EQT AB

STO:EQT

Earnings Call Transcript 2021-Q1

[Olof Svensson, Head of Shareholder Relations]

Okay. Thank you. Good morning and welcome to EQT's Q1 announcement. Today, I will be joined by Christian, Caspar and Kim for a brief presentation. We will spend about 20 minutes presenting. Caspar and Kim and I will then host the Q&A, which Christian will not be joining today.As you all know, in line with EQT's long-term business model, our quarterly announcements only include key operating numbers, and we only publish full financial statements in our half year reports.As a reminder, in order to ask questions during Q&A, you need to be dialed in to the conference slide. And with that, I hand over to Christian. Next slide, please.

[Christian Sinding, CEO & Managing Partner]

[Audio Gap]quarter for EQT. And to mention a few highlights, we teamed up with Exeter, forming EQT Exeter, a global leader in value-add thematic real estate investments, and we continued our preparations for new upcoming initiatives, including EQT growth and long term. In short, delivering on our strategy and our focus on active ownership investment areas where we can really future-proof companies and make a positive impact. Next slide, please.So let's look at the quarter in a bit more detail. In addition to Exeter, which Caspar will cover later in the presentation, we set the target for EQT growth at EUR 2 billion. EQT growth is a key piece in the private capital puzzle, and we can now support companies from startup through maturity. The preparations for potential long-hold strategies continues and -- both for private capital and for infrastructure. And in fact, Exeter already has funds, which are longer term and is part of their offering to their customers. More to come on that later in 2021.Easing towards Asia, we announced our Japan presence in January, and we're currently sharpening the overall Asia Pacific strategy. More to come on that as well later in 2021. Fundraising is progressing well with EQT IX done now in April, and EQT Infrastructure V is expected to be materially concluded in H1 '21. It's also expected to reach its hard cap at EUR 15 billion.So turning to deal activity. Exit volumes were elevated during the quarter and investment activity continued at a really sound pace. Value creation continues to develop well, and in particular, EQT VII is now valued at a gross MOIC of 2.5x, and we also expect that fund now to perform above plan. More on deal activity and value creation from Olof later in the presentation.When it comes to people, in February, we announced partner promotions. We welcomed 12 exceptional individuals to the EQT partnership. This is a diverse group of individuals representing different parts of the organization as well as different geographies. And the number of partners who are now women comprises 10% of the partner group, up from 3% before. And so we're really making progress. We're also making progress at other levels of the firm with 40% of associates now being female. But of course, we still have a lot to do, both in our industry and in our firm, on broader diversity and inclusion.I'm also excited about our membership with FCLTGlobal. This is focusing capital on the long term, which we announced in March. This is a nonprofit organization with a mission to tackle short-termism within the financial markets and to promote sustainable long-term growth. And for us, it's important to take part in the global conversation about the power of investing with purpose and investing for the long term and creating true value.Teaming up with FCLTGlobal is a key part of our ongoing purpose journey that we've talked a lot about. And we continue to put our purpose into practice, and setting ESG-related targets is actually an essential part of that. In our annual report that we just published, you're going to find further details on our sustainability efforts. So let me highlight a few points.Last year, we set a diversity target to have women account for 65% of the investment advisory professionals hired, and a majority of the teams accomplished this. Also, the share of women among independent directors appointed by EQT rose last year to 21% from 16% in 2019. Looking forward, we're setting a goal of having women constitute 40% of the independent Board members that are appointed in all of our new control investments. But again, lots to do on diversity and inclusion.In terms of our environmental targets, all our companies across the portfolio are accelerating their transition into renewable energy. And furthermore, The ESG-linked credit facilities we introduced last year are great examples, both at the fund level and at the EQT level and actually in a number of new portfolio companies. This is part of how we inspire and incentivize performance in this important area.In 2021, we're also sharpening our ambition further in order to set greenhouse gas emission targets in line with the Science Based Targets initiative. And overall, part of our compensation is linked to meeting our sustainability goals as it was last year. Next slide, please.With Exeter, we took a major step forward on our growth ambition, both within real estate and our path to expand EQT's presence in North America. We're thrilled to welcome Ward Fitzgerald to the EQT Executive Committee and to have formally joined up with the full Exeter team to create EQT Exeter. With that, we have leading strategies across private equity, infrastructure and real estate and are becoming truly a global leader in all 3.As of Q1, Exeter has over $10 billion in AUM focused on thematic investments and have a really active value-add ownership approach that fits perfectly together with EQT. Next slide, please.We do get a lot of questions on fundraising cycles, so I'd like to share a few perspectives on that again. As we noted before, the average commitment period in EQT's flagship funds has been about 3 years. And volatile markets has taken longer, for example, take about 5 years during the global financial crisis. In favorable markets, some fund generations are on a slightly shorter cycle than 3 years as we've seen recently. Now EQT IX is 40% to 45% invested 9 months after being activated. And given the current market environment and the pipeline,, we see it is possible that EQT IX will be on a shorter cycle than 3 years.Having said that, you can't really extrapolate the recent investment pace. Competition for thematic assets is high. We only invest when we have a real conviction that the investment will meet our return targets. And of course, performance really remains at the core. So we only do deals when we believe that we can really create long-term value. EQT Infrastructure V has also had a relatively high deployment pace and is now 20% to 25% invested.Now in terms of our other initiatives, EQT Growth first close is expected later this year. But as a first-time fund, that will continue its fundraising into 2022. And as we continue to make progress, we're going to communicate more also on the long-hold strategies and later in H2 more on our Asia Pacific strategies.Towards the end of the year, we're going to start making preparations for EQT Ventures III. And in addition, and in parallel, fundraising in EQT Exeter is progressing according to plan, and Caspar will come back to this in a bit more detail.We do remain razor-focused on delivering performance in a responsible manner for our customers. That's really at the core of our model, and of course, on building and strengthening the firm together with our superb team.And with that, I hand over to Olof.

[Olof Svensson, Head of Shareholder Relations]

Thank you, Christian. If we could turn to the next slide, please. Valuations across our key funds continued to develop well during Q1. As mentioned by Christian, EQT VII gross MOIC increased from 2.3x at year-end to 2.5x following strong value creation and a series of announced exits. EQT VII is now considered to perform above plan. This means that we expect the firm to deliver a gross MOIC in excess of 2.5x.Infra III continues to develop above plan. All other key funds remain on plan. EQT IX is valued at 1.1x gross MOIC. That's down from 1.2x at year-end 2020. As expected, the firm valuation has come down slightly as we added new investments marked at 1x at entry.As you know, we have previously referred to less than a handful of our portfolio companies having been structurally impacted by the pandemic. During the quarter, we exited one of those companies. Next slide, please.Investment activity continued, with deals representing about EUR 2.8 billion announced during the quarter compared to announced investments of about EUR 5 billion in the fourth quarter. EQT IX is now 40% to 45% invested. EQT Infrastructure V is about 20% to 25% invested based on its expected size of EUR 15 billion. Investments announced in Q1 were all in line with EQT sector focus and thematic approach and included EQT IX's investment in Cerba HealthCare, the EQT Growth funds, investment in Epidemic Sound and the investment in CYE by Mid Market Europe.As market conditions remained robust during the quarter, we have continued to execute on the exit pipeline referred to in our year-end report. This resulted in announced exit volumes during the first quarter of EUR 3.9 billion, which compared to EUR 1.3 billion in Q4. If you look at exit activity on an LTM basis, volumes are broadly in line with last year's LTM rate. Exits announced in Q1 include IVC in EQT VII. Additionally, EQT VII sold Desotec, and the Mid Market U.S. fund realized holdings in Innovyze and Dorner. Looking ahead, we continue to expect a number of further exits this year, and it may include certain material exits as well.And with that, I'll hand over to Caspar.

[Caspar Callerstrom, Deputy CEO & COO]

Okay. Next slide, please. Thank you, Olof, and good morning, everyone. As you have seen, we closed the combination with Exeter in early April. And as Christian mentioned, Ward has now joined the EQT's Executive Committee and is heading up the real estate platform. The combined real estate platform will operate under the new EQT Exeter brand, which you can see at the top left of the slide.Exeter revenues were EUR 112 million last year and EBITDA was EUR 65 million, which was very much in line with our expectations as communicated. As of Q1, Exeter AUM was EUR 9 billion, and Exeter had about 230 FTEs. Exeter's contributions to EQT financials will be included as of closing, i.e., from the 1st of April, and will therefore have 3 months of contribution to our financials in the H1 report.In terms of future financial reports, EQT Exeter financials will be integrated based on EQT's current reporting structure. The Exeter-related disclosure, including AUM data, will be aggregated in our Real Assets segment. As previously communicated, Exeter has a number of ongoing fundraises, and the fundraisings are developing well in line with our plan, with $5 billion of AUM expected to be added in 2021. We expect EQT Exeter to maintain at least this fundraising pace in 2022.With that, I hand over to Kim.

[Kim Henriksson, Chief Financial Officer]

And the next slide, please. Thank you, Caspar, and good morning, everyone. Let's have a look at the development in assets under management. AUM increased by 12% during the quarter mainly driven by the fundraising of Infra V, with the fund having reached its target size at first close. We expect Infra V to be materially concluded during the first half of this year and for the fund to reach approximately EUR 15 billion in AUM. Fundraisings continue to develop well in line with plan, and we had EUR 6 billion of gross inflows from fundraisings primarily related to EQT IX and Infra V.Note that after the quarter, i.e., today, the final close for EQT IX was announced with EUR 15.6 billion in fee-generating AUM, and the figures on this slide only reflect the EUR 15.3 billion of closed out AUM as of 31st of March. And additional inflow will then be reflected in the Q2 AUM numbers.As a reminder, commitments which are closed out in 2021 will pay management fees from the time the fund was first activated, and the so-called catch-up fees will then be booked in 2021. As you know, the AUM base in older funds is reduced with the cost of investments as the funds exit their holdings. And please note that this is only reflected when the exits have closed, not when they are announced. And most of the exits that were announced here in Q1 are yet to close.Next slide, please. In line with what we stated and expected at year-end, a meaningful number of new colleagues recruited in the latter parts of 2020 joined EQT in Q1. The FTE+ count increased by 42% in Q1 from 710 to 752, and new employees were added across the organization primarily within client relations and other parts of EQT Central as well as in our new and upcoming strategies.When we think about the remainder of '21, we continue to expect a good increase in the number of employees. In addition to the approximately 100-person net additions we have had in previous years, we continue to expect to catch up from the hiring force, which was in place during parts of 2020. So far in Q1, the recruitment pace has developed well, and we have a good number of new colleagues expected to join us also during Q2. In addition, as Caspar mentioned, Exeter adds another 233 persons to our total FTE+ count, and we expect to grow also our EQT Exeter team over the coming years. Next slide, please.In terms of other updates, worth mentioning is that as we have now closed the Exeter transaction, we may start reviewing our long-term financing options for EQT alongside the revolving credit facility that we put in place already in Q4 last year.So to conclude, we continue to make progress on our strategic agenda, and we are now focused on making the most out of the combination with Exeter. Fundraising has progressed well, and preparations are ongoing for new initiatives. Market conditions have been strong with activity levels keeping a good pace, valuations across our key funds are developing well.Thank you for the time. And now we open up for questions. Operator, please.

[Operator]

[Operator Instructions] Our first question comes from Jakob Brink from Nordea.

[Jakob Brink, Senior Analyst & Sector Coordinator]

I have 3 questions, please. I'll take them one at a time. On Exeter, I appreciate your comments, but -- and the $5 billion fundraising this year, but would it be possible to maybe make some comments about the more long-term strategic plans for Exeter strategies, et cetera, within Exeter? And then also maybe the fee model, just so I'm clear, should we expect the same fee model as in EQT, i.e., that the old funds are stepping down, et cetera? That was my first question.

[Caspar Callerstrom, Deputy CEO & COO]

Yes. Maybe I can answer that, Jakob. I think -- so in terms of the long-term strategy, it's quite similar to the sort of long-term EQT strategy. And that means that I think in terms of products, they will continue with their products that they have, which is the industrial logistics where they are very strong and in office. And they might, over time, add another sort of strategy into that. And then they will continue to develop from a geographic point of view together with EQT. So I think there's nothing else -- there's no dramatic difference in overall strategy compared to EQT as a whole.In terms of fee model, it's slightly different way of working. But I think the way it works in terms of step-downs, et cetera, that's similar. But they are also -- they have fees on NAV and later on invested capital, but they also have other fees. So I think our general guideline where the total fee is generated are in the similar bracket as EQT as a whole. I think that's the sort of guideline we would like to stick to without going too deep into all the details of how it works because that becomes very nitty gritty. So I think you should think of it as mainly the rest of EQT in terms of NAV.

[Jakob Brink, Senior Analyst & Sector Coordinator]

Okay. And actually, one more question on fee structure. I think I read that the new growth fund of EQT has a somewhat different fee structure than the remaining part of EQT. Is that correct? And why did you choose this, I guess, lower fee model than the rest of EQT?

[Caspar Callerstrom, Deputy CEO & COO]

Yes. I can -- it's actually not growth. It's the long-term strategies that we are currently evaluating and -- which are going to charge fees on invested rather than on committed capital. And the main reason for that is basically because that's how the market looks like in general. But there is a natural reason for that. And that is that in order for that fund not to compete with the main fund, they will -- the main funds will always have to say no before the long-hold strategies can actually invest. And then it becomes natural that if someone is always ahead of you in line, then you can't really charge on committed but only on the actual invested money. So that's the sort of natural reason for why that is, and that's how the market looks like very much.

[Jakob Brink, Senior Analyst & Sector Coordinator]

Last question from my side. You already touched upon the fundraising cycles. So obviously, the market is pretty hot right now with exits and new investments, not only for you but for everyone in the market, I guess. And as you said, as Christian said, you're 40% to 45% invested in EQT IX. I remember we had the same discussion, I think, November '19, where we talked about the opening of fundraising of EQT IX. And back then, I think the comments was that you needed to start preparing probably slightly shortly after Christmas 2020 in order to be ready whenever you reach the 80% to 85%. Why would that have changed now? I mean if -- I guess you can't know if the pace continue at the same -- as we have seen in the past, 6, 7, 8 months. And if it does, then I guess you would need to be ready with the new fund in early next year. Or am I missing something?

[Caspar Callerstrom, Deputy CEO & COO]

I think -- I mean I think it's always dangerous to extrapolate the current pace to our future. So I will be careful in doing that. But I would still -- I agree. I mean we're 40% to 45% invested. And even with the normal pacing, I think it's not unlikely that we will initiate fundraising for EQT X during 2022. I think that's fair to say. But I also think it's good for you to know and understand that the investors or the clients, they really would like to see the development of the predecessor fund, in this case, EQT IX, and that is going according to plan before committing a lot of money to a new funds. So there is a need to not rush this too much because then I think it will be more difficult to convince clients that everything is exactly what it should be.

[Jakob Brink, Senior Analyst & Sector Coordinator]

But I guess, last time, in some of your predecessor funds also within Infra, the deployment time was only 2 years. So if that would be the case, then it would be maybe even slightly faster this time. It would be sort of Q1, Q2 2022 that it would reach 80%, 85%. And then I guess you would need to start preparing fund raising just around summer this year or...

[Caspar Callerstrom, Deputy CEO & COO]

I don't expect that. I mean we, today, announced the final close of that fund. So we will not prepare -- start to preparing fundraising for the next fund already on this side of the year-end. As I said, I think it's not unlikely that we will initiate fundraising for EQT X during next year.

[Operator]

Our next question comes from Bruce Hamilton from Morgan Stanley.

[Bruce Allan Hamilton, Equity Analyst]

A couple of questions from me. Firstly, just in terms of kind of timing, the timing on growth capital, I think Christian last time said activating some time this year was kind of likely in terms of when we might start to see fees. So I just wanted to check on that. And also if you have any further sort of color on possible size and timing of the long-hold strategy.Secondly, I guess, just trying to calibrate sort of carry fees. I think you've made sort of EUR 3.9 billion of exits in Q4, and I think the number was EUR 1.3 billion in -- sorry, EUR 2.9 billion in Q1 versus EUR 1.3 billion in Q4. So I mean, should we be looking at the second half sort of carry number and assuming at the moment that it should be -- we should be well up on that in the first half? Or any way to think about that?And then finally, just in terms of the sort of step-down from exits that hasn't come out of AUM yet, I think that's based on the cost of the investment. So have you given us that number? I guess it's going to be quite a bit less than the EUR 3.9 billion, just to double check.

[Kim Henriksson, Chief Financial Officer]

I'll take the timing...

[Caspar Callerstrom, Deputy CEO & COO]

Yes. I can take the sort of growth question and the long-hold. I think -- I mean what we've said is that we have launched the fundraising for growth. And as you know, we have -- we've started to actually invest in a fund that formally doesn't exist, so we invest from the EQT balance sheet currently. So I would expect us to get that fund up and running. I wouldn't want to name the exact timing because we don't really know that, but it will be during this year, I would say, yes.When it comes to long-hold strategies, we're still in the early stages of that investigation. So we don't know neither the exact timing and size of it yet. But hopefully, we will know a little bit more in a few months from now.

[Kim Henriksson, Chief Financial Officer]

And on carry recognition, routes and others, you know the way we think about carry that it's an integral part of the revenue model and that we're really looking at it over the long term, over the term of the fund. So if a fund is expected to have 2.5x MOIC at completion, it's reasonably easy to calculate what the carry will be over the life of the fund. It is challenging to say exactly what accounting period that carry will hit. And we will not be providing detailed guidance on that. So I cannot say much else on that.You're right. It's -- on the other question, you're right. It's based on the cost of the investments rather than the exit -- rather than the sale amount at the time.

[Bruce Allan Hamilton, Equity Analyst]

And have you given us that number? Have you given us that number just to help us model?

[Kim Henriksson, Chief Financial Officer]

I don't have it at the top of my head at least.

[Olof Svensson, Head of Shareholder Relations]

No. Keep in mind that it's only exits that have closed. So out of the EUR 3.9 billion, when they close during the year, we will then deduct that number at cost. So that would be probably reported in the following quarters as deals close.

[Operator]

Our next question comes from Arnaud Giblat from Exane BNP Paribas.

[Arnaud Maurice Andre Giblat, MD & Research Analyst]

I've got 3 questions, please. Firstly, can I ask about for full-time employees, they grew quarter-by-quarter -- quarter-on-quarter, sorry. Could you give us some color where the additions were made?And secondly, I mean, obviously, the investment pipeline matters a lot. Could you give us a bit more color as to how you're seeing things? Are you looking at a lot of deals? What are the investment prospects are you seeing?And finally, you talked about growth capital saying you're already -- you've already made investments from balance sheet to accelerate the growth strategy. Could you maybe quantify the amount of balance sheet that is invested in growth?

[Kim Henriksson, Chief Financial Officer]

I'll take the FTE and balance sheet question. I think the first question was about the employees. Yes, it's a diverse set of new colleagues that we have recruited. But if you single out any specific areas, it would be within the capital raising side. There's some more on the fund operations side. And then it is in the new initiatives that we have, where we have done both internal recruiting and needed to backfill and then external recruits saying growth and in preparation for the long-hold funds. The investments we've made so far from the balance sheet and in the growth strategy is in the region of EUR 200 million.

[Caspar Callerstrom, Deputy CEO & COO]

Yes. When it comes to, in general terms, deal flow, I think it's fair to say that deal flow is good across the board. It's also fair to say that, that is normal in a strong market like this. So typically, good companies are for sale in good times. Rarely that good companies are for sale in bad times. So you will have a good deal flow in good times. But of course, it's also quite competitive up there with high prices, and we're very focused on sticking to our return requirements and not get carried away. So there is this balancing act of having very good and strong deal flow, but at the same time, not to get carried away. And that's the balancing act that we're trying to keep.

[Arnaud Maurice Andre Giblat, MD & Research Analyst]

If I could just follow up on that. In that healthy deal flow you're talking about, do you see prospects to generate the returns you're after?

[Caspar Callerstrom, Deputy CEO & COO]

Yes. I mean we are still -- the deals that we are doing, we are doing -- we're underwriting the same returns that we have in the past few years. So we have not compromised on our return requirements at all. And of course, if you take a longer perspective, if you compare now to 10 years ago, we still have the same return requirement, actually, but I think the difference is maybe that today, you will really have to -- you have to work a little bit harder for your money, and you have to really have a very good sense of what you're going to -- how you're going to develop the company that you're buying in order to meet the same returns.

[Operator]

Our next question comes from Ermin Keric from Carnegie.

[Ermin Keric, Research Analyst]

The first one was you're right that 70% of commitments in EQT IX were from investors or LPs that are also on the predecessor fund. Could you just say if that's by volume or number? And could that be an issue for EQT X in terms of doing it too frequent with new fund raises that -- is that capital constraint? Or is it more just that LPs want to see some track record to be willing to commit capital that they actually have available?

[Olof Svensson, Head of Shareholder Relations]

You take the second one?

[Caspar Callerstrom, Deputy CEO & COO]

Yes. I can take -- the second question is, I would say, in general terms, the vast majority of the investors, the customers that we have, the -- it's not a constraint with one single GP like ourselves. So basically, it's not because they're going to get capital constrained that they can -- it's more of a -- you want to -- they want to make sure that their money has been invested along the lines that we have said that we're going to do and that the portfolios are looking good and healthy. And it's always a little bit more tricky to make that judgment when you have a very new and fresh portfolio. So typically, you would want to see some maturity in that portfolio to make that judgment. So it's more of a feeling rather than a hard restriction.And in terms of the volume versus number, actually, I don't have that figure. But I mean, I think if I make a qualified guess is that even if it is one or the other, they are typically quite closely connected. So I wouldn't say that it's a big difference either/or.

[Kim Henriksson, Chief Financial Officer]

It's volume.

[Ermin Keric, Research Analyst]

Okay. That's very clear. Then in terms of the long-hold strategy, I'm sorry if I haven't understood it fully, but how will it actually work? Will that be a fund which you raise sort of upfront and then you draw capital? Or is it more like a mandate we can just reinvest the money? Or how will that actually work?

[Caspar Callerstrom, Deputy CEO & COO]

I mean it's the same structure in terms of fund as in an equity fund. So you make a commitment to fund. And the way it works, just to be very clear, is that it is a commitment. We don't draw down any money when we raise any funds until we actually have made an investment. So it's the same type of -- it's a pool of commitments. That's basically what a fund is. And as you then start to invest that, that's when you draw the capital from the investors in that fund. And it's the same with any long-hold strategy. So it's just that the fee calculation will be based on a different way.

[Ermin Keric, Research Analyst]

Okay. Then the last question was just on Infra III. If we look at the MOIC, that's above the typical threshold you mentioned for starting carrier recognition. Should we think about that Infra III will basically start contributing with carry as soon as it's done 1 to 2 exits if it's still on the same MOIC as it is currently?

[Kim Henriksson, Chief Financial Officer]

Again, I wouldn't like to give predictions about specific funds under carry recognition, but our rule of thumb still holds, yes.

[Operator]

Our next question comes from Magnus Andersson from ABG.

[Magnus Andersson, Research Analyst]

Yes. Just -- first of all, one question just on your -- on EQT IX. I saw that you hold the fund at close at EUR 15.6 billion while your hard cap was EUR 15 billion. Just so that I understand, I thought the hard cap was a hard cap, but can -- this can actually happen that you close it slightly higher if the demand is higher? That's the question. Can you end up above your hard caps generally if the demand is strong in the market?

[Kim Henriksson, Chief Financial Officer]

Yes. It doesn't have to do with that really. There are some technical reasons around why it's above the EUR 15 billion. Certain parts of the capital raise is not counted towards the hard cap.

[Magnus Andersson, Research Analyst]

Okay. Okay. Secondly, just on performance, that's obviously been very strong. I was just wondering, is it possible to shed some light about how much is that you've done exits at good valuations and how much is kind of unrealized valuation because multiples have generally got up in the market?

[Kim Henriksson, Chief Financial Officer]

No.

[Caspar Callerstrom, Deputy CEO & COO]

No. Exactly. But I mean, in general, what you can say is that the way the model works is realizations are typically more important than revaluations. So...

[Magnus Andersson, Research Analyst]

So what we are seeing now is primarily a result of your -- the strong exit activity during the quarter.

[Kim Henriksson, Chief Financial Officer]

Yes. It's both. I think it's both. They are part of the same -- I mean if you IPO a company, the rest of the company that we still hold will also get marked up. So...

[Magnus Andersson, Research Analyst]

And finally, just on the operational platform. We got the numbers now for Exeter, updated numbers. Is it still around 150 employees you expect to add in the old EQT, excluding Exeter, during the year, roughly?

[Kim Henriksson, Chief Financial Officer]

As a round number, that's a good hypothesis, yes.

[Magnus Andersson, Research Analyst]

Yes. And related to employees, I saw that -- I mean, what's the most common reason for you to waive some lockups? I thought -- saw you have some comments about that, that you had granted some waivers.

[Olof Svensson, Head of Shareholder Relations]

Yes. That's correct. You saw the lockup waivers that were granted were less than 0.1% of the share capital. So it's very small and it's a bit similar to what we did in Q3 when there are very specific circumstances, and we think it's the right thing to do when we've granted these exceptional waivers. But keep in mind, this is -- it's nothing that would generate any net proceeds to any active partner. And then we won't comment on the specific individuals, but that's the essence.

[Operator]

Our next question comes from Gurjit Kambo from JPMorgan.

[Gurjit Singh Kambo, Head of Diversified Financials Research]

Just a couple of questions from me. Firstly, in terms of the realization environment, could you just sort of comment where you're seeing most of those realizations coming from? Is it sort of IPOs? Is it sort of selling to other firms? Is it SPACs, for example? So just a bit on the realization side.And then can you just clarify, did you say for Exeter that we should think about asset raising -- I know it's EUR 5 billion for this year, but did you also say that for 2022, it should also be EUR 5 billion?And then third one is just on the outlook for asset raising this year. We have the rest of Infrastructure V coming. We have the growth fund, I think, towards the end of the year, and then you indicated Ventures III. Is there any other kind of slightly larger funds we should be thinking about for '21 asset raising?

[Caspar Callerstrom, Deputy CEO & COO]

I'm not sure if I got all the questions there. But I can start with your question regarding Exeter. And what I said in the presentation, I think just to correct, it was USD 5 billion, not EUR, that we said was going to be added during this year. And then I said in the presentation that we expect to continue with that pace into next year at least, and that's sort of to give you a feeling for that. That's a pace that we think will continue.

[Kim Henriksson, Chief Financial Officer]

And realization environment, you want to comment?

[Caspar Callerstrom, Deputy CEO & COO]

Yes, realization environment. I think if you look at it, I think it's actually -- right now, there's an environment where all the possible tracks are open, so you can IPO. You can, I think, both trade buyers as well as financial-oriented buyers are very much in the market. So I think it's -- and that's not always the case. So I think the sort of exit environment right now is very, very strong. But a little bit like I alluded to, it also means that the competition for new [ business ] is very strong. So that's the market that we're in. But I think we will see all routes during this year in terms of exit Exeter from the portfolio given that it sustains.

[Kim Henriksson, Chief Financial Officer]

And in terms of capital raisings, the list you mentioned, there's -- in addition, we have said that we are working on potential long-hold funds, but they will have a different then structure in terms of how the AUM and thus the revenue comes into play, which it will sort of go up over time as we invest from that fund. So in the beginning, it will not be a meaningful number, and then over time, it could grow to a meaningful number.

[Operator]

Our next question comes from [ Mats Libitda ] from SEB.

[Unknown Analyst]

Yes. I think we've been through most here. But if I should have a question on the thematic long-hold strategy, how I should just think about your other funds in relation to that, I mean, could you move assets from, let's say, the previous EQT funds into the thematic in order to speed up exits? I mean if you don't find the perfect exit strategy but you still like the company, could you then just move it into there and, therefore, I mean, we will have a shorter horizon of the other funds? Or am I completely wrong in thinking that way?

[Caspar Callerstrom, Deputy CEO & COO]

No. I think -- I mean, could there be deals that goes from an existing fund into a long-hold strategy? The answer to that is yes. But I'd say I don't think -- I mean, obviously, there will be different investors in those funds, so we can't do any favors in either direction. And of course, when we do internal transactions like that, it's, of course, very high scrutiny on that. Everything is arm's length terms. And typically, we do that in competition with the rest of the market in this like that, and typically, even also with third-party sort of verification when it comes to valuation. So could we do those kind of transactions? Yes. But will it affect the holding period for the other funds? I would say no. I would say the only timing that we would do such transaction is when that asset is going to be sold anyway. And whether the long-hold strategy will pick it up or someone else, we will not know at that point in time.

[Operator]

[Operator Instructions] Our next question comes from Jens Ehrenberg from Citi.

[Jens Ehrenberg, Assistant VP & Analyst]

Just a few left from my side. The first one, just on the exit activity. So clearly, it looks like you've managed to do quite a bit in the first quarter. I'm just curious how you see the environment and your exit activity there. Is this partly driven from sort of stuff that was -- that hasn't happened last year? Or is this really sort of the normalized environment that you now see? Yes. So how much is left over from last year that was delayed and how much is really the sort of normalized environment?The second question was just on the flagship funds. So obviously, EQT IX and Infrastructure side, both very large by now at around the EUR 15 billion mark. Just how do you think about that going forward? And I'm not looking for like specific guidance on the next funds, but more generally, do you see scope for them to increase even further? Or do you think that you've probably reached sort of a plateau in terms of the size there?And then the last question, just how -- obviously, after Exeter now, how do you think about M&A going forward? Would -- could you potentially still do something if something opportunity comes along within the next 12 months or so? Or would you rule that out given that you're probably focusing on integrating Exeter at this stage?

[Kim Henriksson, Chief Financial Officer]

Do you want to take the first one?

[Caspar Callerstrom, Deputy CEO & COO]

Yes, I can take the first one in terms of sort of the -- is there a spillover. And I would say -- I mean it's difficult to say yes or no. But I would argue that in the second half of last year, you saw that spillover with very high deal activity in general terms. I would say, today, I don't think it's really spillovers from last year. I would say it's more of the normal type of deal flow in this environment that we are in right now.

[Kim Henriksson, Chief Financial Officer]

Yes. And in terms of M&A, I mean, we sold Credit last year. We did the Exeter transaction early parts of this year, and we are very focused on the collaboration with them and ensuring that becomes a success. I wouldn't rule out any further M&A activity. We are constantly looking for ways of accelerating our growth, be it geographically or in certain product niches, but the focus is on other types of activities right now than M&A.And sorry, on scope to grow for the flagship funds, yes, there is still scope to grow. As you pointed out, even in your question, we don't want to give any numbers at this point and it's far too early. But we certainly do think that there is further scope to grow on the flagship fund side.

[Operator]

Our next question comes from Hubert Lam from Bank of America.

[Hubert Lam, Vice President]

I just got a couple of questions. Firstly, can you give us your thoughts on the impact of rising rates on both client and investment activity? Has it changed anything yet? Or at what point do you think it will start to impact? That's the first question.A second question is can you give us your sensitivity on higher U.S. tax rate, particularly after the Exeter acquisition? For example, what would be the impact on your tax rate if the corporate rate in the U.S. rises to 28%.

[Kim Henriksson, Chief Financial Officer]

Do you want to take the first one?

[Caspar Callerstrom, Deputy CEO & COO]

Yes. I think on long-term interest rates, I don't think we've seen any impact of that yet. If I should speculate, because it's what it is, it's speculation, I would say that once you get to sort of maybe around 3%, 4%, then maybe some of the investors will actually start to put a little bit more money back into bonds rather than to the sort of lower-yielding product. I think if we were still in Credit, we would probably see some consequences there, but we're not. So I don't think we will. So I would argue that now if you look at our product portfolio, it's a long way to go before we get impacted on higher rates in terms of investor appetite.

[Olof Svensson, Head of Shareholder Relations]

I guess the only thing to add is when you look at the exit activity, I mean, the higher rates could, in the short term, impact sentiment in the capital markets and potentially, therefore, ability to do IPOs or sell-downs as exit mechanism. But we will follow the market sentiment and see how things develop, but that would be the only additional point I'd make to what Caspar said.

[Kim Henriksson, Chief Financial Officer]

And on the U.S. tax rate, we have modeled potential changes on that. It is not -- from an overall EQT AB Group perspective, it does not really move the needle. It may increase our tax -- group tax rate with some percentage points or so but not more than that.

[Operator]

Our next question comes from Ermin Keric from Carnegie.

[Ermin Keric, Research Analyst]

Sorry, just one quick follow-up. On Exeter, I was just wondering, when you're saying around the same pace next year in fundraising, if we look to their flagship funds, it looks like they raised new flagship funds both in the U.S. and currently in Europe. So what's going to be the driver for that next step-up next year? Is there new strategies being launched? Or is it something else?

[Caspar Callerstrom, Deputy CEO & COO]

No, I think it will be within existing strategies. But they have -- I mean Exeter has a -- if you compare it to EQT, they have more -- they have a broad product portfolio given their AUM, so to speak. So there will be more in continuous fundraising rather than sort of a little bit chunky. So I would expect -- when I say continue with that pace, it will still be within the existing product floor, so to speak.

[Operator]

There appears to be no further questions registered. So I'll now hand over back to speakers.

[Olof Svensson, Head of Shareholder Relations]

Okay. Thank you very much. And just to confirm, one of the earlier questions on -- it's indeed by volume, the 70% of the commitments in EQT IX. And I think on a general note there, it's a large number of new investors that have joined us. It's after all a larger fund, and we have several new sizable commitments from new investors that we're very excited about for the last fundraising there.So with that, I think we wrap up, and thank you all very much for joining today and for excellent questions as always.

[Kim Henriksson, Chief Financial Officer]

Thank you so much.

[Caspar Callerstrom, Deputy CEO & COO]

Thank you.