EQT AB

STO:EQT

Earnings Call Analysis

Positive Fund Closes and Robust Investment Pipeline Amid Market Challenges

During a strong quarter, EQT completed two significant fund closes: EQT X raised nearly €22 billion, and EQT Future secured €3 billion. The company is optimistic about reaching €20 billion for Infrastructure VI by year-end, despite a challenging fundraising environment. Investment activity was robust, with notable deals in digital infrastructure and healthcare. Exit volumes totaled about €1 billion, with high-quality assets trading well. EQT is advancing sustainability goals, with 40 companies setting science-based targets. The firm remains confident in its strategic growth paths, driven by a diverse and growing investment pipeline.

Introduction to EQT's Recent Performance

EQT had a significant first quarter, marked by milestone fund closings and robust investment activity. The firm celebrated its 30th anniversary by closing its largest fundraising effort ever—EQT X, which exceeded its hard cap with nearly EUR 22 billion in fee-generating assets under management (AUM), a 40% increase from EQT IX. Similarly, the EQT Future fund closed at EUR 3 billion in total commitments.

Fundraising and Investment Strategies

The fundraising environment remains challenging, particularly in areas like real estate. Nonetheless, EQT succeeded in gathering significant commitments for its Infrastructure VI fund, which is expected to reach its hard cap of EUR 20 billion. The company also launched new thematic funds such as Healthcare Growth and an Asia Pacific Logistics fund. Investment activity continued strongly, with approximately EUR 4 billion of investments primarily in digital infrastructure, education, and vertical software.

Exit Strategy and Market Outlook

Exit activities in the first quarter were muted, amounting to about EUR 1 billion in gross fund exits. High-quality assets maintained strong valuations, and the firm saw interest from a diverse range of buyers. Notably, the IPO of Galderma was a highlight, although it did not add to the exit volumes as EQT retained nearly all shares. The firm is cautiously optimistic about the reopening of the IPO market, despite the volatility and upcoming election year. Various exit processes are ongoing, and the firm is well-prepared to execute these when market conditions are favorable.

Financial Health and Future Projections

Fee-paying AUM increased to EUR 132 billion during Q1, with gross inflows amounting to EUR 5 billion. Total AUM grew to EUR 242 billion. Key fund valuations increased by approximately 3%, supported by healthy underlying performance and favorable valuation references. EQT maintains high confidence in meeting or exceeding its return targets, with an estimated EUR 8.5 billion in future carry realizations if current key funds perform on plan. The rule of thumb for carry recognition is typically 4 to 6 years after the first investment.

Strategic Initiatives and Growth Areas

EQT is continuing with strategic hires in private wealth and capital raising, especially in high-cost jurisdictions and roles. The company is also progressing on new initiatives such as the Healthcare Growth strategy, which made its first investment, and the Evergreen fund EQRT aimed at direct investments in commercial real estate. The firm is expanding its distribution channels and expects to scale private wealth products significantly over the next 12 to 18 months.

Sustainability and Future Vision

EQT has made substantial progress on sustainability, helping nearly 40 companies set science-based targets for achieving net-zero emissions. The firm believes this will future-proof its portfolio companies and make them more valuable. With aging infrastructure, digitalization, and the need for sustainable energy, EQT is poised to be a significant player in these transformational areas, leveraging its global platform and deep client relationships.

Conclusion

As EQT enters its fourth decade, it stands stronger than ever, leveraging its comprehensive platform, strategic initiatives, and sustainability commitments. The firm's ability to adapt to market conditions and seize new opportunities positions it well for continued growth and value creation for its investors.

Earnings Call Transcript 2024-Q1

[Olof Svensson, executive]

Good morning, everyone, and welcome to the Presentation of EQTs Q1 Announcement 2024.Let me start by saying thank you to everyone who attended our Capital Markets Day in Stockholm a few weeks ago. And for those who were not able to join us, the presentation materials and the recording of the event are available on the Shareholder Relations section of our website.For today's call, as always, if you've registered ahead of the call, you should have received an e-mail with your personal PIN code to participate in the Q&A and to make sure that everybody has time to ask questions, we suggest that you focus on the most important topics. And as always, we are available for follow-up's after the webcast.So thank you all for joining today. And with that, I'll hand over to Christian. Next slide, please.

[Christian Sinding, executive]

Thanks, Olof. And good morning, everyone. I'm excited now that EQT has entered its fourth decade. And we did this with a big demarcation of closing our largest fundraising ever, which was EQT X at EUR 22 billion. This, of course, is a sign of the partnership we have with our clients and their trust in our ability to deliver strong and resilient returns for the long term.Now a month ago, we hosted our first Capital Markets Day in Stockholm. There, we clarified our ambitions to become the global leader in private equity, top 3 in infrastructure while maintaining the #1 position within value-add infra and over time, approach the top 3 in private real estate; a segment, which is quite fragmented today across the top 10 players. Reaching these ambitions comes down to performance for our clients, and this is why we are focused on active ownership. And as we say, we're positively paranoid around all aspects of transforming and improving companies for the future and thus driving fundamental value creation across the cycle.We're also progressing on our sustainability goals and have now supported almost 40 companies in setting science-based targets. This is actually the largest move towards net zero in our industry and will, of course, also help future-proof our companies and make them more valuable. The key EQT funds are all developing on or above plan. Key fund valuations were slightly up in the quarter. We also had some material valuation uplifts in other funds focused on earlier stage investments, such as EQT Ventures and EQT Life Sciences.Our investment activity continued at quite a good pace in the first quarter. With our thematic and local with locals approach, our deal flow, as we talked about before, remains very, very strong. We have one of the largest deal sourcing machines in the world of private markets. And of course, this kind of deal flow is exactly what we want so that we can remain selective on which deals we go after.On the exit side, we expect activity to pick up materially over the coming year and years. Of course, near-term, this will be dependent on the market. And right now, credit markets are fairly robust, while the equity markets are still in the early stages of recovery. There are geopolitical challenges and other issues, including sticky inflation in the U.S. So this may take some time.Now, from our point of view, becoming less dependent on the market is why we are working to build new capabilities such as private IPOs, as we call it. And this we're doing in order not to be driven to exit companies and assets that we believe can be grown and developed in the long run. So we're exploring longer-term structures that we can own together with other asset managers and financial investors and continue to develop the company. We're also continuing to strengthen all of our capabilities -- strengthening all of our capabilities around other exits, including public IPOs. And actually, I'm quite proud of the team and everyone involved in our recent IPO Galderma, what Bloomberg actually called a case study of IPOs, which is great.Moving to the fundraising market. It continues to be demanding with fundraising time lines still being prolonged. Compared to a year ago, we've seen a slight improvement, partly as the denominator effect has abated. However, with low exit proceeds across the market, some clients have had less liquidity to enable new commitments. Thus, we'll probably only see a real improvement in fundraising markets once exit volumes really start to be active across private markets.We're making good progress with Infra VI and fundraising is expected to continue at least throughout the year, and we do expect to reach the EUR 20 billion target. On new initiatives, the Healthcare Growth strategy has made its first investment and preparations for an infrastructure transition strategy continued. And this strategy, as you may remember, is to go after the enormous space of scaling up companies that are supporting the energy transition.Fundraising for EQT Nexus, our semi-liquid fund catering to private wealth clients in Europe continued. And we're preparing additional products with a similar structure, including just launched EQRT, our U.S. real estate investment trust. And all these products represent solutions that are designed for specific clients or client segments. And these are the kinds of capabilities that we're now building across the firm.Next slide, please. At the Capital Markets Day, we spoke about our strategic priorities and our avenues for growth. We expect EQT to continue to take market share over time, driven by strong returns for clients, created in a responsible manner and a continued trend of clients concentrating commitments to fewer and larger managers.Specifically, we expect to grow based on 4 pillars. First, we're going to scale our flagship funds further. Second, we expect to scale recently launched strategies while introducing also new initiatives. And over the next 5 years, we expect to triple the AUM across our current first-time funds. Third, we'll continue to deepen our client relationships and add distribution channels, including the ecosystems around private wealth. And over time, we expect private wealth to comprise 15% to 20% of fundraisings up from 10% to 15% in recent ones. Fourth, we'll selectively pursue M&A. As you know, our industry is continuing to consolidate, and we expect EQT to continue to be a driver of this trend. This could be a white space in a geography or in a sector or to create new capabilities to better serve our clients. Yet we remain highly selective, and we're only going to go after opportunities that really strengthen the platform and, as always, most importantly, having a very strong fit with our culture and strong performance.Next slide, please. So we continue to see a super investment pipeline across actually all strategies. Digitalization of societies, decarbonization of transportation fleets, the growing need for health care and an aging population, et cetera, et cetera, are all areas that require significant investments where EQT will continue to put its capital and its expertise to work. And during the strong market environment in 2020 and '21, we actually exited a large part of our portfolio and pursued several exits ahead of plan at that point in time. As a result, we have top quartile DPI, which is the industry way of saying cash returns in our funds that are in realization mode and exit mode.And today, only about 10% of the portfolio by capital is 5 years or older, which is pretty unique. The industry, as you can see, is at a totally different level. And as such, the vast majority of our portfolio is still in value creation mode, and we also don't have a lot of old stuff to manage and deal with. So we have capacity to drive value creation and to do new deals.Having said that, we're, of course, propelling exit alternatives across the portfolio. And we have a number of companies ready for exits this year. Some of those will be in earlier vintages, and some will be in more recent funds, which are not yet in carry mode. Since the global financial crisis, we've been laser-focused on owning high-quality assets supported by long-term secular growth trends. As a result, most of our companies are assets which are less cyclical, which are typically market leaders with underlying growth that also have attractive exit optionality with multiple buyers. And looking across the portfolio, we have quite robust solid financing structures.As EQT enters now our fourth decade, we're in a stronger position than ever. We've created a global platform to leverage insights across geographies and industries from early stage to mature companies. We have deep and long-standing relationships with our clients that we're continuing to build on, the tools to drive fundamental value creation, which we're constantly improving. And that includes, of course, our Motherbrain artificial intelligence platform as well.The world is changing at an ever increasing speed. Climate challenges, artificial intelligence, structural changes in demographics, combined with now changing geopolitical landscapes, global conflicts, et cetera, all these bring challenges for society and for us as a firm to navigate. But such challenges also bring out opportunities. And I'm confident that we have the platform and the teams to continue to be forward-thinking, always challenging ourselves to improve, to manage risk and to seize opportunities.With that, I hand over to Gustav.

[Gustav Segerberg, executive]

Thank you, Chris. And next slide, please. Good morning, everyone. This quarter, as Chris said, was marked by 2 fund closes. So EQT X reached and even surpassed its hard cap with almost EUR 22 billion of fee-generating AUM, which was almost a 40% increase from EQT IX. The EQT Future fund closed at EUR 3 billion in total fund commitments and total fee-generating commitments to the strategy, which also includes fee-generating co-investments totaling EUR 3.6 billion.Fundraising continued for Infrastructure VI, with fee-generating commitments of more than EUR 15 billion at the end of the quarter. We expect that the fund will reach its hard cap -- or target fund size of EUR 20 billion and the fundraising is expected to continue at least throughout 2024.The fundraising environment in real estate continues to be challenging, especially for newer strategies. However, as part of our increased efforts in Asia, we have now begun to raise our Asia Pacific Logistics fund. Today, our real estate business has approximately [ $12 ] billion of dry powder. Hence, there will be some time before we raise the next round of flagship logistics funds.As previously stated, given the current investment pace, we expect that our flagship funds to be on approximately 3.5-year investment cycle. This will imply that we would activate BPEA IX towards mid-2025 and then EQT XI and Infrastructure VII to follow with around 6 months gaps each. Preparations are continuing for the transition in Infrastructure strategy and the Healthcare Growth strategy made its first investment during the quarter.Moving on to the Evergreen side. EQRT, our Evergreen product aiming to make direct investments in commercial real estate, made its first acquisition, and we would expect to start fundraising for this shortly. We also continue to onboard new distributors for EQT Nexus. Fund NAV is now above EUR 600 million, and we expect the monthly inflows to increase during the second half of the year as we're scaling the efforts in many countries across both Europe, Asia and Australia.In parallel, we're also preparing for additional private wealth products focused on our core strength in private equity and infrastructure and expect to launch a couple of new products, both in North America and in Europe/Asia over the coming 12 to 18 months. As said before, we find this long-term opportunity super interesting, but also that it will take time to scale our Evergreen strategies and for this to have a meaningful impact on our financials.And with that, I'll hand over to Olof, and next slide, please.

[Olof Svensson, executive]

Thank you, Gustav. Investment activity continued during the first quarter at a good pace with about EUR 4 billion of announced investments, primarily within digital infrastructure, education and vertical software. As a result, EQT X is now 35% to 40% invested, up from the 30% to 35% level at year-end, whereas the Infra VI and BPEA VIII funds are at similar investment levels as they were at year-end.Over the past 12 months, more than 1/4 of our investments were in health care and close to 20% in digital infrastructure. And if we look at it by region, more than 40% of the capital was invested across North America, about 1/3 in Europe and the remaining part across Asia.In real estate, the slight pickup in investment activity that we saw in Q4 last year has continued into 2024. And in fact, our investment levels in Q1 have already surpassed the very low volumes that we saw in '23.Turning to exit activity. It remained muted in the first quarter, with total gross fund exits amounting to about EUR 1 billion. Looking at the market, we'd say high-quality assets, they are trading at strong valuations. And in recent exit processes, we've seen engagement from various buyers, including families, strategic buyers and sponsors. A highlight in the quarter was EQT VIII successfully priced IPO of Galderma, expected to be one of the largest IPOs in Europe this year. EQT VIII retained nearly all the shares it held before the IPO with Galderma using the transaction to raise capital and hence, the IPO does not add to our exit volumes during the quarter.We're cautiously optimistic on the reopening of the IPO market. But as we've seen only in the last week, there'll be times of volatility, and there will be windows to navigate with 2024 being, for example, an important election year. If we look at the broader market, we think the bid ask spread seems to be more prevalent either in more cyclical types of companies or those with a narrower universe.And with that, I'll now hand over to Kim. Next slide, please.

[Kim Henriksson, executive]

Thank you, and good morning, everyone.Let's start with a quick look at the AUM development. Fee paying AUM increased to EUR 132 billion during the first quarter, and gross inflows amounted to EUR 5 billion. And they were primarily driven by closed out commitments in EQT X and in Infra VI. Total AUM also increased during the period to EUR 242 billion.Next slide, please. During the first quarter, key fund valuations increased by approximately 3% as underlying performance remained healthy and valuation references were supportive. The portfolio remains robust, albeit as previously mentioned, there are certain pockets of underperformance. We do not see any systematic performance issues or financing issues.Importantly, all 10 key funds are performing on or above plan. Now what does that mean? It means that they are on track to deliver on or exceed the return targets communicated to our clients when raising the funds. We have a rigorous exercise for determining whether a fund is on, below or above plan. Each quarter, we assess the future projections for each portfolio company as well as our exit assumptions in terms of timing and valuation. Being on or above plan means we have high confidence in meeting or exceeding the return targets.On a separate note, keep in mind that for funds, which are still investing, new investments are added at 1x, and you can thus have increases in the like-for-like valuations, while the overall money multiple for the fund is impacted by new investments at 1x. This quarter, strategy is focused on earlier stage investments, such as EQT Ventures and Equity Growth, which have previously faced some headwinds, saw a meaningful value uplift.Next slide, please. A few words on carry generation. If all our current key funds perform on plan, carry to be realized for EQT AB is around EUR 8.5 billion. When considering the timing of carry recognition, remember that our most recent funds are significantly larger than the predecessors. And in some of the older funds, EQT AB has a smaller share of carry than the 35% applied after the IPO. And as Chris mentioned, we have a young portfolio compared to the industry as a whole. Let me also remind you of the rule of thumb on carry recognition from an accounting point of view. For a fund to enter carry mode, we should normally have reached a gross MOIC of around 1.7 to 1.8x and usually executed a few exits. So this, in most cases, is 4 to 6 years after the first investment.Next slide, please. We saw a small increase in headcount during the quarter with some 20 additional colleagues. Hiring is expected to continue in targeted areas such as within capital raising and private wealth and the growth will typically be in higher cost functions and jurisdictions. Headcount within central remained broadly flat during Q1.And with that, I'll hand over to Chris for some final remarks. Next slide, please.

[Christian Sinding, executive]

Thank you, Kim.So to summarize, we had 2 strong final closes of EQT X and EG Future in the quarter this year when we're celebrating our 30th birthday. Having said that, the fundraising environment is still expected to remain slow-ish until realization start to pick up materially across the private markets. We continue to execute on thematic investments. You've seen that a number of announcements have come after the quarter, and we have a very strong pipeline of opportunities across all asset classes.We have various exit processes ongoing. However, with a relatively young portfolio, it will take some time before all that generates carry, as Kim has explained. And we are dependent on the market to be -- to remain healthy for the exit volumes to be really strong. And you know our philosophy, if we don't exit, then of course, we decide to keep the companies and develop them, so they become more valuable over time.We made progress on recent initiatives, including the launch of Healthcare Growth and EQRT that have announced their first investments, and we're continuing preparations for the new infra transition strategy.In terms of scaling the firm, our central headcount remains flat, and we're really digitizing and sharpening our whole platform every single day, which is great. And we are continuing with strategic hiring in private wealth and in capital raising generally and in certain growth areas.So with that, I thank you, and we open up for Q&A.

[Operator]

[Operator Instructions] We will now take the first question. It's coming from the line of Magnus Andersson from ABG SC.

[Magnus Andersson, analyst]

Can you hear me?

[Christian Sinding, executive]

Yes, we can.

[Magnus Andersson, analyst]

Just first of all, on fundraising, if you could tell us why it seems to be a bit tougher than expected to raise Infra VI since it was up marginally from the 18th of January. Also, if -- on more longer term, if you look beyond the recent and ongoing fundraising of flagship funds, you have been very optimistic about the infra segment. When do you think that infrastructure -- the next flagship fund there actually could surpass your traditional PE funds in terms of size? Could it be already when you raise the next generations here, EQT XI and Infra VII? And finally, there, if you see a cap really for how large those flagship funds could become?

[Christian Sinding, executive]

Gustav?

[Gustav Segerberg, executive]

Yes. I would say -- so on the first question, we ended the year at around close to EUR 14 billion. And during the quarter, we raised approximately EUR 1.5 billion. And of course, as you know, starting off at EUR 14 billion, we -- the target fund size is EUR 20 billion. We have EUR 6 billion to go. So I think we're tracking towards reaching that target fund size by the end of the year or thereabouts, and that's the communication that we have. I think what we had in the Q4 report was that we closed out quite a lot of capital in the beginning of the quarter. And that's, of course, how this works, that you'll have closest rolling. Some of them will be early in the quarter. Some of them will be late, and we'll try to communicate, let's say, as much as we can during the quarter. And that's what we did on January 18, so to speak.

[Christian Sinding, executive]

And on your question on the long term, we don't know yet. But as you know, there is a lot of growth in infrastructure because there's such a need to transform society. You have the energy transition, you have the digitalization of society and you also have the aging population and aging infrastructure all over the world. And infra has kind of 2 elements. One is that we're buying infrastructure companies and developing those, but they're also investing in real assets. So they're actually using a lot of capital to develop their companies. So the capital needs in infrastructure are great. and the risk reward is super. You're downside-protected with an essential service to society, but you have an upside if you're a great owner. So I'll just answer it like that.

[Magnus Andersson, analyst]

Okay. And I mean, regarding the flagship funds, you're already raising among the world's largest funds. Do you see any -- I mean how large can they become?

[Christian Sinding, executive]

Well, nobody really knows, actually. And if you look at the largest infra fund in the world, it's [ EUR 40 ] billion. It's got a different mandate and a lower return mandate than ours. So it's rather -- we're going to size the funds that we can continue to deliver very strong returns. So it may be that the fund has a certain maximum size, but then we can also start to build out newer strategies like infra transition or a sector strategy or geographic strategy. So it's not just about size, it's also about scope as they develop it.

[Magnus Andersson, analyst]

Okay. Secondly, if I may, just shortly on exits, you made some exits across various funds here in Q1. I was just wondering if you could tell us for how long you've been working on those exits, if it was the normal kind of 6- to 9-month exit process periods? Or did it take longer?

[Christian Sinding, executive]

It really varies. I think what I said last time is that we start very early to prepare exits because the windows over the last years have opened and shut, a lot of volatility. So Galderma, we've been ready to IPO for 18 months or maybe even slightly more. So it depends a little bit on the situation, but I think systematically, we are preparing our companies early, our management teams, the capital structures. We're rightsizing those as we did in Galderma, as an example, to make sure that we have that exit optionality that we now are looking to execute on.

[Operator]

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

[Hubert Lam, analyst]

I've got 3 of them. Firstly, just on Slide 5, again, I wanted to clarify. So given that 11% of your assets are only held for longer than 5 years, should we assume a few exits in the next couple of years just as the book needs to mature, even if the market for exits opens up? Is that the right way to think about it? Second question is on BPEA IX. I think Gustav said that he expects that to be activated in the middle of 2025. How should we think about the size of that? I think the previous vintage was about EUR 10 billion. So just wondering in terms of what kind of size would you be targeting for that fund? And lastly, also on Nexus, I think there's -- you talked about more -- getting access to new distribution channels. Can you just talk a little bit about that and the process about getting further distribution channels, where are they coming from, et cetera? That would be helpful.

[Kim Henriksson, executive]

Should I take the first one on exits? Well, I think you need to combine what Chris said about being prepared. So we do have a significant pipeline of companies that are in exit mode that are ready for exit. And if the markets are conducive to that, we will exit those. But the bulk of our companies are invested in -- within the last few years, and there is no rush to exit them in a market environment that wouldn't be conducive to that. So I hope that gives a bit of color, but it's not black or white.

[Gustav Segerberg, executive]

Yes. And maybe I'll take BPEA IX and Nexus. So for BPEA IX, I would say that we feel that on a relative basis, we are coming from a position of strength in Asia with, let's say, good performance, good DPI. The integration has gone very well. There is a lot of capabilities added to the BPEA team and how we operate, so to speak. So I think in general, we feel that we are in a great position in Asia and that we see that, that's a market that we will continue to grow on in terms of size and what we do there. And that, of course, means also that we have ambitions that BPEA IX at least will be a bit larger than BPEA VIII, but we haven't set a target fund size yet, and it will take a little bit of time before we do so. And when we do, of course, we're going to communicate that.In terms of fundraising, you should expect that to start earlier. And I think previously, we communicated that we are preparing and that we think that we will start that fundraising during this year. So even though it's activated mid-2025, the fund raising in itself will start earlier.And then when -- in terms of Nexus, I would say a couple of things. As I said, we're right now scaling up across Europe, Asia, Australia, and the way that we do that is a mix of, let's say, distributors that can handle either several or many countries as well as certain distributors that can handle a single country. So I would say that we have in the area of, let's say, 10 to 15 distributors either confirmed or very, very advanced discussions with, that we expect to onboard during these years. Some of them in the smaller size that will maybe handle one single country and some of them larger scale that will handle several countries.

[Operator]

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

[Arnaud Giblat, analyst]

I've got several questions. If I can start with Galderma, the IPO. I noticed there's no change in valuation as a consequence. So is that -- is it the case that there was no uplift on your previous valuation pre-IPO? That's my first question. Secondly, I'm wondering if the protracted fundraising of the infra fund sort of puts constraints on your ability to invest. If you can maybe give us a bit of -- a bit more color there in terms of, is there a point where you have to contractually stop fundraising if you're overinvested because whoever is coming in has the benefit of foresight? Just wondering if you can talk a bit more about the constraints there in a protracted fundraising environment. You also talked about a 6-month gap between -- at least between fundraisings. So since you're talking about mid-'25 for BPEA IX, are you in effect telling us that we could see the -- another flagship being raised in 2026 and activated in 2026? And finally, just a specific question, but you did talk about adding a U.S. distributor. Is that a large wirehouse? I'm wondering.

[Christian Sinding, executive]

Thank you. I'm glad you asked the first question. The Galderma IPO, we didn't sell any shares. So therefore, it didn't generate directly any carry, but the value uplift was very substantial, actually, versus where we had it in the books. So that is -- when we look at our average uplift of exits versus what we have in the NAV in our reports, it's typically around 30%. And in this case, it's actually somewhat higher than that. So I think what we meant was until we sell shares in Galderma, this new valuation, we'll be crystallizing those returns. So that's answering that question.When there's a question on the constraints, no, there's no constraints on the ability to invest because we're highly confident that we're going to reach the EUR 20 billion, just like EQT X, it's taking just a longer time to raise, clients need more time and new channels need more time, and we'd like to give them that time. And as you know, it doesn't really matter when we close the fund in terms of fees or anything like that. So it's rather that we -- like I said, we have a huge amount of deal flow. So what we're doing is actually trying to say we want to invest over a normal cycle, let's say, 3.5 years over our flagship funds. And then that means that we are being ultra selective in making investments. So there's no problem here, just opportunities in the sense.

[Gustav Segerberg, executive]

Should I do activation and the U.S. side?

[Christian Sinding, executive]

Yes.

[Gustav Segerberg, executive]

So I think maybe there was a little bit of confusion. I think we need to separate what is a fundraising time line and what is activation of fund time line because those are 2 different things. So if we take BPEA IX as an example, what I said was that we aim to activate the fund in mid-2025. But it means that we will start fundraising for it earlier. So the activation is around fees and not around time of fundraising. What we then said was that we expect the activation right now for EQT XI to then be end of 2025 and Infra VII to be in the first, let's say, midyear 2026, so to speak. And that, of course, ties into approximately 3.5 years investment cycles. I would say that in all those cases, you would probably expect the fundraising to start earlier than the activation in the same way as we're communicating around BPEA IX.And then when it comes to the question about the U.S. strategies, of course, if and when we go into the U.S. on the private wealth side, in the same way that we're thinking about, let's say, distribution in Europe and Asia, we're doing that in a broad-based, i.e., targeting both large-scale distributors as well as some of the smaller distributors. And I would say that the case would be the same in the U.S., i.e., that we would be targeting also the wirehouses. And then, of course, as all of you know, our origin is a European firm, which, of course, means that from a branding perspective, we have a little bit of a longer journey to do in the U.S. and that's also why it's important for us to communicate that for us, this is really a long-term opportunity and that you shouldn't expect this to have a material effect in the short term.

[Christian Sinding, executive]

And I'm not sure we answered it fully on the gaps. In the past, we -- when we had a smaller capital raising team, we were very careful to spread out the timing between flagship fundraises, but we've now built out our team globally, and we have more dedicated resources for different strategies. So that's really less of an issue now than it was in that previous generation.

[Operator]

We will now take the next question coming from the line of Jacob Hesslevik from SEB.

[Jacob Hesslevik, analyst]

I heard your comment, Christian, on the exit market being muted and that you don't really expect activity to pick up until the latter part of the year. But my question is, could you maybe shift your focus to some of your investment in listed stocks as the public markets multiples has come up by a fair bit and the timing to exit makes a bit more sense for these investments than maybe your private portfolio companies?

[Christian Sinding, executive]

Yes. We have a few public companies. And of course, in those we're, of course, always working on how do we best sell-down in those. So that's a strategy we're working on and it's something that takes years, but as well planned and managed. And when it comes to the exits, I think we have a lot of exit activity and preparations ongoing. The question we're raising about the market, is the market good enough to take all these exits and receive all these exits at the right valuations? And that's what we don't yet know. But we are more than ready, we have a number of processes ongoing. And it's not just the end of the year. So if we said that, then that's actually incorrect.We have exit processes that have already started. We've had some in the first quarter, and we continue to execute on those, the rest of the year and going into next year. But as you know, we are -- typically, we own very good and healthy companies. And if the market is not conducive, like this week, it would be a pretty tough week to be in the public markets with a new company during those kinds of periods. Sometimes it's better for us than to keep the companies and develop them rather than going out. So that's the decision-making that we are taking. But the drive towards exit is clearly there. The activities are there, the pipeline is there and it's now, it's not tomorrow.

[Jacob Hesslevik, analyst]

All right. But then just a quick follow-up. So we shouldn't expect your public value fund to divest its holdings in the near term, then, I guess.

[Christian Sinding, executive]

Well, the public value fund is, I think, has a NAV now of EUR 100 million or something. So that maybe gives you the answer.

[Operator]

And the next question comes from the line of Angeliki Bairaktari from JPMorgan.

[Angeliki Bairaktari, analyst]

Just a few on my end as well, please. So first of all, can you let us know how much of the EUR 4.7 billion fundraising that you had in Q1 came from Exeter? And if we think a bit more sort of for this year 2024 and also 2025, given that you're sitting on all of these dry powder, what should we forecast in terms of the net fee-paying AUM growth in the real estate business per annum approximately? I think in the past, we had an indication of around EUR 4 billion to EUR 5 billion. So I just wanted to understand whether that could be lower near-term, given that you are deploying and what you've raised in the past. And second question, you mentioned that you've launched Healthcare Growth. Can you give us an indication of the target size for that fund? And thirdly, you do mention in the release that the Swedish Tax Authority is reviewing the social security contributions with regards to the carry -- the taxation of carry. And I just wonder, does it affect only a few individuals or is it sort of across all of your employee force in Sweden? And would you ever consider relocating?

[Gustav Segerberg, executive]

Okay. I can start off with the fundraising question, Angeliki. So the EUR 4.7 billion fund raise in Q1, most of that would be from infra and from EQT X and the part that came from Exeter was a very, very small part of that EUR 4.7 billion. As you rightly alluded to, Exeter has some EUR 12 billion of dry powder and having held off investing for most of last year, whilst also having completed a few fundraisings over the past couple of years, they are now in a position where the fundraising need is relatively limited. And as you pointed out, part of that EUR 12 billion dry powder will only become fee-paying assets deployed. So you will, first and foremost, in the near term, see a gradual increase in their AUM from these investments. There are certain smaller funds that are in fundraising, too. And notably, we've now started to raise a Logistics fund in Asia, as you will have seen. But to your question on this -- the EUR 4-ish-or-so-billion, you should expect that to be a lower number in the near term, taking into account the dry powder and the recent fundraisings that we have done.

[Kim Henriksson, executive]

Should I comment on the tax? Was that what was left?

[Christian Sinding, executive]

Yes.

[Kim Henriksson, executive]

Social Security. Yes. So the issue at hand concerns certain individuals at EQT in certain historical funds of EQT. And should those individuals be subject to income taxation, that may also lead to EQT being subject to social security cost for those specific funds, historical funds, those specific individuals. So from an EQT AB Group point of view, this is not a significant amount.Then you also asked about headquarter. But I don't think we want to speculate on media speculation or comment on media speculation. I just say that the taxation of these individuals is not dependent on where the headquarter of EQT is. It is about where these individuals are based.

[Angeliki Bairaktari, analyst]

And if you could also give us an indication on the size of Healthcare Growth?

[Gustav Segerberg, executive]

Yes. So the -- let's say, taking a step back, we haven't externally communicated a target fund size yet. So I'm not going to, let's say, give you a specific number. What we -- the rule that we have is that, let's say, if it is on the slide that we presented, it's at least EUR 1 billion of target fund size. So that gives you an indication. I would say that we think that, let's say, Healthcare Growth is something that can be scaled over time. And of course, now with the first investment done, we see good momentum in that business. So we're excited about the future.

[Operator]

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

[Oliver Carruthers, analyst]

It's Oliver Carruthers from Goldman Sachs. I've got 2 questions, as you think about the preparation for your transition infra strategy. So the first, will LP see this as a first-time launch for a new strategy? Or will you get a decent amount of credit for your track record existing in your infrastructure fund? That's the first. And then the second, as a follow-up to this, when you think about the opportunity set here, would it make sense or would it help to think about a larger GP commitment in percentage terms relative to your more established flagships as this launches?

[Christian Sinding, executive]

Very good questions. We're excited about infra transition. We haven't set the target size yet, but the opportunity set is very, very large. And we have a lot of credibility because you're asking the right question, yes, we've done a lot of similar investments in the past at a smaller scale, sort of EV charging networks, for example, EV battery recycling companies, so which is new, based on new technology, electricity storage companies and a number of other ones. What we'd like to do now is to create a scale strategy that can go after those opportunities in a bigger way. We haven't decided on the launch date yet either on that strategy, but it is something that we're putting a lot of resources behind.And then your second question, that's a -- it's a good one. The GP commitment is something where that's a -- it's a discussion between really us, the firm, the team running the fund, in this case, of course, the infrastructure team and the clients. And in general, we're only launching strategy that we have a big commitment behind in terms of our spirit and our philosophy and our [ keyness ], we try to back that up with a solid GP commit, but it's far too early to tell where it's going to be.

[Oliver Carruthers, analyst]

Got it. Very helpful. And then just one quick clarification point. I think, Kim, you mentioned that the scope of the social security contribution review was not significant. Are you able to quantify that at this stage?

[Kim Henriksson, executive]

No, I'm afraid I'm not able to quantify that. Again, the review concerns the employees primarily and they -- that's where the sort of the review has gone the furthest. We are not subject to any decisions or anything like that from the tax authorities at this point in time. Furthermore, maybe I should just clarify to say that we -- our clear understanding is that we have been following case law in this -- or the individuals have been following case law in this matter and that has been the sort of -- everything has been done according to the books.

[Operator]

We will now take the next question from the line of Ermin Keric from Carnegie.

[Ermin Keric, analyst]

So maybe I wanted to start off on the kind of long-term MOIC guidance that you gave. Is there any rule of thumb or anything we can look at from the outside that you're using, like if a fund hasn't reached 1.5 within a certain period of time, you will consider it under plan or vice versa, if it gets there before a certain period, it's kind of above plan, anything like that we could look for? Then on the exit side, you talked about the private IPOs for a while. When do you think we could see the first time you're kind of trying out this concept? And then lastly, just on the M&A agenda, as you talked a little bit about, could you look at anything within distribution capabilities there?

[Kim Henriksson, executive]

If I start with the MOIC guidance, I would take you back to what I explained before. It's not really a function of what the current MOIC is in that particular portfolio. That may be subject to sort of up and down valuations in the quarter and different strategies have different time to mature. So the MOIC guidance is very much based on a bottom-up approach each quarter on each asset saying, do we still believe in the forecast for that asset? Or have they changed? And do we still believe that the exit can be had at a certain point in time with a certain valuation? And then you sort of add all of that up and you get to a MOIC number at the end of the fund life. And that part, we are very, very confident about then that we can deliver that MOIC to our clients within the range that we mentioned on plan, above plan, et cetera.

[Christian Sinding, executive]

When it comes to private IPOs, I hope that we'll be able to execute on the first concept this year. Probably will be in combination with other investors coming in, but we will see. That's something we're pushing hard with our capital markets team. And then M&A and distribution capabilities. That is -- it's -- put it this way, our business development team, led by Gustav is evaluating the ones that there are in the investment side of the business, whether it's a geography or a sector or whatever it may be, a new asset class and also other capabilities that we may need. And some of our competitors have bought distribution in the U.S. Most of that has been connected to private credit. So it hasn't been a great fit for us. But it could be a possibility, probably not in the near term, but maybe in the medium term when the types of products that we are creating for our clients when they start to scale. So it could be, but nothing in the near term.

[Operator]

We will now take the next question from the line of Isobel Hettrick from Autonomous Research.

[Isobel Hettrick, analyst]

I just have one question, please, on FTE hiring. So if I remember correctly, at full year results, you guided to roughly net hiring of 50 FTEs over the year. So I just wanted to check, A, does that guidance still stand? And B, if it does, with 21 hires so far this year, then should we expect the rest of the hiring to also be front-loaded in the first half of the year?

[Kim Henriksson, executive]

I can't recall that we guided towards 50, but maybe that's the way it came across. So I would rather say that the sort of the pace that you've seen here in the first quarter is a reasonable guidance for the rest of the year, sort of. That would be my impression. But this is now within kind of, I don't know, 1% of our total headcount. So these are very small numbers compared to the total headcount and things may change based on sort of small sort of circumstances, whether somebody signs or doesn't sign in a particular time period. So yes, maybe that's helpful for you.

[Operator]

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

[Nicholas Herman, analyst]

Most of my questions have actually already been asked, but I do have a couple just outstanding. One on valuation. So I appreciate there are a lot of moving parts on fund valuation. But equally, you do use public comps [indiscernible] valuation for credit capital valuations. So could you please help us to understand broadly how much was the value uplift from higher public multiples in the flagship private equity funds, please? That's the first one. And then secondly, just a clarification on Nexus. You called out some expected increase in monthly inflows in the latter part of this year as you scale it in countries. So perhaps confirm, it's coming therefore -- the step-up is coming from newly onboarded distributors rather than any pickup of inflows from existing distributors. That would be helpful.

[Kim Henriksson, executive]

Well, listen, we are typically not breaking down our valuation into all of its component parts. It's like you say, there's a lot of moving parts in terms of public market multiples moving, the underlying performance of the assets, FX factors, the public market -- the public companies in the portfolio, et cetera, you have potential exits and uplifts due to that. So there's so many factors that it becomes a little bit muddled and technical if we would go into all of that. But what we've said is that public market multiples have been supportive and that the underlying performance has been robust, but some pockets of underperformance and then we've talked today about Galderma and some other things here that have also positively impacted the valuations.

[Gustav Segerberg, executive]

And maybe if I take Nexus, I would say it's a mix, of course, in the sense that when you think about just from a number of distributors, of course, raised -- having, let's say, 20 distributors instead of 10 is going to be helpful to the monthly flow, so to speak. I would say, when a distributor comes on, you normally have, let's say, a little bit higher inflows in maybe the first and -- first, second month, so to speak, just given that it's a little bit of a campaign in the beginning before it becomes a steady state and it more is, let's say, part of their platform.So it has a little bit of a bump in the beginning, which, of course, means that what we're looking to do is to have, let's say, distributors coming in at some, let's say, pre-decided pace that -- which makes it easier for us to ensure that we deploy the portfolio in a way where we have a good sense of the inflow versus how much we're going to deploy. So it's a little bit of a play to make sure that we do it in a smart way so that, of course, at the end of the day, that we're able to deliver good returns for the existing investors because that's, of course, what's going to grow this fund in the long term.

[Operator]

We will now take the next question from the line of Tom Mills from Jefferies.

[Thomas Mills, analyst]

I know you wouldn't want to comment specifically on a competitor, but I've seen Thoma Bravo targeting $20 billion for their flagship Fund XVI, having raised $24 billion for that Fund XV. I know that there's no hard cap on the fund that they're raising, so perhaps they're just trying to manage expectations. But do you see a potential step-down there as idiosyncratic or something we might expect to see more widely among players? You've been raising $20 billion-plus funds in the recent past.

[Christian Sinding, executive]

Yes, I don't comment on specific competitors. But I think at least on our Capital Markets Day, I think we showed a chart, which -- where you can see flagship fundraisings on one axis and investment performance on the other axis. And there's a direct correlation between the size of this current fund generation that's being raised and performance, which is great to see. Some years ago, that was when interest rates were 0, and the tide was raising all boats, so there wasn't such a big difference. Now there is a big difference. So I think that's going to give you the answer that you're looking for.

[Operator]

We will now take the last question from the line of Haley Tam from UBS.

[Haley Tam, analyst]

Just one follow-up and one on personnel expenses, please. So in terms of the follow-up, I think what you said earlier was that you saw a significant uplift in valuation from the Galderma IPO versus what you were carrying at in your books. And so just so I can understand that properly, EQT VIII, the multiple invested capital was unchanged at 2.2, I think, at the end of March versus end December. So to understand that probably, the uplift was not reflected in that multiple? Or do you not -- or are there other things that came down? Or how should I think about that really is the question. And the second question, just in terms of personnel expenses. As we see you more hiring selectively in private wealth and maybe on the fundraising and capital raising side, should we expect to see more of the personnel expenses, therefore, to be on your own P&L because those sorts of individuals don't get carried interest? Just help me understand.

[Kim Henriksson, executive]

Should I comment? I mean on the valuation, I'd say, first of all, there's -- a fund would typically have 15 to 20 investments in it. And the concentration would not exceed, say, 15% for one particular asset and typically be way below that. Now Galderma is a significant asset. But -- so the impact of one particular asset, even though it would be up with X%, as in this case, will not significantly impact the whole -- the MOIC of the whole fund. And that's with one decimal that it may move between 2 point or whatever. You see what I mean. There's -- that's just the background to it.You asked about whether more of the costs should be on our own P&L. Well, I think I did mention the fact that the hiring we are targeting during this year is in both higher cost jurisdictions and in higher cost types of roles. So on average, yes, that would be the case that a higher part of the -- that it would be higher cost for those individuals. Now the installed base is, if you can call it that, it's [indiscernible] or something persons compared to this hiring. So it doesn't really move the needle that much, but that would be the background.

[Haley Tam, analyst]

So can I just clarify, a fund will typically have 15 to 20 investments. I thought it was a lower number than that. So just to confirm, that would be great.

[Kim Henriksson, executive]

That would be the number in the flagship funds, yes.

[Operator]

There are no further questions at this time. I would like to hand back over to the speakers for closing remarks.

[Olof Svensson, executive]

Well, thank you, everybody, for joining us this morning. We know quite a few of you are busy this week, and we appreciate all the great questions and the discussion. So thank you very much, and see you next time.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.