assess our long-term management fee generation. As of June 2025, fee-paying AUM, combined with future fee-paying AUM has achieved an 11% growth. This performance reflects the strength of our dynamic fundraising and deployment across credit funds as well as additional inflows into our private equity and capital market strategies. Furthermore, our direct lending strategies, which charge management fees on invested capital have been a key contributor to this growth. On the revenue side, asset management revenues have increased by 13%, reaching EUR 182 million in H1 '25. This increase is driven by an 8% growth in management fees with a resilient average revenue margin of 90 basis points. Performance fees and carried interest grew to EUR 13 million with contribution from the third vintage of our direct lending fund, AG co-investment vehicles and capital market strategies fixed income funds. These results highlight Tikehau Capital's ability to scale feeing AUM while maintaining a resilient and diversified revenue base, ensuring long-term value creation for our stakeholders. Next slide, a few data points on performance-related earnings, which are set to become a material profit driver in the years ahead, notably when first generation of flagship funds mature. At end June 2025, AUM eligible to carried interest grew 17%, reaching EUR 24.1 billion. In addition, at end March 2025, we had close to EUR 215 million of unrealized performance-related revenues accrued within the group's funds. This level illustrates the performance of our funds over this period. This amount is not yet accounted for in our P&L and will be recognized as funds approach maturity and crystallize their performance. I also would like to remind you that our shareholders are the main beneficiaries of performance fees as reflected in how they are allocated and as per our dividend policy. Let's now focus on Page 23 on the strong performance of our Asset Management EBIT, which grew by 24% year-over-year, reaching EUR 63.7 million in H1 '25. This growth reflects an 8% increase in core fee-related earnings, showcasing ongoing profitability improvements. At the same time, we maintained discipline in platform investments with operating costs growing by 8% year-over-year, but only 3% compared to H2 '24, ensuring efficient resource allocation. These results highlight Tau Capital's ability to drive profitability while balancing growth and operational discipline. Moving on now to next slide on investment portfolio, Slide 24. Our balance sheet investment portfolio reached EUR 4.4 billion at the end of June 2025, still very granular with close to 300 investments. Approximately EUR 3 billion are invested within our asset management strategies, ensuring alignment of interest with our clients with the remainder being invested in our ecosystem and direct investments. And as you can see, we have a well-balanced exposure across our credit, real assets and private equity strategies. Now let's have a look at the moving parts of our investment portfolio over the first half. Investments reached EUR 730 million, of which EUR 380 million of capital calls and investments in own strategies, in particular, our private equity, CLOs and real asset strategies. We also invested EUR 349 million in our ecosystem. During the period, we acquired additional shares in Schroders and crossed the 5% threshold in February '25. We also partnered with our long-standing partner, JC Flowers, to carry out an investment with them co-investment in Enstar, a leading global reinsurance group. Also in the first half, the portfolio carried out EUR 209 million of divestments and returns of capital, returns of capital driven by several of the firm CLOs and credit secondary strategies. On the asset exits and disposals, we continue to carry out granular asset exits. And finally, market effects and ForEx contributed a negative EUR 110 million, supported by EUR 38 million of positive fair value changes across private equity, real estate and CLOs as well as minus EUR 148 million of ForEx impact linked to the USD, pound and Sing dollar, which have limited impact on the P&L. Now moving on to portfolio revenue generation. In H1 '25, portfolio revenues grew by 43%, reaching EUR 111 million despite unfavorable ForEx effects, which reached minus EUR 39 million compared to a positive EUR 21 million of FX in H1 '24. All in all, there is a EUR 60 million delta in revenue generation if we remove the effects of foreign exchanges. This growth was driven by Tikehau Capital strategies, which saw revenues increased 2.6x year-over-year and contributing EUR 73 million and accounting for around 70% of total realized revenues. Key contributors included private equities, aerospace and growth equity strategies, but as well as CLO and value-added real estate. Ecosystem and direct investment added EUR 38 million, further reinforcing the diversified revenue base. So now let me take a moment to highlight a transaction that perfectly showcases the strength of our integrated investment approach, combining both balance sheet investments and also funds investments. Since 2016, we have been a key partner to Dedalus, a leading European health care IT provider, providing EUR 180 million in financing to fuel its rapid growth and internal expansion. This funding played a pivotal role in enabling strategic acquisitions that transform Dedalus into a global player. Over the investment period, Dedalus achieved remarkable growth with revenues increasing sixfold. In 2025, the refinancing, which was led by KKR and ClearLake marked a successful conclusion to this partnership, delivering outstanding returns for both our direct lending fund and balance sheet. All in all, the transaction achieved a net MOIC of 1.9x and a net IRR of 14.2%. This is a prime example of how our disciplined partnership-driven investing creates value and underscores the power of our synergistic investment model. Next slide. If you look at our first half performance, where we achieved strong operating performance for both asset management and investment portfolio activities. Net results before tax grew by a solid 55% year-on-year in spite of higher financial interest linked to the EUR 500 million bond we issued in April and the RCF drawdown in the first half. Nonrecurring items grew to EUR 10 million, mainly linked to positive ForEx impacts on the USPP and tax expenses reached EUR 29 million in 2024, in line with net result before tax evolution and a normative tax rate of around 25%. As a result, net profit group share grew 50% compared to H1 '24. Before handing over to Antoine, let me wrap up on our balance sheet, which has supported the growth of our firm and will continue to do so in the coming years. Our model is supported by strong financial means with EUR 3.1 billion of equity, short-term financial resources of EUR 700 million. Also, our financial debt increased to EUR 2.1 billion following the bond issue I just mentioned and the drawdown of our RCF. Thank you for your attention. I will now pass the mic back to Antoine for the outlook and concluding remarks.

Thank you, Vincent. Two slides to conclude before answering your question. First of all, we consider that the firm is well positioned in the current cycle. As I said, initially, the world is becoming more and more complex from a geopolitical point of view, from a political point of view, from a macroeconomic point of view, from a sector point of view. We think that the platform we put together is really well positioned for the 4 theme, which is going to be relevant for 2025 and beyond, which means if you look in detail, we are focusing on what we call the 4D, defense, deglobalization, digitalization and decarbonization with our both sector-specific strategies in PE, but also our direct lending is benefiting from that and is focused on some of the sector as well. I mentioned real estate initially. Henri highlighted the Zoetermeer shopping mall transaction that we did. As you know, real estate has been very difficult for the last few years following the increase in interest rate. We think that our real estate platform is well operating. We will probably announce in the coming weeks and months new deals to take advantage of the market, i.e., buying at very high cap rate. So the last 2 transactions we achieved were done at double digits, over 10% yield. So both in terms of specialized PE, private credit, real estate, the firm is well positioned. We discussed briefly fundraising. We had a record 12 months, a record 6 months fundraising. We see this momentum accelerating because of our track record, because of our footprint and because which is new and probably the first time we are coping with that, a very strong appetite for Europe, both from Asia, Canada, Middle East, which is fairly new, at least in our 21 year of history. We see that interest rate will remain high, at least long-term interest rates due to government spending and especially with a lot of spending in the defense sector, which means higher cost of capital and liquidity, and we are again well positioned. For instance, our secondary private debt fund offering liquidity is well positioned to take advantage of that. Maybe if -- I'm moving to the next slide. As you know, we've got [ growth engine ], the asset management and the balance sheet. Initially, we used the balance sheet to seed and sponsor our asset management strategy. We went up to 75% invested in our fund. We start declining on that because our funds are now more and more mature and we probably need much less capital. So we are still highly committed, obviously, to our fund and investment since we consider they are very strong performers. We continue to invest in our ecosystem. Vincent highlighted, for instance, the Dedalus case study, which was a fund investment and a balance sheet investment generating P&L for the firm. We had also an IPO with one of our partner, JC Flowers in the U.S. on Jefferson Capital, which translates into a 7x multiple. So the use of the balance sheet is very important for us. And in the next quarter semester, we'll put more [ efforts ] into the balance sheet, and that will obviously generate more net income for the firm. And also now we think that having reached over EUR 50 billion, the asset management profitability will increase. We still have over EUR 7 billion of dry powder, which will translate into more management fees and more bottom line in the asset management. So the fact that we have this growth engine and which probably sets us apart in the alternative landscape will probably translate into more profitability in the coming quarters and years. Maybe I think I will stop here, and we are happy to answer your several questions.

[Operator Instructions] I think we don't have any questions yet on the conference call, but we have several questions on the webcast. So first question is around FRE margin. So while activity indicators are encouraging, we don't see this translating yet in improvement in FRE. Actually, FRE margin in H1 '25 decreased to 30% versus H2 '24 and is quite far from your 2026 targets. Can you elaborate on the reasons for the same? And what is the outlook for H2 '25 and 2026 for FRE margins? So this is the first question. The second question is on Schroders. Can you clarify, sorry, if the mark-to-market gains on Schroders investment is included in investment income, can you clarify the accounting methodology for accounting for this unrealized gains? And third question is on ecosystem investment. The proportion of ecosystem investments has increased in recent years, which seems like different from previous trends. Can you justify the reasons for this change in strategy?

Thanks. Well, we will start maybe with the first question on FRE. Maybe starting with the first comment on H2 '24, where revenues had a high comparison basis, if you remember well, with catch-up, notably fees on PE and also the direct lending deployment, which was definitely higher in H2 '24. What we can say today as we currently end of July now is that, I mean, coupled with disciplined cost management, definitely, we will have an acceleration in the management fee generation in H2 '25, and that will result in core FRE acceleration and underlying margin expansion. If you remember well, our core FRE generation in '25 will be definitely skewed more towards H2. Historically, this has actually been the case. FRE has been higher in the second half, generally accounting for 25% to 60% of annual FRE. We are expecting a similar dynamic for the year '25. Vincent, do you want to take the question on Schroders?

Yes. So on Schroders, which is a listed equity stake. So we recognize the change in fair value according to the stock price in unrealized revenues in our portfolio line. And as regards dividends, they are recognized in realized revenues. So in H1 2025, if you include both dividends and fair value changes, the overall impact is positive and accretive on the P&L.

Antoine, do you want to answer on the ecosystem investments and proportion?

Yes. So as pointed before, we invested our balance sheet in both our funds and in direct investments. More or less 75% was invested in our funds, which was probably a good way to start and seed new activities. So if you remember, when we launched energy transition in 2018 in partnership with Total, we put EUR 100 million from the balance sheet. Total invested EUR 100 million. And as a consequence, we've been able to raise this decarb fund and the Egis transaction is part of that without having seeded this fund, probably more difficult to do. When we launched on the back of the pandemic in 2020, our aerospace and defense fund, we invested EUR 230 million from the balance sheet. And we had a part of the French state and Credit Agricole and Airbus, Dassault, Safran, nobody was willing to invest in the sector. So we use the balance sheet, precisely EUR 230 million to invest in this strategy. Obviously, a few years down the road, now everybody is overexcited with defense. As you know, we have more than EUR 2 billion of equity invested in the sovereignty sector. So without the balance sheet, it would have been totally impossible. While we have 75% invested, we continue to invest in what we call our ecosystem, which is really investing alongside partner, but also investing directly, so more or less 25% of the balance sheet. And we decided that we are going to migrate a little bit more into direct investment with partner or without partner. And the main reason for that, and there are 2 to be precise. One is we don't need to seed with so large amount of money on new strategy. number one, because the brand is stronger, because the track record is stronger. And number two, also the velocity of the portfolio is probably more efficient when you have direct investment. When you invest in a fund, the weighted average life is probably 7, 8 years. So it takes a lot of time. So we decided slowly but surely to keep investing in our direct portfolio. And if you remember, the firm has been started and set up as an investment firm. So obviously, the goal is to remain an alternative leader in the alternative investment management in Europe, but we're going to be more agile in the balance sheet use. And the ecosystem we created, and I think we described it in our annual results is probably over 30 different partners. across the globe. So we've been investing in the U.S. We've been investing in Asia and so on. So we're going to continue to do that. And so the decrease you saw in the asset management investment will probably continue in the next quarter. But we are the largest investor in more or less all of our funds. We remain very committed to our strategies and to our strong track record. But it's also a way for us to diversify and more important, to create more velocity in the portfolio, which will translate into more net income in the coming years.

I think we have a question on the conference call.

So next question is from Nicolas Vaysselier of BNP Paribas.

I just have 2. One is a bit technical, but I'm trying to get my head around the economics for this Egis transaction. As I understand the EUR 1 billion commitment was in the fundraising figures for Q2, so went on your AUM bridge. But when I look at the progress in fee-paying AUM in private equity specifically, I think it went from EUR 4.8 billion in December to just over EUR 5 billion as of June. So I was wondering if you could provide more clarity about this EUR 1 billion. How much of that is co-invest and how much is, let's call it, pure fee-paying AUM? And what are the different management fee rates you get on both that pure fee-paying AUM and the co-invest part? That will be my first question. Second, it's more a high-level topic, but I'd like to have some color on the commercial momentum at Sofidy. Have you seen any growth subscriptions in H1? And what feedback do you hear from your networks about the client demand for this product and what they think of SCPI in general?

Thank you for your question. Maybe I start with Egis. So we announced the Egis transaction just after H1. So that means that the closing occur at this stage already. But the fee generated by this transaction, the management fee will be generated over the years. So that means that in H1, you have no management fees tied up to Egis transaction. Also, we generated some carried interest. But when it comes to management fees on the Egis transaction, it will be generated starting, let's say, in H2 and increasing over time. And it's a pretty large PE transaction. So the fees will be probably lower than the 2% management fees because it's a large equity check and potentially generating a lot of carried. When you do such a transaction, it's a mix between management fees and carried interest. as you know, and it will be generating fees starting H2. I don't know, Henri, if you want to add something on that, and then I answer the second question.

Yes. To complement on the Egis transaction, so the impact it had on the AUM in terms of incremental AUM, it's EUR 850 million of net new money, of which we have EUR 430 million of future feeing AUM because as mentioned, Antoine, we did not recognize management fees yet in H1.

Maybe if I go back to your second question on SCPI. So as you know, we manage over EUR 14 billion of real estate in various vehicles, including SCPI. As pointed before, real estate remain very challenging and very difficult for the large institution, traditional asset manager, banks, insurance company, mainly because of interest rates and the previous cycle. We decided to be very offensive when it comes to real estate because we see fairly unique opportunities around the globe in Europe, but not only in Europe. And more specifically -- so that's why we are able to raise money in real estate, in SCPI, but not only in SCPI. I think we start seeing some inflows, which were very close to 0 the previous year. I think we raised a little bit more than EUR 200 million in H1. So it's really much lower than what we had before. But we start seeing a little bit of momentum, and there are a few firms having some inflows. So we are fairly optimistic on that. We think it's going to take some time. But the most important thing I will say is that we have over EUR 10 billion of gross inflows in the last 12 months with almost nothing coming from real estate. So that means that with an Engine totally shut down or more or less shut down, we have a record fundraising. And the network we put our 17 offices, our various asset classes, the positioning on the film enable us to continue to be very successful at raising money, which is going to translate into much higher profitability in the coming quarter and year, especially because the bulk of the infrastructure is paid. So to go back more specifically on real estate and SCPI, which are, as you know, very French, the momentum remain calm or very different, but we still have some inflows, and we are still raising real estate assets across our real estate practices.