Taaleri Oyj

OMXH:TAALA

Earnings Call Analysis

Taaleri's Q3 2024: Strong Investment Income and Controlled Costs

In Q3 2024, Taaleri reported income of EUR 21.6 million, up from EUR 13 million, largely driven by significant investment income, including EUR 8.3 million from a completed development portfolio sale. While continuing earnings dipped 6% to EUR 9.7 million, the firm maintained a healthy operating margin of 68%. Assets Under Management (AUM) reached EUR 2.6 billion, with fundraising commitments for the SolarWind III Fund at EUR 470 million. Looking ahead, Taaleri expects a slight downturn in continuing earnings for Garantia and anticipates continued challenges in fundraising but remains optimistic about renewable energy growth due to improving market conditions.

Navigating The Results: Investment Income Boosts Performance

In the third quarter of 2024, Taaleri reported continuing earnings of EUR 9.7 million, which marks a decrease of approximately 6% year-over-year, down from EUR 10.3 million. However, total income saw a remarkable increase to EUR 21.6 million from EUR 13 million, primarily driven by robust investment income, particularly from the sale of a development portfolio amounting to EUR 8.3 million. This surge in investment income was a significant contributor to an operating profit of EUR 14.7 million, significantly higher than the EUR 5.7 million recorded in the same period last year. .

AUM and Revenue Insights: Growth amidst Challenges

Taaleri's Assets Under Management (AUM) currently stands at EUR 2.6 billion, sustaining a solid foundation for future growth. Over the past twelve months, continuing earnings totaled EUR 40 million, showing a slight decline of 1.5%. Still, overall income increased by 5% to EUR 68.2 million, with operating profit rising by 10% to EUR 35.5 million during the same period. It's important to note the variance in revenue sources, which are influenced by performance fees and investment operations, underscoring the need to analyze numbers over a longer timeframe rather than quarterly snapshots.

Fundraising Efforts and Strategic Moves: Facing a Tough Market

The fundraising landscape remains challenging, yet Taaleri has secured commitments totaling EUR 470 million for the SolarWind III Fund. In the renewable energy segment, there was a notable 90% year-over-year increase in income to EUR 13.2 million and an operating profit of EUR 9.7 million compared to EUR 2.8 million in the prior year. In contrast, the real estate and bioindustry segments are under pressure, with the former adjusting timelines for product launches to 2025 due to a sluggish market.

Garantia's Steady Performance: A Pillar of Stability

Garantia continues to deliver strong results, achieving an insurance service profit of EUR 3.4 million and robust investment operations resulting in EUR 3.5 million. The low combined ratio of 25.8% indicates excellent management of expenses relative to premium income. This consistency is crucial given that 80% of Garantia's business is tied to the housing market, which is influenced by job security and changing interest rates.

Looking Ahead: Cautious Optimism Amid Challenges

For the remainder of 2024, Taaleri projects that while continuing earnings from the renewable energy sector are expected to grow positively, profitability in other sectors, particularly Private Asset Management, may negatively impact results due to increased expenses for hiring and launching new products. Continuing earnings from Garantia are anticipated to be slightly lower than in 2023, which could shift profitability based on market conditions. The outlook remains optimistic, albeit tempered by potential delays in fund exits and market dynamics influencing profitability.

Commitment to Shareholders: Dividends and Strategic Decisions

Taaleri maintains its commitment to distributing at least 50% of its annual earnings to shareholders, a decision that signals a focus on returning value to investors, despite uncertainties about new investment opportunities post-Aktia share sales. The significance of this strategy lies in reinforcing investor confidence during a period of market adjustment and ensuring sustained engagement with the shareholder base.

Earnings Call Transcript 2024-Q3

[Linda Tierala, executive]

Good morning, and a warm welcome to Taaleri's presentation of the third quarter of 2024. My name is Linda Tierala, and I'm heading Investor Relations at Taaleri. Presenting today, we have our CEO, Peter Ramsay; and our CFO, Ilkka Laurila.

The presentation today will be followed by a Q&A session, and you are welcome to send in questions through the chat function on the webcast page. You can send questions at any time throughout the presentation.

And with these formalities underway and welcome -- I'm happy to welcome Peter to the stage. Welcome.

[Peter Ramsay, executive]

Thank you, Linda, and welcome to the third quarter numbers. The results were good, but they were driven by investment income, and the underlying trends are hopefully slowly improving, although that's not really visible in the volumes yet in our business, but we have continued determinantly to advance our strategy.

If we look at the key figures, you can see that our continuing earnings were EUR 9.7 million for the third quarter. That is a decline of almost 6% from a year ago when there were EUR 10.3 million. Our income totaled EUR 21.6 million, and that's a huge increase from EUR 13 million a year ago, driven really by our investment income. And in particular, we recognized EUR 8.3 million from the sale of the development portfolio to the SolarWind III Fund for the third quarter. The portfolio as such was sold in 2023 in June.

Our operating profit was EUR 14.7 million compared to EUR 5.7 million a year ago. Our AUM stands at EUR 2.6 billion currently. And if we look at the lower row here, we can see some 12-month numbers. So our continuing earnings for the previous 12 months stands at EUR 40 million. That's a slight decline of 1.5%. Our income is though up 5% at EUR 68.2 million. And our operating profit for the previous 12 months stands at EUR 35.5 million, which is a growth of 10%. The earnings per share for the first 9 months is EUR 0.76.

Moving on to the highlights for the quarter. As I said, the income grew to EUR 21.6 million. Our operating margin for the quarter was 68%. I would, however, want to point out that we have 4 different sources of income. And in particular, our investment income and our performance fees do vary quite a lot over quarters. So therefore, comparing just 1 quarter might not always be the right yardstick, rather you want to look at smoothed-out numbers.

On the fundraising side for the SolarWind III Fund, we have now reached commitments of EUR 470 million. In the bioindustry business, we have the Fund I, the Bioindustry Fund I. And they were looking to increase their investments. So they've done 4, and they were looking to increase their investments with one. It didn't happen during the quarter. But after the quarter, actually, they did one more investment.

In the real estate business, we have strengthened the team. We think we have a high-quality team now, and we're looking to increase that business. Garantia continued to perform stellar numbers. The insurance service result was EUR 3.4 million. That is a slight decrease, very slight decrease from a year before. But in particular, the investment operations were very strong at EUR 3.5 million. The combined ratio continues to be very strong, it's 25.8% -- or it was 25.8% for the third quarter.

The fundraising climate, it is tough. We have sort of foreseen that it might improve going forward. And I will show you some statistics later, in particular, on how long fundraising takes nowadays. And hopefully, that will enlighten a little bit the situation there.

Okay. Moving over to our business units, and we start with the Private Asset Management and the renewable energy. And here, we can say that, of course, we continue the fundraising for the SolarWind III Fund. And then, of course, we already have projects that are ready to build. So the fund is starting to advance those as well. We are at the end of the life cycle, as we've earlier said, in the Wind II and Wind III Fund, and we are continuing the preparations for an exit there.

If we just look at the numbers, they might be a little bit small there on the right-hand side, but I can read them out loud. The continuing earnings were EUR 5 million, that's compared to EUR 5.1 million a year ago. Income was EUR 13.2 million, which is a big increase of 90% from a year ago. And then the operating profit was EUR 9.7 million for the renewable energy segment compared to EUR 2.8 million a year ago. We have 51 people working within our renewable energy business, and the assets under management are EUR 1.7 billion at the end of the quarter.

If you look at the other Private Asset Management businesses, we're looking to develop new products. Of course, we have the investment operations of the existing funds that we are pushing forward. As well as in the bioindustry business, we are finalizing the torrefied biomass plant in Joensuu and that we're also investigating potentially to develop the same kind of a plant in Canada. Within the real estate business, we're looking to advance both mandates and potential new funds.

If we look at the numbers here, we can see that the continuing earnings were down from EUR 1.4 million to EUR 1.2 million for the third quarter this year compared to the quarter before. Operating profit was EUR 500,000 negative compared to a slight minus of EUR 100,000 a year ago. We have increased our amount of employees here as we are building for the future. So we have 37 people here compared to 34 a year ago. The AUM is currently EUR 1 billion.

Now if we look at the operating environment, as we said, it is sort of challenging, although maybe there are some sort of green shoots that we can see. But of course, important for very asset-heavy investments like ours is that inflation is sort of contained. And now we've seen that inflation has peaked and that central banks have shifted to an easing mode.

Talking about the fundraising environment, there's a picture here on the right-hand side, which shows you the time spent for fundraising, average months. And you can see, although this is not a very long-time horizon, it's from 2019, you can see that the amount has increased from 14 in 2019 to 29 months currently. And I think that sort of speaks for itself that once you have a little bit of a disruption in the market, interest rates go higher, people do not get money returned in the same pace as earlier, then you put the brakes on and that we can see here. And of course, we hopefully believe that this will then sort of slowly but gradually shift into a more normal mode.

In the renewable energy business, I just want to say that the global transition to renewable energy continues. That is, of course, a good tailwind for us. And if we look at the real estate market, we know, especially in the Nordics, but it's been actually a global phenomenon, we've had headwinds there. And the transaction volumes is one yardstick to measure how active the real estate market is, in particular, Finland, the transaction volumes are very low. However, they seem to have turned in the other Nordic countries.

And Garantia's sort of business is 80% driven by the housing market. And of course, the housing market is very much driven by job security and interest rates. Now job security is still quite weak, in particular, in Finland. It's not a disaster, but we can see that employment has still continued to rise. But on the other hand, interest rates are now coming down.

Okay. So if we move on to Garantia. And we can say that, as I said, the insurance service result decreased slightly. It was 3.2% less at EUR 3.4 million compared to the year before. And there was some expenses. So there was a little bit of increase in insurance service expenses, and that sort of hampered the profitability. But as I said, the combined ratio is really low as we speak.

Investment operations have been good this year. I don't know if you remember, but in 2022, we had a tough year for investments as Garantia has most of their investments in interest rate-related products. Last year, we had some sort of giveback to that. But this year, obviously, has been a very strong year for investments for Garantia.

So if we look at the third quarter, the investments yielded 4% just for the quarter, EUR 6.2 million. This means, actually, from a result point of view, we recognized EUR 3.5 million, those are over the P&L, but the portfolio as such increased EUR 6.2 million in value, which is then booked direct to our equity. That EUR 6.2 million, EUR 3.5 million is taken over the P&L.

What has driven the investments is, of course, the strong equity markets, but also then shrinking credit spreads, and that's really been the big driver there. Interest rates, as such, have come down, but the shrinkage of the credit spreads have clearly also benefited. Yes, looking at the numbers, we can see that the operating profit for the third quarter for Garantia was EUR 6.3 million compared to EUR 3.9 million a year ago.

Okay. Going over to the Other, which is sort of our nonstrategic holdings, and I'll just lift 2 things here. One is the fact that Aktia, we changed how we -- where we booked the Aktia shares. They used to be as a strategic asset. We transported them to our nonstrategic investments in April, and we have sold down that position. We haven't sold all the shares, but some of it.

And then the other thing that I would highlight is the fact that our balance sheet for the nonstrategic investments stands at EUR 23.8 million. It was EUR 35.5 million, including the Aktia shares at year-end last year, and we are slowly but surely then reducing this, our sort of holdings within this. But we'll do it at our own pace, and we don't want to rush and do anything hastily here.

With this, I will hand over to our CFO, Ilkka Laurila, and he will take you through our results and the balance sheet. I'll leave this here.

[Ilkka Laurila, executive]

Thank you, Peter, and good morning on my behalf as well. And then, as usually, we will go through some of the highlights of the numbers as well as some of the changes that we have made to our reporting.

Then first, a couple of highlights of our numbers. Like Peter already explained, continuing earnings declined at roughly 6%. But if we would adjust the previous comparison period numbers with one of the kind of the nonrecurring items, it would have been almost on the same level as year before. Then maybe a second point to highlight that all cost line items are on a lower level compared to a year ago. Combined level is roughly EUR 0.5 million lower level than in the third quarter '23. And that then ends in a result that the operating profit has increased quite significantly versus a year ago.

A third element maybe to highlight here is the -- if you take a look at the year-to-date number of the comprehensive income earnings per share, that is already EUR 0.88, which is the same amount as it was the full year '23. And that obviously indicates the kind of the fair value changes of the Garantia's investment portfolio and, therefore, the kind of the potential and the income potential of the Garantia's investment portfolio in the near future. Taking it into account the kind of the interest rate changes and the duration, obviously, but already on the same level versus the full year '23.

Then going through these -- our 4 sources of revenue. Obviously, the third quarter was now kind of the biggest line item comprised of these investment operations, in total, EUR 11.9 million, followed then by continuing earnings from the Private Asset Management business. But again, like usually, if you take a look at the longer time period, we can see that the kind of the big picture is much more balanced. The biggest kind of the revenue source, obviously, is again this continuing earnings from the Private Asset Management business, then followed by the investment operations. And third largest item is obviously the insurance operations of Garantia.

On the next slide, further highlights the quarterly development. On the left-hand side, you can see that the continuing earnings is developing quite steadily. And then on the other hand, like usually, the other then continuing earnings is the lumpy part of our business. And that obviously explains, in a short term, the lumpiness of our income development and is obviously, on the right-hand side, reflected in our operating profit development almost completely.

But again, if we take a look at the longer period, this is a rolling 12-months numbers, on the left-hand side, you can see how the continuing earnings is -- the development of continuing earnings is very steady. And then on the other hand, other then continuing earnings is also quite steady if you take a look at the longer rolling 12-months picture. And that is obviously also shown in the operating profit development on the right-hand side. As explained, it is almost completely reflected in our operating profit.

Then going to our balance sheet, as already shortly touched upon, our nonstrategic investments have now declined from that EUR 35.5 million at the end of the last year, it's now EUR 23.8 million after we have sold some Aktia shares. And then on the other hand, the direct investments have increased at EUR 37.5 million. So tracking on our strategy, what we have explained. On the other hand, very stable development in Garantia's investment portfolio, reflecting that fair value changes, which is shown in the kind of the comprehensive income. Total assets over EUR 300 million and equity more than EUR 200 million.

Maybe worth noting is also that like this development portfolio recognition in this quarter, we have also these some other unrecognized contractual contingent receivables, which then if it is seen likely, we will recognize the revenue in the coming quarters or coming years. And in the footnote, you can see a couple of those items, which are not now included neither in our P&L nor the balance sheet.

Then 2 additional data points that we have included in our reporting. The first one is that previously, we have specified the direct investments and the nonstrategic investments more than EUR 1 million. Now we have now included the combined level of the other investments so that everybody can now reconcile these numbers to the -- or direct investments and the nonstrategic ones.

So the other investment line item there, of which fair value is that almost EUR 4.8 million, those -- that's the total value of the investments of which value is less than EUR 1 million by item or even recognized in a 0 value. And obviously, if those are then kind of in the future will have some kind of exit, obviously, that will have a full impact on the P&L.

The second kind of additional data point that we have now included in our reporting is the AUM by the fund. And this number is now kind of the fee-generating AUM. And therefore, as an example, the SolarWind III, the number here is EUR 386 million. But on the footnote, you can see that at the end of the third quarter, the total amount of the commitment was that EUR 440 million, but that included some conditional commitments, which are dependent then on the final size of the fund. And that's why the fee-generating number at this stage is that EUR 386 million.

So that concludes my part of the presentation, and I will hand over to Peter again for the future outlook.

[Peter Ramsay, executive]

Thank you, Ilkka.

So what do we say about the outlook? So if we start with the renewable energy business, we expect that to develop positively the continuing earnings for the rest of the year. But the profit of the renewable energy business is naturally driven -- well, now we booked this sizable income from the development portfolio, but of course, also on any performance fees that we book for Wind II or Wind III Fund, and the timing of those exits naturally then deem that booking. And it is possible that the exit will be postponed to next year as well.

Then we're looking to increase our business in the other Private Asset Management businesses. This means that we will have costs, so we've hired people there. We want to internationalize the business. We want to launch new products. And therefore, our expectation is that it will be negative the results for this segment for the whole year.

And then within Garantia, the continuing earnings are expected to fall slightly from the level of the corresponding period, so '24 would be slightly less than '23. But Garantia's net income, given that the markets continue like this, would sort of yield more investment income for the rest of the year.

And then the Other group finally, just reminding you that, that is an investment portfolio. And of course, any exits done with a profit, they will increase the profits; vice versa, if something is exited at a loss, then that will sort of have a negative impact or if we make adjustments to the fair value either up or down, so that will impact the profitability of the Other group.

But I hereby conclude our presentation, and I guess we're open for questions. So thank you.

[Linda Tierala, executive]

Thank you both for presentations. So we now have a possibility to ask questions. And you may ask questions both from the audience, and then those of you following the presentation online can ask questions through the chat function. So let's start.

[Linda Tierala, executive]

Do we have any questions from here? So we have one from Nordea from Jukka-Pekka Pesonen.

[Jukka-Pekka Pesonen, analyst]

One question. You decided to not launch the venture capital fund for the bioindustry and move the goalpost for the launch of the real estate products to 2025. So could you give maybe more color on the reasoning behind these? And should we interpret these as the fundraising market taking a step for the worst during the fall?

[Peter Ramsay, executive]

For the VC fund, I guess what we lacked was sort of a strong anchor investor there. And at the same time, it is a tough environment to fundraise. So given those 2 facts, I guess, led to it. On the other hand, we have ample use for the resources that we sort of used for that project. And unfortunately, in private equity, it is so that some funds just don't get the traction. Maybe it's timing, sometimes that isn't optimal and so forth. We've been very happy to have that fund. But for the time being, it just was deemed that we will use our resources for something else.

And on the real estate side, yes, I mean the whole idea has been really to set up a fund now and use this market to its advantage, but preparations have been a bit slower. And I don't think you need -- you don't need the one to rush that. You just want to get it at the right time. But yes, it's still sort of in the pipeline.

[Jukka-Pekka Pesonen, analyst]

And maybe one question on the SolarWind III fundraising. The -- I don't know, it seems that it's been a bit slower than maybe we have expected. But do you -- have you seen maybe any postponements in the renewable energy commitments overall maybe for the U.S. presidential election? Or have you heard that kind of narrative behind it?

[Peter Ramsay, executive]

That actually, we haven't heard. So the U.S. hasn't sort of come up as a specific item. I'd say that actually, what we've managed to do is to get some real good Tier 1 international investors into the fund, and those are very big milestones. Maybe it's slower. I mean we know -- we saw from the chart there that fundraising is slower, but we still have time until June next year. And there's a quite good pipeline sort of, of due diligences that are conducted. So we just hope that those will then be sort of converted into subscriptions or, in this case, commitments.

[Jukka-Pekka Pesonen, analyst]

Okay. I have 2 more. So you had changed the outlook so that the Wind II and III might be postponed to 2025. So do you see it more likely now that they will be done in 2025 based on the preparations that you've done so far?

[Peter Ramsay, executive]

That's a hard question. I don't actually know the exact date. And therefore, it's just better to sort of, in general terms, say that these are processes that take time. And were it so that it moves to 2025, that may be the case then.

[Jukka-Pekka Pesonen, analyst]

And last one on the Aktia shares. So I know you don't want to maybe commit to any time line, like you said, but do you have any like ballpark figures? And what do you have the -- like exit plan for the rest of the Aktia shares?

[Peter Ramsay, executive]

Yes, we've sold some of them. And I guess, as we move them from the strategic to the nonstrategic, it's a clear sign, we will sell them. So eventually, we will not hold any Aktia shares.

[Linda Tierala, executive]

The next question comes from Kasper Mellas from Inderes.

[Kasper Mellas, analyst]

Are there new recruitments in the real estate included in Q3 figures? If so, why did the headcount drop?

[Peter Ramsay, executive]

Maybe, Ilkka, you want to take that. But some are replacements, but yes, go ahead.

[Ilkka Laurila, executive]

Yes, exactly, but you already kind of answered to the questions. Those were kind of the replacement, but no new recruitments as such. So the headcount has not increased.

[Kasper Mellas, analyst]

One question more about the exit of the old wind funds. If the exit should happen next year, then does that mean that you won't book any profit in Q4 this year?

[Peter Ramsay, executive]

I'll give it to Ilkka again. He's the IFRS expert here.

[Ilkka Laurila, executive]

Yes, it's really not that straightforward. It depends, you could say, because according to IFRS, you kind of should recognize it according to the -- if the possibility increases. And now as we have not kind of recognized more revenue on that, the kind of the conclusion, therefore, is at the stage that the kind of the likelihood and the amount of that has not increased, and that's why we have not recognized more revenue on that basis.

[Kasper Mellas, analyst]

Do you still expect the next close of SolarWind III to happen by the end of the year?

[Peter Ramsay, executive]

Yes, I won't give you a 100% sort of promise, but yes, there is an expectation.

[Kasper Mellas, analyst]

My Last question, did you redeem the Tier 2 loan with cash only?

[Ilkka Laurila, executive]

Yes.

[Linda Tierala, executive]

Thank you, Kasper. And we have a question from online. It's quite long, but it goes, so you terminated 1 to 2 funds and your company is not growing and -- but at the same time, you increased the workforce from 119 to 129. Why was that? And the second part of the question is that it seems that your new strategy investing in bioindustry is not working since there is no new AUM. So what's the next strategy?

[Peter Ramsay, executive]

So on the bioindustry, just separating sort of the Bioindustry Fund business and the bioindustry direct investments, we did invest EUR 5 million in Fintoil. We now own 39-point-some percent of the company that was done in the summer. And on the increase of the personnel, so it has really to do with we are sort of investing for future products.

And within the bioindustry space, it is true that we discontinued the VC fund endeavor. But at the same time, we still have sort of 2 projects that are very much live. We have the fund Bioindustry Fund I, which has already a number of investments, looking to do more investments. And then on the other hand, we have the biocoal factory that is now being sort of finalized. And of course, we need resources for the ramp-up and for the activities around that.

On the FTEs, I think we also did a change in how we measure FTEs. I think did that have an impact on the [ FTEs as well ]?

[Ilkka Laurila, executive]

They might have some technical changes. But obviously, because now the question is referring to year-end versus third quarter, and obviously, during that period, we have increased number of the employees in bioindustry and the real estate teams as well. And that is reflecting our kind of the growth ambitions in both of those segments.

Maybe worth noting also is that the third, obviously, kind of the project which takes some resources in bioindustry is the Canadian biocoal development, looking for opportunities to biocoal development in Canada.

[Peter Ramsay, executive]

Any other questions?

[Linda Tierala, executive]

Yes. There are follow-up questions from Nordea from Joni Sandvall.

[Joni Sandvall, analyst]

Maybe, Peter, one follow-up on -- you mentioned that you have been able to close some Tier 1 customers. And I'm just thinking how is the -- and you said that you have quite good pipelines. So how interest on your funds, especially on SolarWind III, but also for real estate has developed among investors during, let's say, past 6 months?

[Peter Ramsay, executive]

So if I start with SolarWind III, I mean it's really a long process. We started the -- we did the first close in 2023 in June in a tough market environment. So I think it's just that it takes time to get these things through. And then the interest as such, I would say that now that we're this far in the process, it's narrowed down. So we're not talking about tens of potential investors, but there is a good number of high-quality investors that are looking at the fund. And of course, they are quite big tickets as such. So one success actually makes a big difference. So you just need enough of those to convert.

So I would say that it's really more now down to the ones that have been around for quite a while. I don't think there's going to be any new LPs looking at it. We know the suspects and they know us. And then it's more that some have a process that takes time and the other ones are, of course, contemplating this or something else.

On the real estate side, I think our team has got good traction. I think we have a really good team there. We'll see if we have anything to tell in the near future. But what we can say is that we're doing the preparations for the fund.

[Linda Tierala, executive]

And there's a question from Henri Elo.

[Henri Elo, analyst]

Henri Elo, SalkunRakentaja. Interest rate level has gone down quite quickly during -- after summer during last few months. So how do you see effects in your businesses like renewable energy and bioindustry funds and real estate funds as well as Garantia as a general level from that perspective?

[Peter Ramsay, executive]

Well, of course, interest rates are one thing and then credit spreads is another. But we have very asset-heavy businesses. If we think of the renewable energy, it's very asset-heavy. You use debt also there. So for the debt piece, it sure has an impact. It should drive IRRs and everything else equal. And we've also had inflation. So input costs have gone up. At the same time, energy prices have slightly gone up as well across the board, especially in those regions where we are, Finland maybe not so much. So you have -- there's a lot of moving things. But of course, interest rates do impact all of these. And inherently, if your financing cost or your cost of capital comes down, it is sort of positive.

In the real estate business, I think there's a little bit of a different story because you had an overextended sort of bull market and then kind of the bubble burst. And then what you have is sort of you have this reconstruction phase, which we're sort of seeing the end of. And I think, therefore, it would be really good to get that fund going because that's where you have the good opportunities to get above-cycle returns. But of course, there, a prerequisite sort of is that interest rates don't continue to go higher and that there's cost containment, so inflation isn't sort of pressure. And we've seen both of those ease, which is important.

And in the bioindustry, there, it's a little bit back to the same as renewable energy. You have a lot of moving input costs. You have feedstock, you have offtakers, you have substitutions to your products. And then, of course, you have this green wave that how strong is the green wave? Does it have support? Is it sort of -- where is that going? Are people willing to accept sort of new consumer patterns?

And I think the bioindustry is actually most complex of all of these. And then yet you do very capital-intensive investments, and you have a certain amount of uncertainty when you do it. So what you try to do is increase the amount of certainty as you look at the investments that you do, but you will still always have that. You will never have 100% offtakers, 100% sort of feedstock suppliers because some of that is in -- you can't do forward contracts at all.

So what I'm just saying is that interest rates have an impact, but it's not the whole story. But of course, always when it comes to the cost of capital, if that is lower, it does help. But then you have all the other factors. And I guess that's what -- when we say that we've increased our personnel, I think it's really about increasing the quality of our execution and that you cannot actually jeopardize. If you want to be in the business long term, you have to be able to deliver quality on what you're doing.

If you then can create some new business, that might be great. But then also, you have to be able to terminate some of the ventures that you're looking at simply for the fact that you don't get enough security or the margin of safety isn't good enough to forward those. It's a long answer to your question, but I think it's good to give some context.

[Henri Elo, analyst]

Is it so that it was -- in Garantia, it was better investment income. So does it come both from interest income investments as well as equity investments? Or...

[Peter Ramsay, executive]

Yes, I think we showed a graph last time. So we've increased our equity exposure. So it's more like normal now. I think it's around 30...

[Ilkka Laurila, executive]

25 or...

[Peter Ramsay, executive]

Yes, between 25 and 30. And then the interest rate component has come down. I think it was sort of 87 at a high and now we're at 70-ish. But of course, the interest component has generated most of it, and that's really due to credit spreads coming in. If you look at long-term rates, actually, in some jurisdictions, long-term rates have gone up 50 basis points from the low, but then the credit spreads have come in.

The duration isn't that long in the portfolio. It's slightly over 3 years. Yield to maturity is good right now because we're coming from sort of a high regime from the credit spreads, and that also gives us sort of some encouragement by that. But of course, equities have performed well this year, and that has -- or Garantia's equity portfolio has performed well, and that has then also supported the investment income.

[Henri Elo, analyst]

Okay. Maybe one last question. You said in your report that you have got new international investors, and it's also your strategy. Could you open a bit that, please?

[Peter Ramsay, executive]

So yes, our strategy is that 50% of our investors in our new funds should be international or that's our target. And if we look at our energy -- renewable energy team, this is the sixth fund actually that we're doing in renewable energy. We are in 14 countries. We do get traction abroad. And we're really glad for these new openings. They are very, very important. And as we're -- the plan is to be a long-term player in the business, it's always more likely that when you do your next fund, if you deliver, you will have these investors with actually bigger commitments.

So that's why it's really important that you have these openings. And therefore, that is sort of -- it's part of the strategy, yes, but a strategy can just be a word. I think the execution is important. And therefore, it's nice to see that we can execute also on this.

[Linda Tierala, executive]

Thank you. We have one question from the chat. So are you intending to distribute the cash that you received from the sale of the Aktia shares back to shareholders if you don't find any other investment opportunities for that?

[Peter Ramsay, executive]

Yes, we stick to our dividend sort of target, which is that we distribute at least half of our annual earnings to our shareholders. But we're not looking to do any extraordinary distributions for any reason. It's just going to be business as usual. But of course, the Board decides this, just to be clear about this one.

[Linda Tierala, executive]

And are there any further questions from the audience? If there are no further questions, then we're ready to conclude the presentation for today. Thank you very much, and have a great day.

[Ilkka Laurila, executive]

Thank you.

[Peter Ramsay, executive]

Thank you very much.