EQT AB

STO:EQT

Earnings Call Analysis

EQT Moderates Investment Amid Uncertainty

EQT reported cautious investment pacing due to uncertain macroeconomic conditions, with over EUR 50 billion in dry powder and a strong deal pipeline. Amid a sluggish exit environment and global conflicts potentially impacting energy prices and trade, the company completed investments and realizations amounting to EUR 2 billion during Q3. Distinguishing itself, EQT's strong performance record supported the growth of its flagship fundraises. Despite clients taking longer to commit, EQT's diversified portfolio, active ownership focus, and global sector team collaborations have driven thematic investments and client interests. The company is excited about Nexus, EQRT REIT, and upcoming strategic products. It plans to invest cautiously in priority sectors and bolster teams, eyeing new strategies in core areas and refining its value creation playbook.

Product Launch and Fundraising Achievements

The company has announced the regulatory approval for the EQT Exeter Real Estate Income Trust (EQRT), aiming to invest in stable income-generating commercial real estate, particularly targeting distributors in North America. The plan is to raise capital starting around Q2 of the following year by investing in initial seed assets. This forms part of a broader strategy to grow private wealth by introducing additional investment vehicles across different asset classes and geographies, as well as by expanding the sales force and strengthening global distribution partnerships.

Fundraising Environment and Fund Growth Amidst Challenges

Despite a challenging fundraising environment, with global volumes down by over 35% from 2021 peaks, the company has successfully closed on just short of EUR 20 billion for EQT X, with a final close expected at or near the EUR 21.5 billion hard cap in the first quarter of 2024. This marks a significant growth of close to 30-40% compared to its predecessor fund, EQT IX. Furthermore, Infra VI has also had a robust first closing, representing over 20% of global infrastructure fundraising in the first half of 2023, and is on track to reach its EUR 20 billion target during 2024. Not all funds are raising as quickly, particularly those in lower risk/return segments may not meet their full target sizes, but the company's BPEA EQT mid-market growth strategy is seeing strong momentum.

Investment Activity and Realization of Assets

On the investment front, there has been continued activity with about EUR 2 billion in new investments and similar amounts in asset realizations. Notable investments include stakes in Dechra, Gympass, Indira IVF, and VetPartners. The real estate investment pace has marginally improved compared to earlier in 2023, with acquisitions remaining disciplined. Debt and equity capital markets have shown signs of revival, creating more favorable conditions for borrowers. The realization of assets such as Schulke and LimaCorporate demonstrates the ability of the company to successfully exit and return capital to investors.

Managing the Portfolio in a Changing Economic Landscape

Throughout the quarter, fund valuations generally remained stable, with a few experiencing slight variations. While some portfolio companies may occasionally underperform, there are no systemic issues observed, and most are achieving robust operational performance. Active ownership continues to drive value creation despite adverse effects from foreign exchange rates and modest declines in market multiples. With interest rates normalizing, the company has a strategy to manage higher financing costs, and only a small portion of the debt within the portfolio is due to mature in the next two years.

Operational Expansion and Focus on Private Wealth

The company has expanded its personnel, particularly within the high-priority private wealth division, as well as in North America. This growth is part of a strategy to capitalize on opportunities and scale across various assets. Investment in digitalization aims to enhance client investment, communication, and collaboration experiences, reinforcing the advantages of scale in the current market.

Cost Management and Guidance

Headcount growth is expected to remain muted, with cost management being a priority. While there is some run rate cost carryover into the next year, the company continues to evaluate opportunities for efficiency. The goal is to align cost development with the company's strategic targets, ensuring sustainable growth and profitability, even as they prepare for potential changes in the cost structure.

Maintaining Performance Standards Amid Market Pressures

The company continues to demonstrate strong performance amidst market pressures, bolstered by a commitment to maintaining operational excellence and meeting ESG standards and reporting requirements. Their ability to raise funds, exit investments successfully, and manage portfolio valuations reinforces their market resilience and positions them well for future growth.

Earnings Call Transcript 2023-Q3

[Olof Svensson, executive]

Okay. Good morning, everyone, and welcome to the presentation of EQT's Q3 announcement. We will provide a short update on the latest developments, fundraising, investments and performance. As always, if you have registered ahead of the call, you should have received an email with your personal PIN code to participate in the Q&A. You can also click telephone conference at the top right corner of the live stream window to ask questions.And with those words, I'll hand over to Christian. Next slide, please.

[Christian Sinding, executive]

Thank you, Olof. Good morning, everyone. So during the third quarter, EQT continued to perform well with our differentiated active ownership approach and our diversified offering to clients. We made good progress in EQT X fundraising, where we do expect the fund to close at or near the hard cap in early 2024. In this market environment, our track record in terms of IRR and DPI, cash return to investors are important differentiators. And EQT Nexus continued its rollout, and we're quite excited about the long-term prospects within private wealth. EQT now has more than EUR 50 billion of dry powder available and a strong pipeline of deal opportunities. But we are pacing our investments in this uncertain macro environment, so we create the right portfolio construction over time. The exit environment remains somewhat muted, and there's been a lot of talk about green shoots for a while now, but capital and markets activity is yet to really pick up meaningfully. So we remain vigilant. Data suggests that inflation is moderating and rates are stabilizing, but at the same time, we do see an increase in conflicts globally, [ foremost ], a human tragedy, but also something that could further impact energy prices and global trade.Now, next slide, please. Let me briefly reflect on the journey that we're on. Since our IPO 4 years ago, we've more than tripled fee-generating AUM to EUR 128 billion, and our total AUM is more than EUR 230 billion. With funds that are 10 years long or longer, we have a model with long-term contractual revenues, and already now more than EUR 8 billion of carried interest to be realized over the lifetime of the existing funds alone and, of course, there are future funds to come. Today, we're local with locals in countries representing 80% of global GDP. And we have 4 flagship funds across Private Equity, Real Estate and Infrastructure. And in a more challenging market environment, the value of diversification and differentiation become all the more important. So we at EQT are solely focused on active ownership, and our mission is to create investment performance for our clients.EQT's track record underpins the growth of our client base to now include almost 1,200 clients globally. And with regards to diversification, October actually marks the first anniversary of the combination with [ BPEA ]. And I can tell you it's been a great success, both in terms of strategic fit, performance, but, of course, very importantly, also culture. So with this global platform now, we work with sector teams across the world to identify the best companies and assets that we want to own. All of us are supported by Motherbrain, our internal artificial intelligence unit, which we've been building actually since 2015, and now, of course, is getting accelerated with generational AI.So both of our firms in this combination have tremendously benefited. We've broadened the investable universe. We're implementing best practices and the deal teams are now cooperating on a global basis. For example, we're pursuing themes in Asia that we've invested in across Europe for several years, like the personification of pets or areas such as education, where BPEA EQT owns the world's largest private education company, Nord Anglia, and we're looking into that sector across the world.Next slide, please. So the bifurcation between high-performing managers and other managers is becoming now more visible, first time in a long time. So those with a consistent top quartile track record are growing fund sizes and are meeting their flagship fundraising targets, while other managers have lowered their flagship fundraising targets. EQT's track record is consistently strong over time, and that's why we're seeing material growth across our flagship fundraises, whether it's in Private Equity Europe and North America, Exeter's Industrial Fund, BPEA EQT Asia or our latest value-add infra fund, Infrastructure VI. However, our clients are also taking longer to commit in this environment, but they do want to participate in the vintage, so it's primarily about delays and not declines.Next slide, please. As you know, our purpose is to future-proof companies and make a positive impact for all. And there's a tremendous need for capital to finance areas such as the energy transition and the digitalization of society. And this need for capital and growing allocations to private markets will underpin the growth of our strategies. Long-term, we'll see opportunities to further grow our flagships, either in size, geographic focus and/or sector focus. And given our two-pronged approach of being the only firm in the world that's truly local with locals, together with global sector teams, we do have continuously strong deal flow as we speak as well. In the last 5 years, we have initiated a number of newer strategies, where we still have a significant runway to scale, including future, growth-stage technology, health care, multifamily, and Active Core Infra. In addition, we're in the early stages of exploring new investment strategies that further build on our leadership in areas such as health care within private equity and energy transition within infrastructure. We do continue to selectively evaluate M&A as well, with culture, performance and strong fit with our strategy being critical criteria. And we think that the market will reshape over time as a result of this current tough environment, and therefore, there will be interesting M&A opportunities coming along as a result.Next page, please. So as expected, we now have over EUR 8 billion of dry powder to deploy. The realized funds you see on this slide have delivered a gross MOIC of more than 2x. But the way we've created those returns evolves over time, as we gain experience, we grow our toolbox. So it's about refining our thematic focus, running with the winners, driving portfolio composition, driving exits and realizations, developing our network of advisers, adding new competencies, and, of course, learning from mistakes. And really doing this on a global basis now, including BPEA and Exeter. Overall, we're witnessing the end of the financial engineering era, where leverage and increasing multiples helped all managers to perform reasonably well. Going forward, it will be about fundamentally adding value and really transforming portfolio companies and buildings.So for several years, we've invested in digitalization, artificial intelligence and sustainability. And these are critical elements that are part of our value creation approach today. And we're looking, of course, to what's going to happen tomorrow and to really develop as investors and to be the best owners that we can possibly be. So, Motherbrain, for example, our AI is where we're really working to find tangible opportunities to drive value both internally at EQT, but also in our portfolio companies. And on the sustainability side, really making sure that sustainability is deeply embedded into strategy, so that the companies become more resilient over time, but also more valuable. And in the end, of course, it's about people.And we're really happy that we just announced 2 new partners joining our private equity health care team, Maarten de Jong and Mark Braganza. Very welcome again. And earlier this year, Francesco Starace from Enel joined us as a partner in EQT Infrastructure. He was recently appointed the Chair of the Science-Based Targets Initiative and is a well-known global leader in terms of the energy transition. So with those talents on Board, we're excited about the future.And I'll now hand over to Gustav to talk about private wealth and fundraising.

[Gustav Segerberg, executive]

Great. Next slide, please. Thank you, Chris. And good morning, everyone. As we talked about in the last quarters, private wealth continues to be one of the growth areas that we're most excited about. It's expected that we'll see $9 trillion of net inflow from private wealth into private markets over the coming 10 years, where we think that we're well positioned to be allocated a good part of this capital. However, in the short-term, the private wealth market is, of course, also impacted with less inflow and, as you know, also certain outflow in certain of the evergreen structures that we see in the market. As a reminder, we target private wealth from 2 main channels. First of all, in the closed-ended funds through our distribution partners, where we, for example, saw a fairly significant increase in the number of distribution partners between EQT IX and EQT X. Over time, we expect to be able to continue to scale both in terms of number of distribution partners as well as capital received from the actual end clients.Secondly, we launched our first evergreen private wealth strategy towards the end of the first half of this year called EQT Nexus. Having initially distributed the product in the Nordics, we're currently adding new distributors and regions, having just launched in Australia as well as in Asia. We expect to add additional distributors over the coming 12 months to 18 months on a global basis. However, as we've also said before, for us, this is a long-term opportunity and it will take some time for it to scale. As a reminder, we have one [ peer ] that launched a fairly similar product approximately 4 years ago, which is now around EUR 3 billion. Additionally, building on the EQT Exeter strong track record, we have received regulatory approval for the EQT Exeter Real Estate Income Trust called EQRT, which aims to acquire stable income-generating commercial real estate.The next step here is to invest in a couple of seed assets, which will be the building block for raising capital with distributors, mainly in North America. You should expect to start seeing that around Q2 next year. Private wealth will continue to be a growth area for us, with launching additional vehicles over time across asset classes and geographies, continuing to build out our sales force, as well as further strengthening the relationship with global distributors.Next slide, please. The fundraising environment continue to face headwinds, with global fundraising volumes being down more than 35% from peak levels in 2021. In general, fundraisings are taking longer than previous years, where newer firms or strategies are the most difficult as clients need to make tough decisions around allocations. During 2022 and early '23, we saw the denominator effect, primarily in the U.S. as a result of the weaker stock market. Today, similar to historical trends, it's more of a cash flow effect for the clients, where they need to see distributions before they can allocate to new funds. Increasingly, we're also seeing a strong correlation between performance in the last vintages and the ability to fundraise, as Chris mentioned, especially within private equity. Firms with less -- with relatively less strong performance will raise smaller funds today than their latest vintage, where we're seeing large global funds being down 15% to 20%.Those firms that have consistently delivered great performance are most likely to be the ones that reach their goals. In that group is EQT X, being raised in the tough years of 2022 and 2023, where we now have closed out just short of EUR 20 billion of fee-paying commitments. The final close will be held in Q1 '24, and we expect EQT X to close at or near its hard cap of EUR 21.5 billion. Already today, at EUR 20 billion, the fund is up close to 30% versus EQT IX, and at hard cap, it will be up close to 40%. This is a strong testimony of our performance for our clients and the ability to deliver realized returns to those clients. As announced in connection with the H1 reporting, Infra VI held a strong first close with more than half of the fund being raised. As a market check, this was more than 20% of the global fundraising volume in infrastructure during the first half of 2023. Similar to how we did it for EQT X, after the first close, we allow for some time before we have the next round of closings, and we expect to close out fairly significant amount of capital, additional commitments for Infra VI before year-end. And as we previously communicated, we expect the fund to reach its EUR 20 billion target fund size during 2024. The other fundraisings, including EQT Future, EQT Active Core Infra, and the 2 EQT Exeter funds, are generally slower to raise, especially those that are in the lower risk return segment and some of these strategies may not reach their full target sizes.However, the BPEA EQT mid-market growth strategy is seeing strong momentum and will meet or exceed its ambition despite being a new strategy. Over the last years, we have invested heavily into our capital raising capabilities. And that team has gone from 45 people at IPO to being 160 people today. Furthermore, significant digitalization efforts have been made in order to make it easier for clients to invest, communicate and collaborate with us. All of these efforts are important in today's market, where the benefits of scale really comes into play.I will now hand over to Olof, and next slide, please.

[Olof Svensson, executive]

Thank you very much, Gustav. During the third quarter, the EQT funds announced investments and realizations of about EUR 2 billion, respectively. Investments included among others, Dechra through EQT X and EQT Growth invested in Gympass, a U.S.-based fitness and wellness benefits platform. BPEA VIII invested in Indira IVF, India's largest chain of fertility clinics, and VetPartners, a provider of veterinary and animal health services in Australia and New Zealand. VetPartners is an excellent example of the benefits of having integrated EQT and BPEA sector teams, leveraging the European experience in the sector to originate and execute an investment in BPEA VIII.In real estate, the investment pace has picked up somewhat relative to early 2023, but remains low due to debt availability still being lower and continued discipline in investment decisions. There's been talk about green shoots in capital markets for some time, and the debt capital markets saw the best quarter since early 2022, and the environment has turned increasingly borrower-friendly with banks starting to become more active in addition to private credit and high yield. Technicals are supportive, capital is available, but M&A and thus, loan supply has been sparse. In terms of equity markets, we've seen placings and select IPOs, but the activity is yet to firmly pick up. In the third quarter, the EQT funds announced the realizations of Schulke, a leader in infection and prevention -- infection prevention and treatment for the health care industry by EQT VIII, and LimaCorporate, an Italian-based orthopedic manufacturer by EQT VII, and Coforge in India by BPEA VII.Next slide, please. As you will know, lockups related to 87 million shares expired in September, and about 49% of the EQT share capital is now subject to lockups. Today, EQT is included in most of the major indices, including the MSCI ESG Leaders, Dow Jones Sustainability Indices, the ISS ESG, and FTSE for Good Indices. The lockup expiries are expected to increase EQT's free float and index weight in certain indices. And I would remind you that lockup expiries are not equal to share sales. Each individual decides based on their individual circumstances and preferences as to how they want to manage their shares that have been released from lockup. To the extent shares do become for sale among current or former employees, such processes may be coordinated by EQT. And as a reminder, the purpose of coordination is to ensure partners are coordinated between themselves and that they act in a coordinated way vis-a-vis the market. Over time, these factors may contribute to improved stock liquidity, higher index weights and a more diversified ownership base.With that, over to you, Kim.

[Kim Henriksson, executive]

Thank you. And next slide, please. Thanks, Olof. Good morning, everyone. And starting with fund valuations in our key funds, they remained largely flat during the quarter, with the exception of BPEA VIII and EQT VIII, which saw a small uptick in their valuations, and EQT VII, which decreased slightly. Let me comment on the selected drivers here. The companies in the key funds are seeing robust underlying operational performance and double-digit revenue and EBITDA growth. In a large portfolio such as ours, you will also have companies not tracking plan from time to time, but we do not see any systematic issues. The translation effects of FX rates have not been working in our favor, and multiples have shown varied development but are, on average, somewhat down over the period. Taken as a whole, however, and over the time period of this chart, you will notice that the key fund valuations are at least flat, and in several cases up, typically due to the active ownership approach and value creation agenda. All key funds continue to develop on or above plan. The portfolio companies have also worked actively to manage the higher interest rate environment. Across the whole portfolio, only about 3% of company debt matures within the next 2 years, and we are already actively addressing future maturities.Next slide, please. The fee-generating AUM was relatively flat during the third quarter. Gross inflows in the quarter were primarily driven by increased commitments in EQT X of around EUR 2 billion. Gross inflows over the last 12 months includes the AUM from BPEA as you know. Let me take this opportunity to remind you of the earnings model of ours. We have committed capital from our clients, often large pension funds or sovereign wealth funds for 10 years to 12 years and sometimes longer than that. The management fee we earn on the commitments is not related to the underlying value of the assets. In addition, we have historically always created carried interest in our flagship funds and we have significant carried interest to come if our funds continue to develop on or above plan.Next slide, please. We mentioned several quarters ago that our headcount growth will be lower and more targeted. This has also been the case. We have continued to invest in talent and increase personnel but at a slower pace than in the preceding years. The majority of the headcount increase during the last 9 months was driven by hiring within private wealth, which, as you know, is one of our key hiring areas that we will continue to prioritize going forward. We will also continue to grow in North America. Our central platform has been invested in over the last few years. Headcount has now remained largely flat over the last 9-month period and hiring in the future will also be limited. The focus is now on scale, efficiency, and continued digitalization of the platform.With that, I hand over to Chris. Next slide, please.

[Christian Sinding, executive]

Thank you, Kim. So before turning to Q&A, let me summarize a few key takeaways. First of all, diversification and differentiation have become all the more important in this market environment we're now in. Being solely focused on active ownership means being solely focused on performance. And the benefits of our globally diversified platforms -- platform is evident. In the third quarter, we unlocked highly thematic investments through the collaboration between our integrated global sector teams. And it's our differentiated performance track record, which really supports the growth that we're seeing across our flagship fundraises. Our clients continue to invest with us across vintages.They increase their allocations to EQT, and we now have almost 1,200 clients globally. We're at the early innings when it comes to private wealth. It's a long-term game, but we're quite excited about Nexus and the upcoming EQRT REIT. This is a strategic priority for us to scale such products over the long-term. As you know, there's a tremendous need out there for capital to fund areas such as the energy transition, the digitalization of societies or the health care systems. We're excited about those investment opportunities. And we're adding expertise to bolster our teams in priority sectors and regions and in private wealth. Furthermore, we're in the early phases of evaluating new strategies within our core focus areas. And of course, during this time, we're continuously sharpening our value creation playbook, be it in the areas of digitalization, AI or sustainability or across the board. And we have more than EUR 50 billion of dry powder to invest in what we believe will be a very interesting vintage.So with that, we open up for the Q&A. Thank you.

[Operator]

[Operator Instructions] And now we're going to take our first question. And the question comes from the line of Ermin Keric from Carnegie. Excuse me, Ermin, your line is open. We will proceed to the next question. Just give us a moment. And the next question comes from the line of Arnaud Giblat from BNP Paribas Exane.

[Arnaud Giblat, analyst]

Yes. I've got 3 questions, please. Firstly, could we look at the portfolio valuations? So you're talking about, on average, double-digit EBITDA and revenue growth for quite a few number of quarters now. Yet, we're not seeing much progress now in terms of the multiples of the valuations which portfolios are held at. I'm just wondering if you could talk a bit more about the dynamics there in terms of multiple compression and other elements? I think you mentioned ForEx, what contribution did ForEx have there in terms of holding back those valuations? Also, the exits that you've had, have the -- what's been the average uplift which these have happened? My second question is on deployments. So quite a slow quarter for deployments. How does your pipeline look like if I'm looking at over the next 3 months, 6 months? And finally, you talked about the new distribution channels in wealth. I was just wondering if you could give a bit more color there, particularly in North America?

[Christian Sinding, executive]

Thanks. You want to go first?

[Kim Henriksson, executive]

Yes, I can kick off. On the valuation topic, yes, as you know, we have about 10 key funds and more than that in total, 50 funds or so. So it's quite difficult to summarize in sort of -- because you're going to have different movements between different funds. But in summary, the FX point is not a major one, it's just a translation effect really. I'd say that the main things impacting the valuations is that we have continued to have very robust performance in these companies. So that's a positive.At the same time, there has been multiple compression. Over the 9-month period, it was approximately 10% on average over the key funds. But that's sort of just one number out there. There's going to be multiples moving in different directions. I'd also remind you that if you have a 0.1x MOIC pickup in a fund, that could actually be a pretty significant underlying valuation uptick in that fund, either because it has -- it's from a low base if it's a recent fund or because a significant part of the fund has already been disposed of, in which case the assets that you can actually impact the fund MOIC with is a small proportion. So there has been a valuation uptick over the period here.

[Christian Sinding, executive]

Thank you, Kim. Now with regards to deployment, we have this two-pronged approach, which we're pretty unique about with being local with locals in every single country and investing thematically across the world. So our deal flow remains actually very strong because we have deal teams all over the world sourcing from those 2 different angles. Now that doesn't mean that we immediately turn up the heat and do a lot of investments. What we try to do is create a robust portfolio for the future. There's still movement between sellers and buyers. Now we're getting closer. So you see a lot more activity. But we want to make sure that when we invest this vintage that will -- it will deliver the best it can. And probably we're on something like a 3.5-year type of cycle in terms of investing our funds. So that means that we also need to pace ourselves, wait for the right opportunities and the right sectors, the right geographies, create the right portfolio construction. So there's both art and science in the deal-making. But from a deal activity point of view, it's significant. And also from every single source, whether it's corporate carve-outs or families or public to privates or whatever. So that's actually also a real positive for the future. Gustav?

[Gustav Segerberg, executive]

And on the distribution partners, I would say, as you saw on the slide, if you think about this from an EQT IX versus EQT X context, we more or less doubled the number of distribution partners that we're working with on that specific fund. And I think that's, of course, how you should think about it, both in the closed-ended funds, but also in the evergreen structures that over time, we will continue to strengthen the relationship with these as we add capabilities and capacity on our sales force that are really the ones that are speaking to the distribution partners. And then specifically around North America, of course, our core strength is in Europe and now through the acquisition of BPEA also in Asia. When we think about the opportunity, we really see it on a global basis, including North America. But of course, on a relative basis and compared to some of our, let's say, North American peers, our strength is mainly going to be in Europe and Asia.

[Operator]

And now we're going to take our next question. Just give us a moment. And the next question comes from the line of Bruce Hamilton from Morgan Stanley.

[Bruce Hamilton, analyst]

Yes. Thank you for the slides and comments. Three from me. On the M&A environment, as you said, it sounds like there will be further opportunities. When you think -- I think the past comment you made was that you filled in the big gaps, so we should be thinking more sort of bolt-on. So I just wanted to check if that's still the right way to think about it? And any change in your view on the attractions or a lot of credit? Obviously, you talk about sort of active ownership being key, but obviously, there's quite a lot of demand on the credit side. So I just wondered if that was changing at all?Secondly, on sort of Gen AI and Motherbrain, obviously, you look quite well positioned, but can you talk us through maybe a few areas where you're currently trialing things or where you think that the initial impacts will be felt in terms of efficiency potential? And then final point, just on sort of higher rates for longer, clearly the financing path over the next couple of years looks pretty modest, given that 3%. But I guess if we're at a much higher level beyond 2025, how would you think about the risk there in terms of potential impact on fund IRRs relative to history for the stuff that was deployed in '20 and '21?

[Christian Sinding, executive]

So the M&A environment, yes, we are doing bolt-ons as well. It's -- but also there, we're trying to be quite selective and thoughtful to make sure that during this time when interest rates are higher, there's geopolitical unrest, et cetera, that we're also deeply focused on making sure our companies are performing organically at their best, and that we're strengthening management teams, building robust systems, et cetera. So bolt-ons are active, and I wouldn't be surprised if they become even more active. But the comment is pretty similar between bolt-ons and overall new deals, where selectivity during this uncertain time is key. Now we have -- what we're also doing is in the portfolio companies building capabilities to drive consolidation, for example. So we own something like 280 companies now, and it's important that those companies build platforms that they can continue to accelerate beyond our ownership.And yes, I think I'll answer it in those ways. We're always looking at every single value creation driver for each single company and really applying and helping with the tools to make sure that rather than us doing it for the companies that they build those capabilities that can accelerate. And then we come with capital expertise and a really, I'd say, forward-leaning mindset to drive these companies to their full potential. So on the credit side, no change in our view there. We want to be -- and we think we are one of the absolute best at driving active ownership at creating returns for our investors and strategies where we're actively owning buildings or actively owning companies. It's quite a different philosophy to be a lender to have someone else work with your capital. And therefore, well, that's on the one hand.On the other hand, the credit space, you need to be very large for it to really scale. It's a lower margin, more commoditized part of the industry. The big players have $400 billion, $500 billion under management and huge systems. And that's great for those specialists. But for us, I think we have plenty of opportunities to continue to grow and perform in the related areas that we're in, real estate being the biggest sector of all capital markets in the world, infrastructure, which is growing and will grow for the foreseeable future for a long, long time with the transitions of society, and then, of course, everything related to private equity as well. So that's where we are on that question. Then the next one was Motherbrain. Olof, you want to take that?

[Olof Svensson, executive]

Sure. So as you know, Bruce, Motherbrain originally was established to help us screen for new deals. And it's something that we originated in the ventures area to source and identify the investment opportunities that we wanted to pursue. That has then developed into both something that we rolled out more widely across the various investment teams with the same application and using the data as a corporate memory to improve our decision processes. Today, we have about 40 people that are working in the team led by Alexandra Lutz. And I think the next steps are also to engage -- continue to engage with the portfolio companies and advising them on how to integrate AI where applicable in their processes in terms of efficiencies or whatever it might be. So an area that we continue to be very excited about. And I think focus will also need to be on really diving the tangible applications for AI across portfolio.

[Christian Sinding, executive]

Kim?

[Kim Henriksson, executive]

And on financing, just like you say, Bruce, the next couple of years, we're in very good shape in the portfolio, only some 3% debt maturities. And we are already working on the maturities beyond that time period. Of course, what it means is that when you roll off fixed rate financing, you're going to refinance at what is a higher rate. And that would everything else equal impact your returns. But everything else is not equal. I would come back to what Chris here mentioned on that we are an active owner and we are working with those companies and becoming better and better at creating value, driving their strategies, becoming more sustainable, et cetera.So we do not see that as a major risk. I would also just highlight that, again, the current interest rate environment is not abnormal in any way. It was the period here before that was strange with negative interest rates, et cetera. And in EQT's 30-year history, we have experienced these kinds of levels before many times. And we know that we can create value in these kinds of interest rate environment. So it's just a normalization of the interest rates.

[Olof Svensson, executive]

And operator, if I may squeeze in. Carnegie had some issues with reading up their questions that I've received them by email and they have from Ermin 2 questions. One regarding the balance between value creation versus driving exits and distributions to support cash flow to investors and clients in extension, enabling them to participate in the upcoming funds. That's part one of the question. And the second question relates to M&A. And Ermin is asking regarding M&A opportunities, seeing U.S. competitors source a lot of capital from insurance subsidiaries, would this be a route EQT could consider?

[Gustav Segerberg, executive]

Yes, and I can take those. I think on the first question around balance, I think there is a double balance there both in terms of -- as Chris alluded to in the beginning around acquiring companies that there is a balance there in pacing how we invest the funds to make sure that we come back at the right time for the clients. And given, let's say, our deal flow, we feel very comfortable that we could invest it even quicker if we wanted to, but there is a balance there that we need to make sure that we come back at the right time.And then on the other hand, of course, there is also a balance around value creation versus realized exits. We, of course, come from a track record of having more or less all of our flagship funds or top quartile in terms of DPI, in terms of making sure that we are providing capital back to our clients. And we will continue to do that to make sure that we find that fine balance between, of course, long-term value creation and making sure that we also have realized returns for the clients. And on the second question around M&A and insurance, I would say that to a very large extent, the insurance market is tied to the credit market. And, of course, that's the majority of the capital that they get is related to the ties between insurance and credit. And I think until we see a change in that, it's probably unlikely that we would pursue something large within insurance. Of course, there are special situations where something might be interesting, but the large play is mainly related to credit.

[Christian Sinding, executive]

There's maybe one more perspective around credit, which is, for us, a positive, that private credit is now continuing to grow, huge amount of competition there, banks are actually starting to reenter, so a number of large buyouts the last couple of months have been financed through the syndicated loan market. The banks have the high yield market is open again. So for us as buyers of credit, this is a positive. And that's why we're also pushing back maturities and driving refinancings now. And you could ask yourself, is there -- is that boom that's happening in credit now, who's the ultimate beneficiary of that? We'll see. Next question?

[Operator]

Now we'll proceed with our next question. And the next question comes from the line of Hubert Lam from Bank of America.

[Hubert Lam, analyst]

I got 3 of them. Firstly, it was mentioned that some funds won't reach their target fund size. Maybe I missed it. But can you talk about what specifically these funds are? Would you consider it to be more challenged? And how big are these funds? That's the first question. The second question is on the headcount growth and costs. I know headcount growth has continued, but it's at a slower pace. Which outlook for costs for the second half versus the first half? I think previously you said that you expect the cost in the second half to be similar to H1. Is this still relatively still the case? And lastly, you've said that EQT X will likely reach or close to this hard cap or at a hard cap early next year. I'm just wondering also on the infra fund, I think you're so far targeting still the target size, but what do you think about that hitting its hard cap?

[Christian Sinding, executive]

Kim, you want to take the first 2 and then Gustav?

[Gustav Segerberg, executive]

I can do maybe first.

[Kim Henriksson, executive]

Yes, do it first. Yes.

[Gustav Segerberg, executive]

Yes, I can do it first and let him.

[Christian Sinding, executive]

All right.

[Gustav Segerberg, executive]

So on the comments around that certain funds won't reach its target fund sizes, it was related to the funds that I mentioned being, let's say, EQT Future, EQT Active Core Infra. So the ones that have a little bit of a longer hold. EQT Future had a -- has a hard cap or a target fund size of EUR 4 billion and EQT Active Core Infra has a target fund size of EUR 5 billion. So it was mainly related to those funds. And maybe on EQT X or the question around Infra VI, as we said, we expect to hit the target fund size. That's what we're commenting on right now. And, of course, we have the hard cap, which is [ EUR 21 billion ] versus the target, which is [ EUR 20 billion ]. But right now, the communication is around the target fund size.

[Kim Henriksson, executive]

And with regards to headcount and costs, yes, as mentioned, so headcount growth is going to continue to be muted, but we are not stopping completely. But you will see muted growth when -- and costs are, it's not a bad proxy to assume that H2 costs are in line with H1 as -- because the additional headcount, of course, comes in late in the year and doesn't impact costs dramatically. So I'd say that's a reasonable proxy.

[Operator]

Just give us a moment. And now we're going to proceed with our next question. And the next question comes from the line of Magnus Andersson from ABGSC.

[Magnus Andersson, analyst]

Yes. I have 3 questions. First of all, I know this is a difficult topic, but just on the deal environment, as you alluded to in the beginning there, there's been a lot of talk about green shoots for a couple of quarters. And it's -- you sounded a bit more upbeat as well in conjunction with the H1 '23 report. Obviously, things have remained quite slow and the deal activity has remained slow in Q3 as well. So my question is what changed? What was it that did not materialize? And is there any reason for why Q4 should be significantly better if rate worries remain? What would have to happen? Is there anything else in addition to just general capital markets activity?Secondly, related to that, Olof, I think you said at the H1 call that you perhaps could think a bit more creatively about exit processes and transfer of ownership, et cetera. If you please could tell us some more about that as it seems like it's needed? Thirdly, just on Infra VI. I guess your message, since it was flat quarter-on-quarter, is the message to us that it was a deliberate pause after the first close and that actually the outlook you see for Infra VI has not changed at all from what you said in the H1 '23 report?

[Christian Sinding, executive]

Thank you. Good questions. On the deal environment, the private markets are a bit peculiar because it's not a continuous flow of investing. We're investing in companies and there are 2 kind of high points during the year, typically before Q2 or in Q2 before the summer and in Q4 before New Year's. So there's some cyclicality, I guess. And if you look at -- we measure, of course, is the deals that are coming into the funnel and the number of investment committees that we're having and our expectation that which of those will come to fruition. So if you look actually even after September 30, we've announced one transaction in BPEA EQT. We have signed another or in the process of signing another transaction in another fund and a number of other ones where we're active. So we're not reading anything differently into the market now than we were in Q2.The only thing I'd say is that I think we or let's say maybe even the capital markets, we're hoping that the IPO market would be super attractive. If you read a lot of these investment banking reports, everyone was expecting the fall to be a boom time for IPOs, for example. And that's not really the case. There are a few. Performance has been not so great. So that's more the reflection that we're having is that the capital markets are still not humming. But our business, there's a lot of activity. And I think then we go back to the answers that Gustav and I gave on how we're deploying capital over time. Next one, Olof.

[Olof Svensson, executive]

And your other question, Magnus referred to the exit processes. And we think we're in a very interesting times where more and more of the value creation is taking place in private markets compared to public markets. And you see the statistics on, say, the number of companies that remain private compared to the number of companies that are actually publicly listed. And we think that we are increasingly coming to a point where public and private markets are converging in the -- in how we can drive exits. And when we think about exits for companies, it's very much related to what is the best ownership form for that company in order to continue to thrive. And we can see, for example, scenarios where some of our portfolio companies would thrive in an environment where they remain private, but we open up the ownership and distribute it much more widely. So you almost do an IPO type of process, but you remain a private company. And that could be one such idea. But again, it would depend on the nature of the company and what's good for the company development long-term and also, of course, the ownership interest in that.

[Christian Sinding, executive]

Yes, there are some questions in the market now around NAV financings where private markets firms lever up funds to drive distributions. That's not something that we do. That we believe is more in the financial engineering side of the equation rather than fundamental value creation. So this is about trying to drive innovation in the private markets and trying to run with the winners and drive even better portfolio construction rather than any type of financial engineering.

[Kim Henriksson, executive]

And lastly, on the last question around Infra VI, you should not see that this is in any way a change from the communication that we had in H2. We're still saying the same thing in terms of outlook. It's just that when we had the first close that happened in July, and as we -- similar to what we've had historically and what we had with EQT X, given that the clients have an incentive, a financial incentive to come in to the first close, there is also a little bit of a vacuum created in the short-term after that where we allow for the investor to take some time before we do the next closes. So you should -- as I said, you should expect to see fairly significant amount of capital being closed out in Q4 and then, of course, continuing into the first half of 2024.

[Operator]

And now we'll proceed to our next question. Just give us a moment. And our next question comes from the line of Nicholas Herman from Citigroup.

[Nicholas Herman, analyst]

Yes. I have 2 quick follow-ups and then 2 questions as well, please. So just on the 2 quick follow-ups on fund valuations, I hear that multiples have contracted by 10% year-to-date, but for Q3 specifically, could you just talk a little bit please about the drivers of the upticks in private capital MOIC? I guess BPEA VIII was mostly FX, but EQT VIII, I was a little bit surprised that despite low public markets. Could you just explain that one, please? The other follow-up was on deployment. Christian, I heard you mention the 3.5-year fund cycle approximately. Just curious, is that across the piece or is that more private capital specifically?And also just part of that, is that the current pace of fund cycle or is that kind of the expected pace as well going future even if things continue to improve? The other 2 questions I had, please, were one on cost and one on wealth. So you've talked about the cost outlook. I guess the hiring outlook is going to be fairly limited. I guess, would you expect similar headcount growth in 2024 as in 2023? And if so, I guess that suggests much more muted cost growth next year versus this year. And as part of that, I guess with catch-up season, particularly from Infra VI, that might suggest a notable improvement in FRE margin next year? And then just finally on wealth, I hear that you'll be the most -- you expect the strongest position in Europe and Asia. It also seems to be an increasingly common view that private wealth will consolidate to a handful of players. Do you agree with that view? I guess, where do you see the kind of the long-term position of EQT Wealth? And I guess, do you see yourself in that handful of key wealth players, please?

[Christian Sinding, executive]

Thank you. With regards to fund valuations, I don't think we're going to go into particular quarters. I think Olof -- sorry, Kim actually gave a pretty, a relatively detailed explanation. There's so many elements that play into valuations. I think what's important is the underlying performance and the long-term trends. Then the second question was the fund cycles. Yes, it's reasonably consistent across the funds. When we speak on these calls, we're typically talking about the flagships. So Asia Private Equity, Europe and North America Private Equity Infrastructure and Exeter's Industrial Fund in the U.S. And those are more or less on that cycle. Exeter normally invests a little bit faster than that. Real estate is a faster cycle. But, of course, right now, that area of the market is also quite muted, and the team is waiting for superb opportunities to invest after doing a huge amount of exits before the cycle turned. So I think I'll answer it in those terms. And then the third question is on costs. Yes.

[Kim Henriksson, executive]

On cost outlook. Yes, I mean, the headcount growth next year may be like this year or below. But I say that we will also continue to be agile and sort of react to how the market develops during the year either positively or negatively. So that could still change. We will be, of course, having with us the run rate costs from this year into next year then for the headcount that we already have. So take that into account as well.

[Christian Sinding, executive]

Gustav?

[Gustav Segerberg, executive]

And on the wealth, I think when you think about the market, as I said, over the coming 10 years, we expect $9 trillion of net inflow to come in. And, of course, the fundamental or -- and most interesting part of that is when you think about the full market, there is around 15,000 private market players that are taking in institutional capital. But as you say, when you think about that from a private wealth context, it's going to be much more consolidated. And as you say, probably there's going to be a handful that take a fairly large chunk of it. It's probably going to be room for a number of others, especially those that have broader market products. But the ones that are really able to provide significant deal flow returns on a global basis, there's only a handful of players. And we are, of course, one of them. And therefore, of course, we see that we have a very strong, let's say, place and right to win in that space over time. And it's, of course, a key reason why we think it's a super growth area for us in the long-term.

[Operator]

Now we're going to take our next question. And our next question comes from the line of Angeliki Bairaktari from JPMorgan.

[Angeliki Bairaktari, analyst]

Just a few from me, please. In terms of the EQT Future and Active Core Funds, can you give us an update on where we currently stand in terms of commitment? And is there a specific deadline after which you have to stop fundraising in those 2 funds? In terms of the equity component in new deals, I hear you on the financing, but I was just wondering, typically in private equity or private infra, we would imagine that a GP would put around 50% in committed capital and another 50% in debt. Has that percentage changed or shifted at all, given that the cost of leverage is now higher?Then on carried interest, what shall we expect with regards to the second half of this year? I mean, obviously, carried interest on the P&L has been relatively low over the past 12 months. I think there was a hope at the H1 stage that we could see an acceleration into the second half, but exits remain relatively slow based on what we've seen so far. So is it fair to assume that there shouldn't be a very significant pickup into the second half of this year based on sort of the exits that you have agreed already and the year-to-date?And one clarification on the fundraising cycle. Now you mentioned that you're on a 3.5-year cycle. Does that mean that if nothing else changes -- and I appreciate that things could change between now and 2025 quite significantly, but if nothing else changes, I guess the activation of the next EQT private capital fund would happen towards the end of 2025 and the next infra fund would then come in the beginning of 2026?

[Christian Sinding, executive]

Thank you. Go ahead, Gustav.

[Gustav Segerberg, executive]

Should I start?

[Christian Sinding, executive]

Yes.

[Gustav Segerberg, executive]

So maybe on Future and Active Core Infra, both of them are today in the, let's say, EUR 2.5 billion to EUR 3 billion bucket. And as I said, Future has a target fund size of EUR 4 billion and Active Core of EUR 5 billion. Future will be closed by the end of this year and Active Core will be closed in the first half of next year.

[Christian Sinding, executive]

Yes. On the second question, the components hasn't really changed that much, Angeliki. It's rather -- it's -- multiples have come down a little bit, which means that the total capital need has changed, the split hasn't changed so much. But it's rather changed in the sense that 2 years ago, you could borrow 7x, 7.5x EBITDA with the interest rates being where they were. Now it's more like if you were to maximize the potential is more like 5.5x or so, maybe 6x in very stable high cash flow companies. So that the amount of leverage compared to your EBITDA is lower and that's not unhealthy. If you look at where the markets are now, we're at somewhere around the 20-year average of interest rates. And as long as the market stabilize, I think from a private equity or private markets point of view, that's what we want. We want some stabilization, so we can go out there, do deals and drive exits and create value. [ Third one ] is...

[Kim Henriksson, executive]

Carry, maybe I can't -- I mean, we don't give guidance on carry, especially not here in Q3, but I'd say that it's a function of -- accounting carries a function of exits, like you mentioned and valuation upticks. And we've given you the components, so you can draw your conclusions for there. Just a reminder on the Future and Active Core Funds that they are charged on invested capital. So that's how it impacts the fee-paying AUM.

[Gustav Segerberg, executive]

And then maybe on the fundraising cycle, of course, when you -- I think, as we said, there's not a fixed answer. If it's, let's say, [ 3 or 3.5 ], it's there about, so to speak. When you think about this in the context that the fundraising, of course, needs to be balanced in terms of the 3 large flagship fundraises. So BPEA IX will most likely be the first one if you think about it from a percentage point invested and then the other two will follow. So I think that's how you should think about it, that the fundraising cycle will be somewhere between [ 3 and 3.5 ], and -- but that they also need to go a little bit in tandem.

[Christian Sinding, executive]

And we start fundraising typically when we're -- when we've exceeded 50% of capital invested in the fund, and then we close the fundraisings typically around 75% or so.

[Operator]

Now we're going to take our next question. Just give us a moment. And the next question comes from the line of Oliver Carruthers from Goldman Sachs.

[Oliver Carruthers, analyst]

So I just have one question. It sounds like there's decent momentum in the final portion of the fundraise for EQT X in this environment. And it will be around a 40% uplift in fund size vintage when it closes out or near the hard cap that you're not guiding. Are you able to share any color on how the LP competition has shifted from EQT IX to EQT X? So presumably the re-up rate is very high. But is this EUR 6 billion uplift? Is this more of a function of the increase in average ticket size from these clients or is it more driven by new clients committing capital with EQT in the particular lineage for the first time?

[Gustav Segerberg, executive]

I would say that it's a mix of the things that you took up, so to speak. So it's really, let's say, going from the EUR 15.7 billion or so up to the target of EUR 20 billion and the hard cap of EUR 21.5 billion, it's going to be -- it's a mix of a strong recommitment from our existing clients. And then, of course, between EQT IX to EQT X, a lot of -- a lot has happened in terms of us getting new clients. So you have a large pool of new clients coming in from Exeter, from BPEA and also organically, so to speak. So that's helping. You have the private wealth platforms as we've talked about also helping. So it's really a mix of the different elements. But I would say that on everything else being equal, the average ticket has gone up somewhat between EQT IX -- between EQT IX and EQT X.

[Oliver Carruthers, analyst]

Right. But would it be fair to assume that if you do hit or are very close to EUR 21.5 billion, the kind of EUR 6 billion delta, is it fair to assume the majority of that is new clients coming in through these channels that you mentioned rather than re-ups?

[Gustav Segerberg, executive]

It's fair to assume that a fairly significant part of the EUR 6 billion is coming from new clients. Yes.

[Operator]

And now we're going to take our next question. Just a moment. And the next question comes from the line of Tom Mills from Jefferies.

[Thomas Mills, analyst]

I just had a few questions, please. I guess firstly, strategies with core type returns as until recently you had a place in portfolio construction for LPs. But with rates where they are essentially higher for longer, how do you see those strategies varying from a demand perspective? It kind of feels to me like higher return strategies such as the ones that you're running with good performance should be able to capture relatively more in the way of flows. Then there appear to be tons of potential exit processes across the market at the moment just based on my inbox. I'm guessing that quite a few of those may not happen. Could you maybe talk about the stigma attached to sort of failed exit processes? And do you see that becoming a big problem across the market or do you think those assets can actually shift as conditions stabilize? And then the final question is, I think we've seen U.S. and European competition authorities increase scrutiny of PE roll-up stories in recent months. How are you guys thinking about that? Do you see it disrupting the value creation process across the industry and for you as well?

[Christian Sinding, executive]

Thanks. Good questions. So I think you're right that lower return strategies are more commoditized now with higher risk free rates. If you look at our strategies, they're typically core plus or value-add if you want to use the terminology from infrastructure and real estate. And I think it's important that you're really delivering a premium above other alternatives in the market. So I do agree with you, and I think that's going to continue to drive capital whether it's from institutions or from private wealth into the types of strategies that we're managing.Now exit processes, yes, there's always a stigma and a failed exit. Maybe more important also is the time from management that it takes and also from us, but most importantly, from the companies themselves. So we try to be very thoughtful about when we start exits. And if you look at EQT across the board actually, we are leading in terms of DPI, that's distributed to paid-in capital cash to our investors in more or less every single fund, which means that we've actually sold a lot compared to our peers, and that is important for our clients, but it's also important in terms of managing that portfolio and not having that intense pressure that might be out there for some people.And the third one was, oh, yes, the regulations. We're, as a public company, coming from originally from Scandinavia. We're quite transparent. That's one of our key values. We like to work with regulators. And we think a lot of the time, regulation can actually facilitate building an industry, creating more credibility in the industry, creating more transparency with all stakeholders and society. And now that we're also increasingly having private wealth, private individuals investing in our strategies in this industry, that's also important. So we're not particularly concerned about regulations unless something very peculiar would happen. So I think it's a natural tendency for any large industry to have some structure around it.

[Operator]

Now we will proceed to our next question. And our next question comes from the line of Isobel Hettrick from Autonomous Research.

[Isobel Hettrick, analyst]

I have 2, please. So the first is on fundraising. And have you seen any direct impact on fundraising from the increased geopolitical uncertainty so far or do you think it will be mainly contained to indirect impact by a slowdown in exit for net distribution? And then my second question, please, is on ESG. So in your opening remarks, you touched on the fact that ESG is very much a cornerstone of your value creation. So I therefore wondering what you think, if any impact, the potential consultation and reform of the [ SFTR ] will have on EQT, and presumably, it will have a limited impact on how you build out your investment strategies and portfolios. But I was wondering as well how many of your clients are raising or giving capital to you because your funds are Article 8 as compared to some peers who might not have Article 8 or Article 9 compliance funds?

[Christian Sinding, executive]

Thank you. Gustav?

[Gustav Segerberg, executive]

Yes. I would not say that we've seen any direct impact from the geopolitical side. It's, of course, always hard to, let's say, say what are the effects and what you can't into that. Of course, we've had a large effect from the whole Russia-Ukraine situation for a long time now. But if you talk about, let's say, the recent events in Israel and [ Palestine ], I think it's a little bit too new to have a direct impact. I think, of course, with increased geopolitical tension, it will have an impact on the global economy and therefore, of course, also on the exit possibilities. And as you know, those are, of course, tied to fundraising. So you will have direct indirect effect, but very limited direct, I would say.

[Christian Sinding, executive]

And thanks for the sustainability question. Yes, it's -- sustainability is a key part of how we think about owning companies and buildings. We are -- as you know, our -- we were actually the first public company in Sweden to enter our purpose into our Articles of Association. We are the first private markets firm to sign up to the Science-Based Targets and commit our companies to sign up with the Science-Based Targets. And we think all these elements are important. CSRD and other regulations for reporting created a lot of work for us, ourselves, our funds, our portfolio companies. But it is important actually that reporting starts to work so we can see that sustainability has a positive impact on the businesses. So that's the kind of mindset that we have. And we have the size and the scale with specialist teams internally to be able to handle that increased regulation. And most of our funds are Article 8, which have Future -- EQT Future is Article 9. And yes, everything else equal, I think that's an advantage that we are on the forefront of this important part of owning companies. Thank you.

[Operator]

Now we're going to take our next question. And the next question comes from the line of Sharath Kumar from Deutsche Bank.

[Sharath Ramanathan, analyst]

So most have been answered but I still have one pending, and I basically wanted to dwell a bit further on [ group ] fund valuations following upon [indiscernible]. So EQT VIII, EQT IX, where we invested a sizable chunk in 2020, 2021. I still see that the fund valuations are broadly flat. Hello? Am audible?

[Christian Sinding, executive]

Your line is not very good. Could you speak up and speak slowly, please?

[Sharath Ramanathan, analyst]

Is it any better now?

[Christian Sinding, executive]

Yes. Thank you.

[Sharath Ramanathan, analyst]

Yes. Sorry about that. So I'll again repeat. So I wanted to dwell a bit further on the fund valuations, especially in private equity funds, EQT VIII and EQT IX, where we invested a chunk in 2020, 2021. So as far as consolidated valuations in these funds go still flat, but when I look at some of the underlying portfolio investments, I know you do not comment specifically on individual investments. But when I look at some examples, say, like an example, zooplus, where the competitive -- listed competitor is down 90%. So just wanted to get a sense in terms of the various moving parts, again, just to give more comfort that the marks that you have are still conservative?

[Christian Sinding, executive]

Well, yes, it's just like you said, we're not going to go into that level of detail. I mean, both of these funds would have 15 to 20 investments in the -- and this would have been a period when we would drive a lot of value in those investments during our ownership period. So that they are flat is a function of the multiples and other things going down at the same time. So that's sort of the big picture mechanics around it. I'd probably leave it at that.

[Operator]

Thank you. There are no further questions. I would now like to hand the conference over to our speakers for any closing remarks.

[Christian Sinding, executive]

Thanks, everyone, for your questions or engagement and your continued support. Have a great day. Bye-bye.