EQT AB

STO:EQT

Earnings Call Transcript 2023-Q1

[Olof Svensson, Head of Shareholder Relations]

Good morning, everyone, and welcome to EQT's Quarterly Announcement. Today, we are joining you from EQT's London office. Together with Christian, Kim and Gustav, we will reflect on the first quarter for about half-an-hour before opening up for Q&A. As always, if you've registered ahead of the call, you should have received an email with your personal PIN code to participate in the Q&A.

And with that, I'll hand over to Christian and ask for the next slide, please.

[Christian Sinding, CEO]

Thank you, Olof, and good morning everyone. We just finished our Global Partner Summit with 125 partners from around the world and we're excited about the future of our platform. In the first quarter, we had a pickup in investment activity with more than 10 new investments announced. Deal flow remains strong across the platform and we're seeing buyers and sellers getting closer to each other, even though it is still an uncertain market out there and exits do remain muted. The fundraising environment continues to be challenging.

Flagship fund raisings are taking longer to raise. And for the smaller and more recently launched strategies, it's also more work. Importantly, EQT X is expected to be materially completed during the summer and Infrastructure VI is expected to have a first close during Q2, with the majority of the funds to be raised this year. All our key funds continue to perform on or above plan with valuations flat or slightly up in Q1.We continue to prepare for launching semi-liquid products which will cater to private wealth investors and the main BPEA integration is complete and it has been quicker and better-than-expected. The investment teams have aligned processes working now together on a global basis and we're already driving best practices and investing value creation and exits together, as well as actually creating true global sector and sub-sector teams.The number of employees remained largely flat in the quarter.

And while we have slowed down the hiring pace, we see many interesting growth opportunities ahead and we'll continue to hire selectively. Markets are volatile and the economy is facing some headwinds. But in light of our long-term investment strategies, we view these challenges as being more temporary. And we continue to manage the equity for future growth based on a laser-focus on delivering performance for our clients. The market for actively managed alternative AUM is expected to grow to EUR15 trillion by 2030 and EUR30 trillion by 2040, driven primarily by private markets delivering higher returns compared to public markets across relevant time periods.

As such, private market allocations are critical for our clients to meet their return targets and underpinning long-term trend of clients gradually increasing allocations to private markets, in particular, within private wealth and sovereign wealth funds.Next slide please. As private markets grow, there are five broader trends that we expect to continue to shape our industry; first, companies are staying private for longer while the investment universe in public markets is shrinking. According to analysis in the US, there are more than 10,000 PE-backed companies while there are fewer than 5,000 listed companies. Over the past two decades, the median age of a company going public has increased with more than three years and the number of IPOs has decreased with more than 60%, thus a large part of value-creation takes place in a private setting and we have the ability to support companies all the way from ventures to mature companies. Second; we have a governance model and the capital required to catalyze change.

We take swift action, yet have the ability to take a long-term view in our investment decisions. We also see a trend where clients want to remain invested in certain assets for longer rather than having to reallocate capital. We therefore have an opportunity to create products to remain invested beyond a typical fund life. Today, we do this and Exeter for example where clients acquire portfolios of stabilized assets from us and we continue to manage those assets. We also see a preference to concentrate relationships with fewer managers.

In this context, we expect that larger managers with an ability to offer different products to clients will continue to gain share. And in fact Bain estimates that mega funds, those that are greater than $5 billion, their share of total global buyout capital raise in 2022 was 57%, up from 43% for example, in 2021. At the same time, individual investors are looking to increase allocations to private markets from a low-base.Next slide please. We see four principal drivers for long-term growth of our firm. First, we will continue to scale our flagship funds with larger funds and we increased the number of investments somewhat in those, but we're also able to do larger deals and larger underwritings.

Today, we have a global infra flagship fund-raising of EUR20 billion and our buyout fund in Europe and the US is also raising EUR20 billion, whereas our private-equity fund in Asia currently sized at $11 billion. Looking across the world of closed-end funds, the largest single fund in the world is EUR30 billion. Thus, we have several vectors in which we can grow our flagships overtime. Second; we plan to scale our recent new initiatives such as equity growth and our longer hold strategies such as interactive core. This will be done over fund generations and likely also to involve more open-ended structures over-time.

We'll also extend funds with a European focus today to cover North America and/or Asia. For example, we recently launched the mid market growth strategy in Asia and that's going well. In EQT Exeter, we see potential to grow across regions from what today is mainly a North American and to some extent, a European business. Third, we see significant potential in providing access to our funds for private wealth clients. You will get a lot more from that -- on that from Gustav in a minute.

Fourth, we plan to launch selective new initiatives. These could be thematic or geographically focused funds.Next slide, please. So EQT does things differently. And this is why I'm confident that we will continue to outperform also during these more challenging times. It's really about delivering true value-creation in our investments for our clients by being active owners.

For example, we're creating our next level of value-creation playbook now per sub sector across the world. We're continuously refining our thematic investment approach and we're developing our world-class network of industrial advisors and board to support our companies. We aim to make our company's abilities more resilient for the long-term through our integrated approach to sustainability and digitalization and now generational AI will help propel our [indiscernible] AI forward. We are local with locals. In-country is now representing 80% of global GDP.

And having these local teams means that we can build long-term relationships with potential investments and truly understand the local operating environment to drive better returns. And this of course is quite different than flying in teams from a central location somewhere else.Next slide please. During the quarter, fee paying AUM increased to EUR119 billion and our total AUM to EUR216 billion. Some reflections; first, our AUM is quite diversified across strategies and across geographies, also across clients with no client constituting more than 5% of total committed capital and in terms of bank and other financing relationships in the portfolio companies and real estate. Each fund is also diversified in terms of its number of investments and sectors and we maintain a quite strict thematic focus on companies and assets, which are supported by long-term secular trends rather than the economic cycle.

With the combination with BPEA, we can identify trends and source the best investments on a global basis. Take India for example. This is our largest market in our Asian business and it's the fastest-growing major economy in the world. It's supported by favorable governmental policies and a young digitalized population. And here we see very interesting growth opportunities in sectors that are at the core of EQT's long-term strategy like tech services.2023 is a year of execution.

First and foremost, this means driving continued performance for our clients. The integration with BPEA and other combinations and acquisitions have progressed well and are substantially complete. On the fundraising side, we're making good progress, but it's taking longer and it requires a lot more work. We continue to future-proof EQT for long-term growth. And as part of that, during Q1, preparations for the launch of semi-liquid structures intensified, which we're quite excited about. And with that. I hand over to Gustav. Next slide, please.

[Gustav Segerberg, Head of Business Development]

Thank you, Christian, and good morning everyone. As we talked about in the last update, we continue to see very interesting opportunities in the private wealth space. This segment has historically been facing difficulties investing into our industry due to the large required ticket sizes, multiple drawdowns and long lock-up periods. However, this is changing and we expect the allocations to increase in the coming years. Today, individual investors average allocation to private markets stand at around 2% and to active managed strategies where we're focused it's only 1%.

In comparison, institutional investors average allocation are around 8%. The expectation is that individual investors allocation to active managed strategies will go from $1 trillion today to $4 trillion by 2030. Therefore, we are very excited that we expect to launch our first semi-liquid strategy during the coming months where individual investors will be able to get exposure to our funds in private capital and infrastructure. More to come on this in H1 update. Next slide, please. So continuing to the fund-raising update.

We are, as we've said previously and as Chris said, in a more challenging fundraising environment, driven mainly by the lower liquidity among our clients. Despite that, during the quarter, we have raised more than EUR5 billion across the platform. In EQT X, we have now closed out more than EUR17 billion and as Christian said, we continue to expect the fund raise to be materially completed during the summer. In Infra VI, we had closed out around EUR6 billion as for the end of Q1 and in the first part of April, we have received commitments of close to another EUR1 billion. We're yet to have the first close in Infra VI and expect to raise the majority of the fund in 2023.Finally, for EQT Exeter Industrial Value VI, we are in the last part of the fund raise.

We will significantly exceed the $4 billion target being at $4.8 billion by the end of Q1, which is also where we expect the fund to end up around. As a benchmark, Fund V was around $2 billion. Next slide please. And with that, I'll hand over to Olof.

[Olof Svensson, Head of Shareholder Relations]

Thank you, Gustav. In Q1, we saw a slight pickup in investment activity, as we announced more than 10 deals or the equivalent of EUR5 billion; this compares to just over EUR3 billion in the fourth quarter of last year. We are seeing buyer and sellers expectations gradually converging and the financing is available for the deals that we are pursuing. In Infra VI, we announced two deals; SK Shieldus and Lazer Spot, EQT X completed the acquisition of va-Q-tec, an add-on acquisition for Envirotainer and EQT Active Core Infrastructure made both its first-end second deal in the quarter. We had two interesting investments in EQT Growth and on the exit side, activity remained muted during the first quarter, but there were some deals including sell-downs that were done by BPEA VII and we also had a sale of Bloom from Infrastructure Fund II and III. In real estate, activity remains muted and we see a continued slowdown in leasing and construction development, given the current macro environment.

We focus on leasing vacant space and we will be looking to deploy capital selectively in repriced market at attractive yields. We have significant dry powder and we are continuously evaluating new investment opportunities. Despite the volatility, our intention is to keep investing at a measured pace. Our objective is not to be market timers, yet many of our best deals were done in volatile times, which proves the value of investing across cycles. We continue to see debt financing being available for the deals we are pursuing. The all-in cost has doubled since rates started to rise and we have always maintained a conservative approach to leverage.

The higher-cost of financing, may result in somewhat lower leverage target yet for new deals. And furthermore the sources of financing have evolved from having used banks us inter-mediators to us going directly to lenders, including commercial banks as well as private credit providers. Throughout the bank turmoil in late Q1, our debt providers continue to signal appetite to finance our deals and being long-term relationship driven targeting conservative financing structures and importantly being invested in thematic sectors which are less cyclical, means we are in relatively strong position to finance our new investments.

Next slide, please. During Q1, Infra VI was the main driver of the increase in fee-paying AUM with approximately EUR6 billion of closed-out commitments as of March 31 And the continued fundraising for EQT X, which was up more than $17 billion by quarter-end contributed to our AUM development as well. EQT Active Core Infrastructure is generating management fees based on invested capital.

And as I mentioned, we have made two investments. Exeter also has some inflows, largely from EQT Exeter US Industrial Value VI and however, this was largely offset by FX effects and some small step-downs. Gross inflows over the last 12 months. As you know, includes the AUM from BPEA. And with that, I'll hand over to Kim. Next slide please.

[Kim Henriksson, CFO]

Thank you, Olof, and good morning everyone. Fund valuations remain flat or slightly up during the quarter, with small increases in most of the key funds despite volatility across markets. Strength could be seen in several infra sectors such as transport and logistics, energy and environmental while private-equity sectors that showed strength were services, health care, consumer goods and technology. Operating performance remains healthy across the portfolio despite inflationary headwinds and rising interest rates. Our portfolio companies are well-prepared to handle challenges. The infra portfolio is broadly in-line with their budgets with some over-performance by the energy and environmental companies.

Within private capital, we see health care portfolio companies generally outperforming versus budget, which is a sign of the resilience in the sector and in our business. In addition, industrial technology companies have been experiencing strong growth and so have our technology companies in general. Next page please. Our conservative hiring pace during the last few quarters shows up as a largely flat headcount for the quarter, with only a few net additions and total FTE+ just shy of 1,800 persons. Hiring in general continues to be very selective. But as previously discussed, we will be strengthening our strategic growth areas such as private wealth, North America and APAC.

And as a result, headcount will grow this year and the flat development in Q1 should not be extrapolated to the full year. A core element of EQT's growth journey has been our ability to win, retain and develop the best talent globally. This will always be critical for our model. Next slide, please. We have repeatedly said that our business model is long-term. Being long-term is especially important in times of short-term volatility and perceived risks in the market.

Our management fees are contractually recurring on committed or invested capital and more than 50% of our AUM was raised in the last three years. Our funds generate fees for 10 years or more. So we know we will have meaningful revenue streams in the years to come. Exit markets may be volatile and uncertain, but our fund performance continues to be solid with long-term carry potential. If our key funds are all on plan EQT AB is entitled to more than EUR8 billion of carry and all of our key funds have generated carry historically.

And all of our current funds continued to develop, own or above plan. Our portfolio is young and thematic averaging about three years. We're not in any hurry to realize assets. This means carry maybe booked later, but our objective is always to maximize returns for our clients over the lifetime of the funds. Our approach to financing is structured and conservative. Some hedges are being renewed in the portfolio companies and thus higher interest charges will materialize, but refinancing risks are limited with 97% of the portfolio company debt maturing in 2026 or later. With that. I hand back over to Chris for some concluding remarks.

[Christian Sinding, CEO]

Thank you, Kim. To summarize, EQT is truly diversified across strategies, geographies, clients and counterparties. We invest in market leading companies with thematic tailwinds. We continue to execute on semi-liquid structures allowing private wealth segment to access our investment strategies. We saw a deal activity pick-up somewhat during the quarter, but there are uncertainties in the market, which means our investment pace may be measured in the near-term.

There our deal flow is strong and we're active. Looking beyond the current challenges, we operate in a long-term growth market with significant potential for future growth. Our development will always depend on our ability to generate returns for our clients and that is why we remain intensely focused on performance. And with that, we'll open-up for the Q&A. Thank you. Operator, please, activate.

[Operator]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] We will now take the first question. One moment please. It comes from the line of Ermin Keric from Carnegie.

[Ermin Keric, Carnegie]

So, first-off, maybe about leverage and how you see that developing in new deals. You mentioned a little bit that you might be using a little bit less. Could you quantify there anything and also do you expect that to have any impact on the net IRRs you can deliver to your investors.

[Christian Sinding, CEO]

If you look at global financing markets, they are let's say partly open and a little bit better than they probably were a quarter or so ago. So that means that in Europe we can finance deals probably up to around $2 billion or so, in the US, probably $4 billion. And like we mentioned before, in infrastructure, there is a deeper market because it's an inflation-protected asset class and with long-term resilience. If you look at the effective interest rates, what's that actually done to I think the capital markets and to us. Of course, it's brought some valuation and some sectors are down, particularly higher-growth sectors which we think actually is healthy.

And it means that in the investments that we're making in private equity and infrastructure for example that we're focusing even more on fundamental long-term value-creation, so a combination of growth and cash flows from the companies, which actually also is pretty healthy because we're making the company stronger and better and more resilient. The effect on net IRR is actually difficult to quantify because there are so many factors that drive value creation. And if you look at our long-term value-creation is driven primarily by sales growth, margin expansion and strategic repositioning, etc. So it's rather something that we built into the models and we're not changing our long-term return targets.

[Ermin Keric, Carnegie]

And then moving on to the semi-liquid product. You mentioned that you are looking to launch. Do you expect them to have any material contribution already for EQT X and Infra VI and does that change anything in the guidance you've given before your expectations would be for how much retail or private wealth will kind of be up of your flagship funds generally.

[Gustav Segerberg, Head of Business Development]

I would say that we are not changing, let's say, the guidance that we've given previously. We would expect that the semi-liquid structures that I talked about will invest in EQT 10 and Infrastructure VI. But as we also said previously, this is a long-term strategy for us. So it will not have a material impact in the beginning.

[Ermin Keric, Carnegie]

Then one last question from me, just. I think at least by the time of the IPO, you talked about care of interest accounting for maybe 25% to 30% of your top-line over-time. When could we expect that you approach that interval again, if you would guess.

[Kim Henriksson, CFO]

Yeah. I mean, it's Kim. I guess what we have said is that, that would be a number over a longer time period rather than in any specific accounting period. And as you know, we have actually been in excess of that for some time here before. So that rule of thumb may remain, but it's not a target or goal that we are specifically sort of steering at.

It's a consequence, rather of us creating value for our clients and exiting company, so it's a round answer, I recognize that, but that's a fact.

[Operator]

We will now take the next question. It comes from the line of Arnaud Giblat from BNP Paribas Exane.

[Arnaud Giblat, BNP Paribas Exane]

I've got three questions please. Firstly on deployments, at the full year results, you had indicated that EQT was roughly on a three-year cycle from a deployment point-of-view. Do you standby those comments, I suppose in light of what's happened with Credit Suisse and SVB.

[Christian Sinding, CEO]

This is of course something that is hard to be very precise around. If you look at our history since 1994, we've been on a three-year average cycle. When it's very hot in the market like it was in EQT IV or let's EQT VIII, EQT IX, then we're on a shorter-cycle in that and during the financial crisis, longer cycle. So the way we think about it is around three years, but whether it's not an exact science, so whether that's going to be 3.5 or 2.9 or whatever, it's not something we actually plan for, because it's the way we build our funds is actually slightly different, we're trying to diversify across sectors and themes across vintages across types of companies that we are owning. And since we're working in the non-liquid world that portfolio takes time to construct.

So I don't think I'll be more precise than that. But for right now, I think that gives you some guidance.

[Arnaud Giblat, BNP Paribas Exane]

Questions on private wealth. Some of the, I suppose the larger private market players you've got significant presence in the private wealth segment indicate that they have up to 100 or more people supporting distribution networks across various private banks and various distributors. What stage of development are you there in terms of supporting distribution networks and where are you aiming for.

[Gustav Segerberg, Head of Business Development]

Yeah. So as we said previously, we are in let's say the early innings of this long-term opportunity. We have a number of people today that are focused on it and that number will continue to grow without us having a specific target. Of course, a lot of this is dependent on how this scales, when we get to the new strategies, but of course our clear ambition is that this will be a key growth area for us going forward.

[Arnaud Giblat, BNP Paribas Exane]

And finally on the underlying, also the companies, I think growth there was for organic EBITDA growth were in the high-teens. Is that still the case today.

[Christian Sinding, CEO]

If you look across our total portfolio across private equity and infrastructure globally, we are still growing significantly both the topline and the bottom line. We typically don't show that on the quarter. It's more of a half year number that we provide. But like I've said before and if you look at the overall portfolio is still performing pretty well because our investments are supported by these longer-term secular trends, but we do have pockets of underperformance here and there whether that's because of inflation or some challenges with some of the supply chains or whatever it might be, but overall performance remain solid.

[Operator]

We will now take the next question. It comes from the line of Bruce Hamilton from Morgan Stanley.

[Bruce Hamilton, Morgan Stanley]

A couple from me. So in terms of the sort of financing markets, obviously it sounds like things are gradually improving though I guess given the setback back in the last month, I'm wondering whether you think in reality exit activity is going to be more a kind of 2024 event. I mean, could we see anything in the second half of this year or you think it's going to be very, very tough? Second question around I guess sort of vintage concentration. I guess a lot of your peers sort of talk about the need to be very disciplined across vintages and LPs are increasingly focused on that. Given that you take a slightly different approach, are you feeling pressure from your LPs to maybe spread investments and be aggressive given that you deployed a lot in 2020 or 2021s, interested in those conversations. And then finally on the private wealth opportunity, obviously great significant opportunity there.

In terms of managing the liquidity risks sort of mismatch risk, would you expect to do anything different to some of your peers or does it really come down to investor education and just making sure people are aware of what gating risk under duress and that sort of thing.

[Christian Sinding, CEO]

When it comes to exits, what we're trying to do is focus really, continuously focus on the long-term for all of our investments driving let's say long-term fundamental value-creation within the companies, strengthening the resilience, investing in add-on acquisitions, you've seen some of those announced and innovation etc. And I think that this year, the exit market is going to be a little bit lumpy, and if you look at, for example, very large IPOs, that's a market which probable, which for now is closed. And we don't know, hopefully, it will open up again after the summer. We don't know, but for our medium-size IPOs, the market remains open. So we have some of those in the pipeline.

The private markets are active as you can see. So in certain sectors that are not that cyclical, let's say certain software sectors, tech sectors and health care tech-enabled services and infrastructure, renewables, for example, there is either is deal activity and interest in buying, so I would expect that we're able to execute on some exits. But the way we think about it is that if we can create more value by -- for in the companies and for our clients by keeping the business a little bit longer and going out into a more robust market, we'd rather do that and that's also positive for the fund long-term. So it's something that we manage very carefully and every single fund we have something called an exit and liquidity committee. So we follow this up very carefully on a company-by-company fund-by-fund and I think that probably covers how we try to drive our exits.

Of course, given that there's less cash flow come into our clients, we would like to create monetization opportunities. There are also other ones like partial sales, continuation of vehicles and other elements that we're looking into and we'll see how the year turns out.

[Gustav Segerberg, Head of Business Development]

And then on the private wealth side, I would say that as I think we talked about in the Q4 update, we actually think that this is a pretty good time for us to start with these structures, because the investor education, as you talked about will be more clear going forward and that this is not -- these are not liquid structures, but they are semi-liquid structures, which mean that investors need to have more of a long-term perspective than you would need in a liquid structure. I think when comparing let's say our product and products going forward compared to others, I would say that they are fairly similar, but of course that each individual product will probably have some elements where they can be small differences in order to cater for the needs of each individual structure.

[Christian Sinding, CEO]

And when it comes to vintages, if you look at the average across the industry since its beginning, vintages were typically closer to four years while our vintages are typically closer to three years. So our clients and we have 1,000 institutional clients across the world. They understand our cycle and our way of investing and our way of diversifying. So I don't feel that there is any pressure, but I would say that during this cycle where there was a two-year type of deployment that created a lot of pressure on us and our clients, as we've talked about before, because you're almost then continuously in fundraising and sort the three-year cycle for us is more natural.

[Operator]

We will now take the next question. It comes from the line of Hubert Lam from Bank of America.

[Hubert Lam, Bank of America]

I've got three of them. Firstly on Infra VI. How confident are you that you can get the majority of it done by year-end. So from today to what your target is still seems like there is a way to go. So how dependent is this on markets or exits and returning capital back to investors to get their liquidity for them to commit to the new fund.

So that's the first question. The second question is on Exeter. Just given the market focused on real estate and in general, as well as commercial real estate, can you talk about the exposures of Exeter and how performance has been recently on the Exeter funds? And lastly on hiring. Hiring was slower this quarter. You only had modest headcount growth this quarter. How should we think about our headcount growth by year-end.

Anything like what should we think about in terms of growth around headcount.

[Christian Sinding, CEO]

I'll take the first one. Infra VI, what we say is that it would be materially concluded this year, which means that some channels will continue into the beginning of next year as we have for all of our funds actually, in particular, the private wealth channels. And when it comes to the momentum, if you take a step-back and look at infrastructure, last year was the only asset class, in private markets that grew fundraising year-over-year. It's very thematic driving both the digitalization of society and the energy transition. So there is a lot of interest from investors to invest in that.

We have not yet had a first close. So it might be confusing from the way that it's communicated. We've had rolling smaller closes until now. We will have a first close sometime in Q2. So I would say that the indications that we're communicating here in the report are pretty accurate. And second question, probably Gustav.

[Gustav Segerberg, Head of Business Development]

Yeah. So on the EQT Exeter, I would say, of course, they're part of their real estate market and hence are also impacted by the turbulence that we see in that market and the increasing interest rates. I would say that in general, just given the underlying exposure that we have with over 80% being in the logistics sector, the very small exposure to more traditional commercial real estate and also the fact that we completed over EUR10 billion of exits during 2021, just as we were going into this, let's say, longer downturn, we think that we're in a fairly good spot. So out of the around 50% of AUM for EQT Exeter is dry powder. And a lot of it is also -- the rest is in a fairly newly invested real estate.

So we feel comfortable, but of course, we continue to be very, very focused also in EQT Exeter on making sure that we have the best possible performance for the clients.

[Kim Henriksson, CFO]

On hiring, yes, the net additions in the quarter was a low number and that's obviously a function of hirings that have taken place kind of one or two quarters earlier and started now. I think we're trying to be clear in that, that you should not extrapolate that kind of flat number for the year. There will be growth, we will be investing in private wealth, we will be investing in the US further, we will be investing in APAC for example. We're not giving exact headcount forecast for the year. There was a question around Q4 as to whether the increase in Q4 was a reasonable estimate of the annual increase for FY 2023, to which I said that that's not an unreasonable way to look at it and I still think that's the right way to look at it.

[Operator]

We will now take the next question. It comes from the line of Magnus Andersson from ABG SC.

[Magnus Andersson, ABG SC]

You covered a lot already, but two questions from me. First of all, I note that the exits you have announced during Q1 were in Asia [indiscernible] and your mid market Asian fund. Is that just by coincidence or is it the fact that the exit market is a bit more active in a shutdown in the US, Europe generally. And secondly, just on that slide, you have on your four main avenues for future growth, I didn't see M&A in there. But given the current challenging market environment, couldn't there be a consolidation that would you be still be willing to participate or you basically done with your M&A efforts.

[Christian Sinding, CEO]

Good questions. The Asian market, yes it is, because of demographics. I think we talked about last time also lower interest rates, lower levels of inflation and overall growing economy across many of the countries there when China reopening. There is more momentum there. And therefore, the exits that we drove were more sell-downs of companies that are public.

And given that the markets are healthy, that was possible. So yes, you are right. But that does not mean that we're not looking at exits across all strategies or all the major strategies in other markets as well. And when it comes to M&A, I think that's a great question. We probably should have said, organically on that slide.

When it comes to M&A, we've done the combination with Exeter in real estate and two smaller add-on acquisitions in real estate to complement that and of course the combination with BPEA, which made us now one of the top-five players in the world in private markets. So that's been superb. As I mentioned, the integration is now more or less done and we're looking towards the future. So this year we probably are not going to prioritize M&A because we want to make sure that we really integrate everything also from a people and culture and values point-of-view, which is also going well and have razor-focus on performance in the existing funds for our clients and on fundraising. But as we look forward, yes, we will look at at M&A and I do believe if you look at the long-term of this industry, it will continue to consolidate globally.

[Operator]

We will now take the next question. It comes from the line of Angeliki Bairaktari from JPMorgan.

[Angeliki Bairaktari, JPMorgan]

A couple of follow-ups, please from me. First of all, I think you mentioned, of I heard correctly during the opening remarks that you have launched a Mid-Cap Asia strategy. So could you give us some more color with regards to how that is progressing. And also can you remind us of any other strategies outside of the semi-liquid private wealth targeted firms that you have in the pipeline for the first half of this year, please. And second question with regards to the exits. The exits were pretty low in the first quarter, but the exits announced in the fourth quarter last year were quite sizable, EUR5 billion.

So I was just wondering, given that there is typically a lag between the date of announcement and when those actually close and are visible in carry, and does the fact that the exits in Q4 were quite high, mean that carried interest could still be better than the second half of last year, in the first half of this year.

[Gustav Segerberg, Head of Business Development]

Yeah. So you're correct in that, we're also raising a mid market strategy, it's not on the slide that we saw as it has a target fund size of below EUR1 billion, which is the threshold that we have for that. But I think in general, what we can say is that it's progressing, it's doing well. We think that to it, we will end-up in a good spot, so to speak. It will continue to take throughout at least this year before it's completed, but I think over the longer-term, we see that as a very good complement with to the large-cap strategy that we have in Asia.

[Christian Sinding, CEO]

The other question on other strategies in the pipeline. I think we comment on most of them. There are some smaller real estate funds that we're also launching or raising as well as some smaller funds within life sciences as a result of our acquisition of Life Sciences Partners. And as we develop those platforms, we're going to build-on those for more sizable strategies and we'll come back to that at a later date.

[Kim Henriksson, CFO]

And with regards to excess and carry, on a general note I'd first say that sort of one quarter is a very, very short-time period in our industry and drawing too far-reaching conclusions based on what happens in one quarter should be avoided. Carry from an accounting point-of-view is a function not only of exits. And you're right, it's mainly on closed exits, but also of course on valuation, performance and the time effect there, because you will have the return to the clients as well that has to be above a certain level. So it's not a linear relationship and I wouldn't draw that conclusion you mentioned there based on the Q4.

[Operator]

We will now take the next question. It comes from the line of Oliver Carruthers from Goldman Sachs.

[Oliver Carruthers, Goldman]

Just one question from me. So given your comments on semi-European financing markets, EUR2 billion available in Europe, EUR4 billion in the US. And also your general comments on leverage targets coming down. How much of a differentiator is your ability to bring in sizable equity co-investors when you think about your near-term deal pipeline and the competition that you see relative to other investing market participants.

[Olof Svensson, Head of Shareholder Relations]

Sure. Co-investors, I think -- we of course have very strong long-term relationship with our clients and for sizable deals co-investment is always a strategic tool for us both from the client perspective very much appreciates investing and deploying capital directly together with us and for us it's a efficient tool to have an efficient cost structure when it comes to portfolio construction. So it's for sure a tool that we use. I'd say in this market environment, there is -- the co-invest structure is probably slightly more sensitive to market conditions in the sense that it's a decision for a particular deal, which is slightly different to the commitment that you do to fund when you want to continue to invest across fund generations together with EQT, so slightly more sensitive to market conditions, but it's for sure a tool that we are very actively working with as part of the investments that we do and also to some extent with our clients when we think about the exits that we do in our assets and part of us strengthening a bit the focus on our capital markets activities is also to be working slightly more actively in this regard when it comes to realizing assets together with our clients.

[Operator]

We will now take the next question. It comes from the line of Jakob Brink from Nordea.

[Jakob Brink, Nordea]

Just two quick questions please. On the exit question before carry, Kim, could you maybe just remind us of what the deals that were closed towards the end of last year, have they all been closed now or what's the progress here, please. And my second question. There was a question earlier about impact of interest rates and Exeter. Could you maybe give us a bit more detail on what are the debt structures here and the covenants, maybe also some maturity hedges in-place, please.

[Kim Henriksson, CFO]

Yeah. A significant part of the transactions that were made end of last year has now closed. I can't remember the exact number, but we should have it on our website. So I would ask you to have a look there or give me a call afterwards and there are no transactions which would not have closed because of any other reason than the normal time lag between signing and closing.

[Christian Sinding, CEO]

Olof, do you want to take the financing question?

[Olof Svensson, Head of Shareholder Relations]

Sorry. Would you mind repeating the financing question, Jakob?

[Jakob Brink, Nordea]

Yeah, of course. Would it be possible suggests gave us a bit more detail on what debt structure you have in-place in exits, so just I know the rate sensitivity.

[Olof Svensson, Head of Shareholder Relations]

So I would say that in general, we're talking about let's say, traditional real estate financing structures in-place. It's a little bit different depending on which fund we're talking about. So in the value add funds, you have a little bit lower levels compared to some of the more core like structures, but I would say in general that it's fairly market standard.

[Jakob Brink, Nordea]

And you have previously I think, said that you had hits in-place and the interest-rate also, what's the duration in Exeter on the interest rates.

[Olof Svensson, Head of Shareholder Relations]

I don't have that top of my head. So I think we need to come back to you on that one.

[Operator]

We will now take the next question. It comes from the line of Nicholas Herman from Citi.

[Nicholas Herman, Citi]

I do have a few [indiscernible] actually. Just one quick one on Infra VI, so you're raising about EUR1 billion per month. Is that a good run-rate. So I mean is it fair to assume that you would expect some acceleration into the first close? Secondly, we have seen Blackstone REP X close at EUR30 billion, I guess that is the global fund rather than US fund, but do you see that impacting the pace of deployments in Exeter. And actually on Exeter. Could you just remind -- you're raising funds currently.

Could you just remind us how many dollars are outstanding to complete the fundraising for these strategies and the timeframe. And I guess also just with respect to given that you have 50% of the AUM in external dry powder, once these fund raisings are done, should we basically assume a fundraising hiatus for the next year or two. And then I do have one last one on, competition on carry or on PRE, I mean your PRE has long been weighted towards carry rather than investment income. Obviously, you just talked about how carry is dependent on a number of factors not at least timings, but how should we be thinking about investment income for this year and next. Thank you.

[Christian Sinding, CEO]

I'll take the first one, then Gus and then, Kim. No, it's not a -- the fundraising in private markets is not kind of a monthly rolling type of structure, it's actually pretty lumpy. So you kind of build the book with investors until they're ready to commit and then you have closings. You build-up towards the first close which is important because it involves certain rights, I guess you could say and sometimes certain small discounts on the management fee. And then from the first close, then you build towards subsequent closes and then the final close is dependent on the let's say the either the slowest channel or sometimes some clients might need an extra time period towards the end.

So it's actually -- it's kind of a wave where the majority happens doing like Infra VI, the majority will happen this year, a little bit next year, but during the year, it's going to be quite lumpy. Given that as a key fund that we will announce when we have the first close and I think you'll then see a little bit more about how that rolls together.

[Gustav Segerberg, Head of Business Development]

Great. And I'll take the Exeter question. So I think in general, the direct impact of Blackstone's $30 billion fund, I would say that that is very limited. I think the way the structure here for Exeter is fairly different from Blackstone, given that we work with regional funds in a specific sector. So when we talk about the EQT Exeter US logistics, it's $5 billion purely in the US purely in logistics.

And as I said, the previous fund was $2 billion, so I think it accounts for their continued ability for us to scale our real-estate platform in that sense. That of course also means that when we think about, let's say, the fundraising in the coming one, two years the way that this operates, given we have three regions, given that we have a number of sectors, we will continuously be in the market with different funds. Right now as you said, we're in the market with free funds, one being the Value VI, the other two being multifamily in the US and Core Plus Fund in logistics in Europe. Those are still, let's say, early-on in their fundraising. We have let's say the majority of the capital to be fund-raised over the coming 12, 18 months.

And then we will see at least one fund being start to be fund-raised during this year and you should probably expect a couple of funds per year also in this environment.

[Kim Henriksson, CFO]

And on investment income, just a reminder first of all, what our investment income primarily is. For each fund, we would typically invest 35% of 1% to 3% of that fund in order to both to be able to have our share, the house share of carry and in order to show commitment to the fund to our clients. So it's basically fund investments and therefore the investment income is fully dependent on the performance of the fund. So if you see that in Q1, they were slightly up as you can see that's what has happened so far this year and what the rest of the year will look like, we'll see in due course.

[Olof Svensson, Head of Shareholder Relations]

And maybe to add, as you know, in our year-end and half yearly reports, you will find a note, where you can see the sensitivities and the commitments that we have outstanding in our existing funds and future commitments to those funds.

[Operator]

We will now take the next question. It comes from the line of Sharath Kumar from Deutsche Bank.

[Sharath Kumar, Deutsche Bank]

So most of my questions have been answered, but there is one pending, so I had one on the investment marks, particular in your EQT IX fund, I saw the fund marks went up marginally from 1.3 times to 1.4 times. So but then is it possible to comment on the effect of liquid investments on the markups, say for example, [indiscernible] just as one example, which is up more than 30% in the first quarter, just to get some color on the effect that this particular investment on the markup.

[Christian Sinding, CEO]

No, we will not typically go into that level of detail about the valuation levels per company in a specific fund. The level of detail is what we gave here and then in some cases there are public companies, in which case we mark them to market. And in other we mark them to market based on other methodology, so I wouldn't like to go into that level of detail.

[Sharath Kumar, Deutsche Bank]

Sure. And then one last clarification on Active Core. I noticed that you've already made the investment, but in terms of it being reflected in AUM, I believe it is not yet because the transaction is officially not closed. Would that be a right understanding.

[Christian Sinding, CEO]

We have made two investments now in Active Core and given the -- in this case, it is not a function of the closing but rather of us having committed fully to that transaction. So the part of the deal is already reflected in AUM, but on the, not fully as of yet.

[Operator]

We will now take next question from the line of Haley Tam from Credit Suisse.

[Haley Tam, Credit Suisse]

Just two quick follow-ups from me. Firstly, the comment about fund raising taking a lot more work. Can I just check or just to comment on the amount of time taken to [Technical Difficulty] impact EBITDA margins this year amid you have a long-term target at 55 on which I guess is on the bulk of [Technical Difficulty]. And secondly, just help me understand valuations being very resilient in your flagship funds, you sort of flagged the strong underlying performance of investments and supportive valuation benchmark. I think the portfolio was down about 10%. [Technical Difficulty]

[Christian Sinding, CEO]

I can't here you in there. Could you speak, your line is pretty weak. Could you repeat the second half of the question there.

[Haley Tam, Credit Suisse]

Sure, let me try again. Is that better?

[Christian Sinding, CEO]

It's better. Yes.

[Haley Tam, Credit Suisse]

Yeah. If I think about the valuations in your portfolio, we can see the most have been flat for up. I think you said the underlying performance of investments were good and the public market valuation benchmark were supportive and I think at the full year, you said the multiples were down 10%, so I just wanted to know is there any similar numbers you gave us in Q1. Thank you.

[Christian Sinding, CEO]

No, I don't have an exact number like that to give you either, about the exact multiple that has moved into quarter. It's a portfolio that changes over the quarter etc. So there is a number of challenges in giving such a number and the reason we gave it were just to provide an example of how things have changed at that point where it's not something we will do on a continuous basis, but you can see that the March were up, the performance was okay and the resulting more evaluation and that is more like in the books now.

[Gustav Segerberg, Head of Business Development]

And then on the first question, no, it's not a margin question really on -- that itself gave a lot more work to do the fund-raise, it's rather that in the best cycle raising a flagship fund takes six to nine months the majority of it and then there is a shorter tail while now it probably takes 15 months plus a shorter tail. So it's just time and during that time we're having meetings, we are traveling, we're providing lots of information to our clients, we are interacting, hopefully, we're also doing some transactions with them with co-investment, etc. So just the whole the whole effort to do is bigger, but it's primarily a result of that time factor rather than having to hire more people or anything that's impacting our margins.

[Kim Henriksson, CFO]

And maybe worth reminding also that economically for us the clients start paying fees from when we activate the funds. So ultimately, the duration of the fund-raising process is not really going to matter to the fees that we generate from a certain fund.

[Operator]

Thank you. There are no further questions on the line, please continue.

[Christian Sinding, CEO]

Okay, thank you very much for excellent questions today and for your support. Have a wonderful day.

[Olof Svensson, Head of Shareholder Relations]

Thank you.

[Gustav Segerberg, Head of Business Development]

Thank you.

[Kim Henriksson, CFO]

Thank you.