Catella AB

STO:CAT B

Earnings Call Transcript 2022-Q3

[Christoffer Abramson, executive]

Thank you, and good morning, everyone, and thank you for attending our third quarter 2022 Earnings Call. My name is Christoffer Abramson, CEO of Catella. With me today are Mattias Brodin, our Chief Financial Officer; and Michel Fischier, our Head of Investor Relations and Communications. All materials, including the reports and presentations, as usual, are available on our website, and the recording of the call today will be available on our website shortly as well.

So as usual, I'd like to start the presentation on Page 3 with a brief overview of Catella, although most of you are likely familiar with our strategy and operations by now. Catella operates in 3 property-focused business areas: Investment Management, Principal Investments and Corporate Finance. We manage SEK 142 billion in our pan-European investment management platform. About 75% of those assets under management are managed in property funds and the other part in a significant number of asset management mandates across Europe. Principal Investment is where we invest our own equity into a broad and diversified portfolio of European investment projects together with partners.

In Corporate Finance, it's our real estate advisory and brokerage arm with leading positions in large European markets. Corporate Finance is also an important internal adviser to our other business areas, Investment Management and Principal Investments.

So with that brief introduction, let's move to Page 4 for the key operational highlights of the second quarter. Firstly, I'd like to reiterate, which we've said before the last couple of quarters, and I think it's maybe even more important now. I'd like to reiterate that in the current uncertain market environment we're in, we are very, very focused on managing our cash position prudently and maintain a good liquidity.

We continue to have a strong liquidity position and no near-term refinancing needs, thus making us well positioned to capture long-term value creation opportunities, which we'll speak a bit more about later on. Since our strategic shift towards a property-focused company, we continue to grow synergies across the group and thereby new revenue stream. Recent examples are new Pan-European asset management mandate where we aggregate in industry-specific strategies and where we co-invest alongside strong capital partners who believe in our strategies.

And at group level, I'm glad to welcome Peter Umegård as our Chief Digitalization Officer and supported by Martin Johanson, as our Head of Data & Analytics. With them on board, Catella will strengthen its position and know-how and data, analysis, artificial intelligence and new product strategies.

As always, our goal is to help our investors and clients create value based on intelligence-driven future-focused strategies and investment opportunities. But much like the Pan-European mandates I just mentioned or the move to energy-positive building, which we have talked about in previous calls.

So Investment Management. We continue to deliver very strong growth in assets under management, adding nearly SEK 7 billion in the third quarter. mainly driven by inflows into our property funds and new asset management mandates in the U.K. and Finland. During the quarter, we also entered into an agreement to sell 34 properties in Germany and the Netherlands from 2 residential funds, Catella Europea residential and Catella Wohnen Europa. We expect the transaction to close somewhere around year-end. And the main purpose of this divestment is to accelerate our portfolio transition to even more sustainable assets.

We secured also a very successful exits from a couple of asset management mandates during the quarter. And we also ended some other low-margin mandates, primarily in the Nordics, which drives both strong revenues in the quarter and higher profitability going forward. As the market continues to be uncertain, we see an increased demand for value-add strategies, an area in which we have strong competence to help clients, both in mandates and in new funds, and this is something we will focus a lot more going into 2023.

Principal Investments. We continue to see strong investor interest in the assets we are developing. However, the timing of planned sales has been pushed forward somewhat. Investors are not as active as before, which is a natural reaction in an environment where baseline interest rate assumptions and other parameters are hard to foresee. In this environment, it is to our advantage to be well capitalized and have the ability to wait for a stabilized market. In the longer term, we are convinced of the attractiveness of our projects, and we will only exit at the right time.

Our pipeline is mainly progressing according to plan, and we feel positive about the attractive and sustainable assets we will bring to market in the coming years. Our strong balance sheet allows us to review and possibly invest in a number of more opportunistic co-investment opportunities across Europe, where we are seeing an increased interest from several capital partners, especially from regions where they might have a strength in the macroeconomic climate locally or in the FX position.

And finally, we go to Corporate Finance, whereas most of you probably know, the transaction market continues to be slower than usual. And before the expectations of buyers and sellers reset in the line, which we talked about a lot lately, the transaction market will likely continue to be in a wait-and-see mode. There are large transactions occurring, but generally, the core transaction market is relatively slow in most markets at least.

On the other hand, demand for valuation services is very strong in a market where uncertainty prevails. And so is the need for debt advisory and complex transaction advice playing a little bit to our strength.

Okay. On Page 5 is a summary of the group's consolidated results. So, I'm very pleased to present an improved results and continued growth in assets under management despite the turbulence and uncertain market climate.

During the quarter, we grew revenue by over 30% year-over-year to nearly SEK 500 million. We delivered an operating profit of SEK 62 million compared to SEK 46 million in Q3 last year with an operating profit margin of nearly 13%, and we are tracking it 26% year-to-date, just to note. Earnings per share in the quarter was, let's call it, SEK 0.77 for those who know that, nearly doubling the value of the shareholders compared to last year.

Investment Management has delivered substantial AUM growth to SEK 30 billion over the last 12 months. In Q3, assets under management grew by SEK 7 billion, I'd say, call that a very strong outcome in a relatively challenging market. The profit margin was nearly 30% in the quarter and 32% over the last 12 months driven both by underlying AUM growth, increasing our fixed fee revenue and in this quarter a substantial variable revenues.

In Principal Investment, no divestments were carried out in the quarter, but the business area has contributed substantially to operating profits during the last 12 months. As mentioned, the focus ahead is on continuing to develop the current pipeline of projects and to pursue co-investments, which are really aimed at creating new partnerships and revenue streams across Europe.

And as the market fully correct, exploring opportunistic ideas with a strong balance sheet behind us. Despite a slower transaction market, revenue in Corporate Finance was on par with last year. EBIT also showed an improvement of nearly SEK 10 million for the quarter. And in fact, helped quite a lot by discontinuing the loss-generating operations in Germany and the Baltics earlier this year.

So let's move to Page 7 to discuss Investment Management in a little bit more detail. Since the inception of Investment Management, we have delivered a strong average annual growth rate of 27%. And year-on-year, assets under management now grew by SEK 30 billion as of the third quarter. The growth continues to drive increased fixed fee income, our key underlying investment management metric and really the main underlying profit driver in Catella. Last 12 months, fixed fees grew by nearly 20% to SEK 770 million.

Last 12-month variable fees were SEK 509 million compared to SEK 317 million for the same period from 12 months prior. The increase of 60% is mainly driven by significant performance fees in various residential funds and also some performance fees from asset management mandates in this particular quarter.

So Investment Management is the main growth engine of Catella, and we continue to successfully raise new capital and launch new sustainability-focused funds and asset management mandates. Albeit in a slower environment today, which is why it's important that we have reached the scale and structure that even during slower transaction quarters, we still can deliver a very solid profitability on underlying fixed earnings.

On Page 8, we look deeper into the AUM growth and Investment Management. We provide a broad and diversified fund offering for our clients, which continues to generate capital inflows especially the funds with a clear sustainability agenda.

Of the SEK 30 billion in AUM growth over the last 12 months, a large portion stems from inflows to our modern residential funds with particular interest in sustainable assets. Notably, we show strong inflows into Catella Wohnen Europa and our Article 9 Dark Green Residential Fund, Catella European Residential III.

In Q3, the AUM growth was both strong and I would say, quite broad from fund inflows, roughly 60% residential and 40% commercial funds, SEK 1 billion in the quarter from new asset management mandates in the U.K. and Finland and also aided by some positive currency effects due to the weaker Swedish krona our reporting currency.

Outflows during the quarter related to normal active portfolio management. And as I mentioned earlier, ending some low-margin mandates in Sweden and Norway, as well as successful sales of assets managed by -- predominantly by Catella APAM in the U.K.

So on Page 9, the P&L for Investment Management. I'm very happy to report a 20% revenue increase year-over-year, mainly driven by the underlying growth, again, in AUM increasing fixed fee revenues, which over the last 12 months have grown by 19%. Earnings in the third quarter were also strengthened by material performance fees from our asset management businesses in Denmark and Finland.

Our growth in managed assets doesn't notably increase cost, obviously, with the exception of variable compensation. And this is really important now in the slower market that we're in currently. This supports our expanding margins and improves the scalability of the business model where we have now reached a level where this really kicks in. Fixed fees and total revenue increased by about 20%, whereas OpEx only increased by 15%. And the more we grow, the more parameters will be.

As mentioned, we have now reached a scale and structure that even during relatively slow transaction quarters, especially when we look at our -- the 75% of our assets in funds, we deliver strong underlying profitability even with limited transactions.

So let's turn to Page 11 for an overview of Principal Investments. We continue to invest into a diversified portfolio of projects in different asset classes. Portfolio consists of 11 active projects in 6 European countries, which continue to progress according to expectations.

During the third quarter, we made no divestments, but our expectation is that the far advanced development such as the Kaktus residential project in Copenhagen and our 2 current logistics development projects in Sweden, we'll close -- we'll exit through them during the next 3 to 6 months.

To date, our transactions have generated an IRR over 50%, well ahead of the long-term target of 20%, of course. Total revenue for Principal Investments was SEK 74 million in the quarter, mainly consisting of stage of completion revenues in Catella Logistics Europe and management fees in Catella Project Management. The loss [indiscernible] for the quarter amounted to SEK 20 million, mainly as an effect of development costs in projects that cannot be capitalized in Catella Logistics Europe.

And additionally, after the quarter, some late-stage development costs were added to the closing accounts of Principal Investments sales in Ljungby, also on Logistics asset. These costs will lead to a reduction of the reported second quarter operating profit in the fourth quarter. And we'll finalize the reconciliation of the closing accounts, but it seems that it will reduce the second quarter EBIT from SEK 328 million to around SEK 320 million. So on the whole, not a material adverse impact, but still unfortunate.

Principal Investment earnings will always be somewhat volatile between quarters, but we really focus on the SEK 170-plus million of operating profit during the last 12 months and a very strong pipeline, both in development and upcoming sales in the coming quarters.

So briefly, let's look at the project overview of Principal Investments on Page 12. We continue to develop our current high-quality investment projects across Europe. As you can see, it's a very diverse portfolio of assets coming to market over several years into the future. As already mentioned, the current market is hesitant, but we expect to complete it and nearly completed projects to be exited, as I said, in the next couple of quarters.

Now having a strong balance sheet in this environment is crucial as we can wait out the current market rather than selling, while instead focusing on future investment opportunities. In the longer term, we are convinced of the attractiveness of our project, and we still have a strong investor demand.

On Page 14, let's talk a little bit about Corporate Finance. It maintains a very strong market position in all remaining 5 markets with exceptional strength in certain complex segments and niche markets. And the current market uncertainties and bid-ask gap between buyer and seller price expectations pushing transactions forward in time. The traditional core transaction market was very slow in the quarter, but there were still large complex portfolio transactions and restructuring is occurring.

Despite this environment, Corporate Finance has delivered a positive EBIT of SEK 6 million, an increase from negative SEK 3 million in the same quarter last year, which is strongly supported by discontinuing loss-making operations in Germany and the Baltics earlier this year.

On the positive side, also, interest in valuation services has increased in the current market backdrop, and we have continued discussions and good dialogues with clients regarding debt and capital markets advisory services as a traditional credit markets and equity markets have tightened up significantly.

So I now hand over to our CFO, Mattias Brodin, to cover the financial summary, beginning on Page 16.

[Mattias Brodin, executive]

Thank you, Christoffer. And let me briefly cover the financial summary, focusing on below the line items. As Christoffer already mentioned, the strong quarterly operating profit was driven by investment management growth in fixed fees, leading to improved operating profit of SEK 62 million corresponding to a margin of 13% compared to 12% year-over-year on a group level.

I would once again remind you of the line deduction of profit attributable to noncontrolling interest. According to IFRS accounting standards, we fully consolidate all income from companies with controlling interest. In order to highlight profits related to Catella AB shareholders, we adjust for profits related to noncontrolling interests. As there were no divestments in this quarter, there were only minor deductions on this line.

Turning to financial net. We noticed a substantial improvement from last year. This is mainly driven through positive fair value adjustments on long-term investments as well as positive currency effects, primarily from a weakened Swedish krona against euro. As a result of both stronger quarterly earnings and improved financial net, earnings per share nearly doubled to SEK 0.77 year-on-year compared to SEK 0.39 last year.

Continuing to Page 17, where we look at our financial and liquidity position. Catella continues to have a strong balance sheet and equity ratio supporting our future growth plans, both in new investments and potential M&A activities. Compared to last year, total assets have increased by over SEK 1 billion to SEK 5.8 billion. The increase is related to additional new investments in Principal Investments. The liquidity at the end of the quarter improved to SEK 1.6 million (sic) [ billion ] compared to SEK 1.4 billion in previous quarter. As Christoffer already has mentioned, given the current market climate, we're comfortable with holding a larger proportion of cash.

The good capital position and no short-term refinancing needs makes it possible to further explore both long-term value-creating opportunities and also have the firepower for opportunistic ideas. That was all regarding Catella financials, and I hand back over to Christoffer.

[Christoffer Abramson, executive]

Thank you, Mattias. So before opening up for Q&A, I would like to briefly summarize the quarter from our perspective on Slide 19 with the nice pictures. So I'd say, we feel very positive about the strength of our underlying business model and 3 property-focused business areas. We delivered increased revenues, improved operating results and continued growth in assets under management despite a turbulent and uncertain market climate. The main profit drivers continue to be fixed fee growth in Investment Management and supported by steps taken earlier this year in closing loss-making operations to further streamline Catella.

Looking ahead, we still expect growth in Investment Management, but believe that a likely scenario is that inflows and growth will moderate somewhat as transaction markets remain slow and investor willingness to invest is dampen until the macro environment becomes clearer. Whether that takes 3 or 6 months, it's very hard to tell.

We will stay the course, of course, by continuing to develop our fund offering with sustainability profile products, which will continue to drive our AUM growth, something that we've already seen in the beginning of the fourth quarter. We're also developing new value-add product strategies, both fund and mandates to meet investor demand, which is shifting towards this area of the market.

Another important strategic initiatives we are pursuing is the strengthening efficiency through digitalization and scalable processes. With the Chief Digitalization Officer and Head of Data & Analytics joining Catella, we will be positioned to help our investors and clients to create value-based and an intelligence-driven future focused strategies and investment opportunities, which has already begun.

And with the final point, it is, of course, hard to make any predictions on how the market will develop. The most likely scenario is that the transaction market will be slower for at least 1 or 2 quarters, and this will affect all of our business areas. At the same time, the current market with potential price corrections and distressed situations occurring, we'll open up great possibility to invest in long-term value creation opportunities. And that's based on our fantastic teams across Europe and a very strong liquidity position, we are ready to act upon.

With that, I would like to thank you all for listening and open up for questions.

[Operator]

[Operator Instructions] The first question is from the line of Jesper Von Koch from Redeye.

[Jesper Henrikson, analyst]

Congrats to the strong quarter. So let me just start with Principal Investments. And yes, I guess you said that you expect tax and some of the -- and 2 of the Swedish logistics projects will be like divested in the next 3 to 6 months. But regarding Kaktus first, I mean we know that the residential part of it is will let out to tenants. But how about the commercial part? Is there anything we have left to do there?

[Christoffer Abramson, executive]

Yes, a little bit. I can't obviously discuss an ongoing negotiation, but we are, I would say, in the final stages of securing the vast majority of the commercial area in Kaktus. And of course, we want to present any buyer investor with a completed building. So we're trying to try and line those up to both -- as you said, the residential area is fully let. It's been a fantastic success and the commercial areas, we're getting close, and I hope that we can get a sale to close as soon as that lease or those leases are signed. Again, strong investor interest, we are in live processes. So hopefully, more to come shortly.

[Jesper Henrikson, analyst]

Okay. So it sounds like, I mean, in this more in secure market investors in Kaktus as a whole, the kind of demand that everything is being let out and have tenants on all parts. Is that a correct picture?

[Christoffer Abramson, executive]

Yes. Yes and no. I think we also consider that it's best for both buyer and seller and that we get the most value out if the asset is more completed today. 6, 9, 12 months ago, there were a lot more risk taken by buyers on forward transactions. And today, certainty is more important.

So we think that it's in both sides, interest to have more completed leases on the whole process. And the other reason that it's been delayed a little bit is processes should take longer, investment committees and the various parties that we're discussing with, they go back and forth a little bit today, and that's normal.

[Jesper Henrikson, analyst]

Great. And also just generally, we don't need to go into the each specific projects but like you have -- like Vaggeryd and the French Logistic project had also faced up like how is the interest there? And how are you thinking about those projects in general?

[Christoffer Abramson, executive]

Well, if we start here in Sweden, we have 2 projects, 1 recently completed, as you mentioned, in Vaggeryd and 1 that will be completed in the or early spring, very close, very similar locations. We have great interest. We've had offers back and forth. But as we are in a very fortunate position of having strong liquidity and I'd call it first-class logistics assets that are going to be very attractive, there's no reason to sell unless the offers are good enough.

And we have offers that are good. We're hoping that it will be even better. And I think we should see some transactions in the not-too-distant future. Of course, the asset in -- the second asset in Vaggeryd we are shutting. It might be better to complete first and sell after rather than take a forward discount. But that's something that we assess, I wouldn't say daily, but quite frequently, and we're in live conversations there as well.

In Catella Logistics Europe, there are a couple of assets that are completing or have completed. I can't talk about what the outcome will be there, nothing truly material and I think, in the near term, but we have a couple of projects that will be a bit longer and generate bigger profits.

See, did you have -- was there any other oh, yes Seestadt.

[Jesper Henrikson, analyst]

And opening of Seestadt, yes.

[Christoffer Abramson, executive]

Yes. Seestadt is nearing completion, I think early in the new year. I mean just around the end of this year or early next year. Letting activity there has been good. I think the good thing there is that the rents are creeping up. They're beating our expectations.

And again, it's a matter of -- a year ago, you would probably have sold it out of forward. And in this market, I think you -- everyone is better positioned to complete the project and to exit upon completion when rents are more stabilized. But letting activities doing well. Rents are strong. The construction is on time and on budget. So it's -- we feel great about the project. And as you know, Seestadt will be a very long multiface project. This is only [indiscernible] which is the first phase.

[Jesper Henrikson, analyst]

Yes. great. And then I mean, it seems -- it still seems like the interest is quite good for all these projects, like especially when everything is left to different tenants. But if you were not to sell it in, I mean like each of these assets in the near time after total completion, like would you then just like operate them yourselves and collect tenant fees, like with their own capabilities or what's the time there?

[Christoffer Abramson, executive]

Well, if you think about Kaktus and Vaggeryd to start with, we already are. They're operating. We have operating income coming in. And I think the important part is you're keeping it on the balance sheet, which, just to be clear, we don't have intentions to keep things long term on the balance sheet. But if it's the right thing to do, we'll do it. And the key there is to then finance them at attractive terms and have a positive interest coverage ratio and continue to talk to buyers. That's the plan, and that's the plan all along.

[Jesper Henrikson, analyst]

Okay. Good. And then I mean I guess the uncertain market conditions also create opportunities for financially strong actors like yourself. I mean could you talk about what kind of assets that you're especially looking into right now?

[Christoffer Abramson, executive]

Sure. Yes. As always, it's really aligning our own interest and strategic outlook on the market with those of our partners. What we see right now, both from ourselves and a lot of our partners is that across certain key European markets, there's a lot of distressed developers, particularly on the residential side where we think there could be a lot of opportunities to step in.

A lot of those would require a lot of capital, which means that we partner up with some of our established or hopefully new as well, capital partners. So we are actively looking in, let's call it, 3 or 4 geographical markets where we think -- if you think about rental market in sort of a free market dynamic undersupplied assets and developers with less financial strength.

Those are the 3 things that we're really focused on and that we're working with our local teams, too. And we look at these opportunities I would say, almost on a daily basis. The thing is there's no real rush. We don't think that the situation is going to get better in the next 2 months. But -- and you have to be prudent in your underwriting and pick the right timing and assets and partners of course. But we think there's a lot coming. There's a lot of attractive stuff on the market.

We also have a handful of interesting discussions, which we've already started a couple of mandates where we aggregate specifics, which I talked about earlier, industry-specific assets and portfolios that we build up together with partners across Europe, where our ability to transact and have asset management presence in 13 countries, is a real strength for a capital partner looking to for an operating partner. So those are some of the things we're working on. There's a lot more to talk about.

[Jesper Henrikson, analyst]

Yes. And I mean the 3 to 4 geographical markets that you're especially looking into sort of these assets, are they like on your -- where you're already at like a geographical...

[Christoffer Abramson, executive]

Yes. Yes. I think yes, it's really important that -- when you invest your own and other people's money, we have to play to our strength, taking in, looking at these developments or optimistic, that's -- I don't want to sound arrogant, but it's not for amateurs. That's where we rely on our strongest platforms who know this market inside and out.

If I think about the markets we are looking at, if you look at the U.K., that's probably where prices and market has moved quicker than elsewhere with well-known and well-discussed political issues and economic issues. If you look at Germany, I think on the residential side, there's been maybe a little too much and people have overextended.

I think in Poland, where we have a new very, very strong team. The interest rate in other countries have increased enough to make the swap cost into Poland much more attractive for foreign buyers than it was 6 months ago.

So all those things are things that we assess. And of course, we still think that from a value creation and value add and opportunistic segment, converting assets to more sustainability, net zero transition-type mandates is going to be absolutely critical with a lot of investor demand and that's what we're trying to position ourselves.

[Jesper Henrikson, analyst]

Yes. And about that kind of transition that you're making, I mean, which you also talked about on the last conference call. I mean, you may see the -- or at least you have intended to make a large divestments from, I think, European residential and Wohnen Europa expecting to close before the end of the year. So could you just talk to more about this divestment and also your strategy is?

[Christoffer Abramson, executive]

Yes, that is not closed. I don't want to talk about it too much, but it is -- it's a transaction of 34 assets and I think more -- well, I don't think, I know it's more than 4,000 residential units. From an external source, I think it's the second largest cross-border transaction in residential. So it's a big transaction.

And look, we are -- we want to recycle our investors' capital into even more forward-looking and even more sustainable assets. These assets that we're selling are great. But I think there are buyers who look at them slightly differently and value them even higher than we do. And we want to recycle the capital into slightly more forward-looking assets that -- that's how we do it. And I think from a repositioning perspective, if you look at where the capital is flowing in at the moment, it is in our Catella European Residential III has more commitments already.

We look at our Wohnen Europa as well, getting more capital. Our Energy-Positive towers fund, Elithis is getting more commitment. So it is a clear trend and pattern, and we think it's a good pattern. It's something that we should be focusing on. And on top of that, clearly, we have a big old portfolio of assets that need work and we are making some moves which we will talk about in the coming quarters as part -- as far as establishing operations and recruitment to support that transition, both for our own portfolio and hopefully, to support our partners in transitioning portfolios across Europe.

[Jesper Henrikson, analyst]

Good. And then I also want to just go into like even show outflows from pension funds and the like. Like do you see any risk or any tendency of these wanting to reduce their share of real estate due to like the uncertain macro item?

[Christoffer Abramson, executive]

Well, there's always in a risk. We don't see any trend, so 2 different answers, I guess. Reallocation in real estate assets is complex. Obviously, any reweight stocks, bonds and fixed assets, real assets, it's -- there are some -- there has to be changes in certain funds, but it's rather slow.

And after the 2008-'09 financial crisis, the rules of funds for real assets that are left liquid changed, which means that calling your money is a pretty complex and time-consuming process, which means that our assets are secured for quite some time.

What we see today is that people are hanging on and clearly believe in long term, and we continue to have great performance in our funds. So we have no materialized flows to speak of. And the new capital inflow is slightly slower and that is clear.

But it is strong into the right funds and mandates that we work on. We have, as I mentioned, really on the sustainable funds, and sort of the new and more forward-looking. But the sustainable funds and residential, pan-European Logistics focus, for example, on the commercial side, the inflows are still strong. We have new ventures here in the Nordics, which is really great.

We're getting actual for the first time since the launch, we have institutional money coming in, which we'll talk about in the next quarter, a lot more going into our Nordic funds. It's about having the right assets and the right funds. We still see inflow there.

It's a broad inflow into everything that's a bit slower. But I'd also say, if you look at our asset management operations, I think that's becoming more and more important. We've had a fantastic run on the fund side, and we continue to see strong inflow. But asset management, which is really -- now it's the time to shine.

We have great teams in our 13 markets. We're able to deliver on complex long-term value-add strategies, and those inflows are actually increasing because that's where money will, I think, will be made over the next few years as the market is now right for more creative strategies and more value add.

[Jesper Henrikson, analyst]

Yes. I mean [indiscernible] the likes of APAM and so on being more and more specialized in the trust assets.

[Christoffer Abramson, executive]

Exactly, exactly. And typically, it's had great inflow over the last 6 months, really great inflows.

[Jesper Henrikson, analyst]

All right. And then just also wondering if -- I mean you have -- some of your peers that are continuously reporting like the duration or lock-in times, if you will, of their AUM. Do you have any plans to do anything like that so that like investors can tell like how sticky the capital is at the moment?

[Christoffer Abramson, executive]

No, we don't. It's a short answer. But I think if you look at funds, it's a tricky thing to do because you can say, this is a 10-year fund. This is an evergreen fund. This is a 7-year mandate. Look, the key is to have the rule -- if you call on 12 months, most of the time, people can call with a 12-month notice, whether you say it's an evergreen fund or not, the key is to have great assets, great investor relationships and continue to perform. That's the safest bet. That's the safest way to keep the money in the funds. And I can just reiterate, we don't have outflows at the moment. They don't get called. The positions are strong.

And whatever our peers say that they're locked in, I mean, yes, they're locked in to a degree. And I think anyone who says that their money is secured for 15 years is they're not quite telemetry. But our money is secured because of our great relationship and a great performance. And then, of course, there is a call period of 12 months that gives us a good stability and outlook. But beyond that, it would be -- I don't think it would be prudent to promise more than that.

[Jesper Henrikson, analyst]

Sounds good. And then just one last about I mean you talked about the underlying macro environment creating opportunities for the likes of M&A. And regarding this, would this be like smaller bolt-on acquisitions in the market like the one you did in Poland? Or what kind of acquisitions are you thinking of?

[Christoffer Abramson, executive]

Well, we're thinking about a few things. But yes, so look, Catella does not have a history or ambition to buy a competitor of our same size at the moment, at least. We look in the right segments and in the right markets where we think we don't have the strength today or I think even more importantly, where we can bring a lot of value to a new park, where they might be in a pan-European presence, very much like our Polish acquisition or when we acquired APAM what we have done since is to get more institutional capital in and provide them with Principal Investment support to increase their mandate and increase their power.

So what we're looking for is partners today who are in maybe on segments that we think are really looking good going forward, but really where we can have synergistic strengths together, where they might be looking at needing co-investment capital to really expand their operations, get new mandates or where our real strength is in our pan-European presence and that's work, which is attractive to a lot of targets. But midsize bolt-on is probably a fair expectation.

[Operator]

Ladies and gentlemen, that was our final question. I would like to turn the conference back over to Christoffer Abramson for closing remarks.

[Christoffer Abramson, executive]

Okay. Well, we have no more closing remarks. I think it was a really interesting and strategic Q&A. We appreciate the questions. And we thank everyone for listening. And again, I hope if you want a replay, it's going to be available online shortly. So thank you, everyone, for listening, and have a wonderful day and a great weekend.