Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EQT AB (EQBBF, Financial) concluded the fundraising of EQT 10, EQT Future, and the Asia Market Growth Fund, raising inflows of approximately EUR 7 billion.
- Fee-paying AUM increased to EUR 133 billion, with active fundraising efforts for Infrastructure VI expected to conclude this year.
- Equity revenues grew by 7% compared to the first half of last year, driven by higher management fees.
- EQT AB (EQBBF) launched several new initiatives, including a liquidity forecasting tool for investors and an AI-powered assistant for due diligence.
- The company opened new offices in Warsaw and Bangalore to drive efficiencies and support global investment teams.
Negative Points
- Carried interest was lower at EUR 40 million due to relatively low volumes of completed realizations.
- Realization volumes across private markets were at decade lows in 2023, impacting liquidity for clients.
- Fundraising times have continued to be extended, with realizations needing to pick up materially for improvement.
- The company expects costs to be somewhat higher in H2 due to investments in private wealth and branding efforts.
- Exit processes still face challenges with bid-ask spreads not fully converged, requiring conducive market conditions for materialization.
Q & A Highlights
Q: Investments are growing faster than exits. Does this mean you expect a bigger pickup in realizations soon to keep up with investments and fundraising?
A: We see many investment opportunities globally and are generating a lot of deal flow. We believe deploying capital now is right for the long term. We have many exit processes ongoing and expect more in the next six to twelve months, depending on market conditions. β Christian Sinding, CEO
Q: How should we think about costs for the rest of the year? Will H2 costs grow above H1?
A: We are growing, so costs will be somewhat higher in H2. We are hiring for private wealth growth, investing in our brand, and increasing headcount in higher-cost regions and functions. β Kim Henriksson, CFO
Q: Nexus NAV growth was marginal. Why has growth been slower, and what is the potential size for the new EQRT fund?
A: The Nexus NAV number is net; we are still taking out some seed capital. We expect growth to increase as we onboard new distributors. For EQRT, it's early days, and we don't expect significant flows in 2024 due to the tough market for REITs. β Gustav Segerberg, Head of Business Development
Q: On valuations, is the value creation broad-based or driven by a few holdings?
A: The valuation uptick is broad-based. We have a large portfolio, and while some companies stand out, the overall earnings and revenue growth have been strong. β Kim Henriksson, CFO
Q: Can you provide details on the carried interest in H1 2024?
A: The carried interest was primarily from BPEA VII and EQT VII. For future exits and carry, refer to the chart in the back of the pack showing which funds are in carry mode. β Kim Henriksson, CFO
Q: Are LPs facing pressures in financing their commitments due to lack of distributions?
A: No, there are no such problems. This is a cyclical element, and we believe the situation will normalize as exit activity increases. β Christian Sinding, CEO
Q: Can you provide more details on the private wealth products being launched in the US?
A: We are working on two initiatives in the US targeting private EQT and infrastructure. These are expected to launch in six to twelve months with strong distribution partners, including wirehouses. β Gustav Segerberg, Head of Business Development
Q: How should we think about the AUM development from here?
A: AUM development will be influenced by both exits and new fund activations. We expect BPEA IX to be activated in the first half of next year, which will contribute positively. β Kim Henriksson, CFO
Q: Can you explain the impact of new investments on adjusted carry recognition?
A: New capital contributions come in at 1x gross MOIC, which has a dilutive effect on the fund's MOIC if it is higher than one. This capital also has a 30% to 50% discount when applied to the carry waterfall. β Kim Henriksson, CFO
Q: What is the mix of exit pipelines between public and private markets?
A: Historically, about 20% of our private EQT exits have been through public markets. We expect a similar share going forward, with significant appetite from strategics and continued IPO activity. β Olof Svensson, Head of Shareholder and Bondholder Relations
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
