EQT AB (publ) (EQBBF) Q4 2022 Earnings Call Transcript

EQT AB (publ) (OTCPK:EQBBF) Q4 2022 Results Conference Call January 18, 2023 2:30 AM ET

Company Participants

Olof Svensson – Head of Shareholder Relations

Christian Sinding – CEO

Kim Henriksson – CFO

Gustav Segerberg – Head of Business Development

Conference Call Participants

Hubert Lam – Bank of America

Arnaud Giblat – BNP Paribas

Ermin Keric – Carnegie

Michael Werner – UBS

Oliver Carruthers – Goldman Sachs

Magnus Andersson – ABGSC

Bruce Hamilton – Morgan Stanley

Angeliki Bairaktari – J.P. Morgan

Nicholas Herman – Citigroup

Jakob Brink – Nordea

Olof Svensson

Good morning, everyone, and welcome to EQT’s Year-End Announcement. In addition to Christian and Kim, today Gustav, Head of our Business Development team will be participating in our quarterly webcast and will do so from here on. We will present the results for about half an hour, as normal, before opening it up to Q&A. 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, a new procedure.

And with that, I’ll hand over to Christian. Next slide, please.

Christian Sinding

Thank you, Olof. Good morning and welcome everyone. 2022 was the most transformative year in EQT’s history, despite the headwinds and uncertainties during the year. Through the combination with BPEA, add-ons and real estate and life sciences and new funds, we created a diversified global leader in active ownership strategies. We strengthened the EQT’s Executive Committee, reflecting our diverse global footprint and on our added focus on scaling the platform. We had an active fundraising agenda with the successful close of a number of funds, including in growth and ventures, and made good progress in our flagship fundraisings.

In the business lines, EQT continued to make selective thematic investments, and we drove and preserved value across all of our existing portfolios, with all key funds continuing to perform on or above plan. However, the deterioration in market conditions, of course, resulted in a drop in investment and exit activity and value creation was largely flat, despite robust performance in our portfolio companies. As a result, reported carried interest was lower and we slowed down our hiring pace with additional focus on cost and efficiency.

And as you can see on the right, the combined EBITDA landed at EUR1.06 billion for the year. Having activated the latest generation of flagship funds, management fees are set to grow in 2023, while we do scale our global platform. Recently, we’re seeing signs of the macro situations and markets turning more constructive, which is good, but we do plan for continued uncertainty. The fundraising market will continue to be affected by lower liquidity for investors for some time, which is now resulting in longer fundraising timelines.

On the investment side, with a global platform, a team of exceptional people, and more than EUR50 billion of dry powder, I’m quite confident in our ability to seize investment opportunities ahead. And our deal flow remains solid. The long-term trend to investing in private markets remain strong, driven by our proven ability to generate good risk-adjusted returns. And many investors across the world remain under-allocated to the asset class.

Having said that, deal activity across private markets is somewhat cyclical, as we saw in 2022. But at some point, markets and activity levels will rebound and the longer trend of private markets remains positive and growing. We’ve also seen a more constructive start to 2023. Whether the current situation turns out to be a shorter downturn or a recession, our priority is always to come out stronger, and this requires sharpening our future-proofing capabilities and continuous decisions in managing our portfolio and transactions. With EQT’s governance model and the insights we gained from our 250-plus portfolio companies globally allow us to do exactly that, and that is to take action.

Looking back, some of the best investments were made in times of volatility. After the financial crisis we did some strong deals, such as Atos Medical, KMD, Tampnet, and Anticimex, deals that delivered between three and 10 times gross multiples of invested capital. And since then, we’ve sharpened our thematic investment strategy, sharpened our portfolio construction methods, and have much deeper value creation skills and tools to create long-term value.

Looking at past cycles, our key funds have always delivered at least two extra turns and as always, generated carry. And we have 10 years plus of time in each fund to secure such returns. But the journey hasn’t always been smooth, we’ve seen IPO windows come and go, funding markets dry up, higher interest rates and deep recessions and market corrections like the dot-com implosion and the financial crisis. But we always maintain a long-term perspective.

So in this recent hot cycle, we did not maximize leverage in our portfolio companies. We did not pursue hyped assets or financial engineering, like SPECs or cryptocurrency. Nor did we assume that valuation levels will remain at record high levels in our underwriting. And in fact, the average expected exit multiple in EQT IX was four times lower than the entry multiple.

So we want to own the right companies and assets, supported by long-term macro trends which we can transform through active ownership. Resilient market-leading companies also see robust valuations throughout the cycle. And our deal flow remains strong, supported us by being local with locals in every single country where we invest.

Our investment approach is built upon the belief that delivering strong returns goes hand-in-hand with creating a positive impact. And that these are mutually reinforcing, in fact. With our scale, the value of the assets we manage is more than EUR210 billion. We make a difference as an active owner, like committing all of our companies to the science-based targets. Over 1,000 clients globally trust us with their capital, and most of our clients are managing capital for pensioners and savers around the world. Thus, we have a responsibility to develop these companies in a manner which creates long-term value.

Under EQT ownership, we work to future-proof our investments. We create more sustainable companies that will attract the best people and have resilient business models which digitize operations, invest in R&D and in people, and we build global platforms through consolidation. Of course, we also need to drive efficiencies and cost measures when needed, and drive transformation of industries like, for example, GETEC Energy Services, which we exited last year.

Over the past years valuations have benefited from low rates and availability of capital. As these tailwinds abate, it will be more important than ever to transform companies and assets through active ownership in our view. To grow revenues, expand margins, gain market share, derisk assets. And this is what active ownership means. Take IFS, for example. Since 2015, we’ve appointed a new management team, upgraded the organization, almost tripled sales and more than doubled the margin. We’ve sharpened the company’s focus on five core verticals, strengthened the sales force and accelerated new customer acquisition, becoming a global leader and making more than nine times multiple of invested capital.

EQT is well placed to continue to make attractive investments is now clearly — and now is clearly an interesting time to invest. We have EUR50 billion of dry powder at our disposal. We’re local with locals, as I said. And we have the people and the EQT network advisors, more than 600 of them, to support due diligence and bring deep sector expertise to our companies and management teams. And valuations and the bid-ask spread between buyers and sellers is starting to settle.

We invest in sectors supported by secular growth trends, often providing essential services to society. In private capital, we have Envirotainer and SPT Labtech in health care. We actively pursue public to privates like Billtrust and va-Q-tec, and corporate carve-outs as well. These are areas where we have deep experience, also including tech service transactions, for example, in Asia.

In real estate, we’re investing in sound locations, primarily in logistics supported by long-term trends. We improve the assets and we have strong relationship to lease space with our hands-on approach to global blue chip tenants. We upgrade those assets to the highest energy efficiency, making them more sustainable and more valuable.

In Infra, we have strong deal flow across sectors, all of which are connected to important societal themes, such as climate and energy transition where the need for capital and competence is immense. With an estimated incremental annual $3 trillion of investments for energy and land use systems to deliver on net zero ambitions by 2050, as well as the digitalization of society and the aging populations. So I’d actually like to show you what this means in practice with a short video.

[Video Presentation]

I hope that brought some of our investments to life. Good. So resilience and value creation, these are not given in any business. We’re continuously evaluating risks and reassessing value-creation plans in all of our investments. And to mention a few recent examples, we were early to extend debt maturities in our companies and focus on pricing and procurement when the market shifted. We reviewed and upgraded Boards and management competencies, accelerated bolt-on acquisitions and performed a full re-underwriting of the private equity portfolio to ensure that we remain on track in our funds.

The conclusion is that, we have a robust portfolio. On average, portfolio companies grew revenues more than 20% last year and EBITDA growth was close to 18%. Having said that, we also do have pockets of underperformance. Certain companies have been impacted by COVID lockdowns, supply chain issues and rising labor costs. And while top line has been robust in most cases, some of these companies have seen slower EBITDA growth in the last year.

In real estate, similar to other businesses, we’re focused on sectors with long-term demand drivers and robust supply and demand fundamentals. Despite the uncertain market situation with higher interest rates and softer global demand for real estate, the net operating profit from our properties continue to grow close to double-digit.

The fundraising market has become somewhat more challenging and timelines are being extended, also for flagship fundraisings. So fundraisings which took less than 12 months before the downturn, will now probably take more than 12 months to raise in the current environment. We have the capacity to make that happen.

Looking back at the last four to five years, institutions have increased their commitments to alternatives. Fundraising cycles have been shorter than normal, and given the strong performance in private markets, institutions have reallocated capital from public to private markets. At the same time, financing in M&A markets were wide open and the net liquidity for clients was positive. The main driver of the softer fundraising market currently is less liquidity. As the financing, M&A and IPO markets were closed or constrained in 2022, institutions were getting some less money back. And thus new commitments actually exceeded distributions last year.

Having said that, 2022 was a strong fundraising year for EQT. In fact, we raised more capital than we have ever done in any year before with EUR31 billion raised. EQT also has strong relationships with its clients. We distributed EUR40 billion over the last 24 months in exits, and we’ve continued to realize the exits, notably at or above valuation marks during the past year. We have a young portfolio and a strong performance across the board, as you see, and we’re investing behind strong secular trends.

As we enter 2023, our immediate priorities are to realize the full potential of our recent combinations. For example, the private capital sector teams are now working as one global team, sharing insights and working together. With a more challenging fundraising environment, we’ll work with our clients to complete ongoing fundraises and scale our recently launched new initiatives. And we’ll continue to optimize our global platform while strengthening our future-proofing capabilities across sustainability, digitalization and artificial intelligence with Motherbrain. We continue to evaluate and develop new products, which would provide access for a wider set of private wealth clients to invest with us. And, of course, we’ll remain razor focused on performance, performance, performance.

So with that, I hand over to Gustav.

Gustav Segerberg

Thank you, Chris, and good morning, everyone. By way of introduction, I head up our business development and I’m part of the EQT’s Executive Committee. In the recent years, I’m focused on growing our global presence, leading the acquisitions of Exeter, LSP and BPEA. Today, I want to start by providing an update on the EQT Exeter transaction and the development since the acquisition, now two years ago. Since then, fee-generating assets under management have grown by almost three times and EQT Exeter is today a global top-10 player within real estate. In addition to the EUR22 billion of fee-paying AUM, we have another EUR4 billion of commitments which will be fee paying as we invest the capital.

Since the acquisition, EQT Exeter has had a very active exit agenda with over EUR10 billion in realizations, hence derisking the track record of the existing funds, both in the US and in Europe. These exits have been — mostly been large portfolio realizations, where the funds have sold the assets, but EQT Exeter continue to manage the portfolios through so-called managed accounts, and therefore, also continue to charge management fees. This is due to the unique setup of the EQT Exeter, being a real estate operator and being vertically integrated with an in-house leasing team and an in-house development management team. At the same time, EQT Exeter has also been very active on the fundraising side, on the back of industry-leading returns, and today we have over EUR12 billion of dry powder to deploy.

At the time of the acquisition, the key short-term lever was to scale up within logistics. And during 2022, we’ve raised both the value-add fund and the Core Plus fund in the U.S. The Core Plus fund is approximately three times larger than the previous fund. And the value-add fundraise is still ongoing with over $4.5 billion raised to date, hence more than doubling the size of the last fund, despite being raised in probably what’s the most difficult fundraising year for a long time.

The real estate market is experiencing uncertainties, with higher inflation, higher interest rates and global supply chain disruptions. EQT Exeter is, of course, also impacted by this, however, mitigated by the focus on sectors with long-term demand drivers in markets with stronger demand and supply fundamentals and also by the significant exit wave that we saw in 2021. Going forward, the focus is to take advantage of the repriced investment market with the significant dry powder, as well as to continue to expand into other sectors and asset classes, such as within multifamily.

Now moving over to BPEA. We’re very excited to have a scaled platform in Asia, especially in today’s markets, where we see weakness in Europe and North America, whereas Asia is providing a very interesting diversification opportunity with an uncorrelated cycle and different drivers of growth and return. Asia is supported by positive long-term trends across GDP growth and middle-class population, creating significant investment opportunities in the years to come.

As a result, the expectation is that private markets across Asia will grow significantly quicker than the rest of the world and that global firms, such as ourselves, will continue to take market shares. Having a large investment platform in Asia is also providing benefits with our Asia clients, as we can serve them better, provide better access to people and knowledge and build stronger relationships.

The Asia market has been relatively resilient over the past year, with continued investment and exit activity, and financing markets have been and remain more constructive. As a result, BPEA has used these markets to return almost 50% more than been invested in 2022, further improving distribution to the clients. Fund VIII is just over 15% invested, which means that we have around $9 billion of dry powder to invest. The first joint step in building out the platform in Asia is the mid-market growth strategy, using the existing team and platform to invest across technology, healthcare and services and where we’ve already done a couple of transactions, taking advantage of the current market opportunity. A key focus during 2023 will be to continue to work on a global cooperation, use best practices and learnings across the platform, in areas such as, for example, capital markets, sustainability, value creation toolbox and digitalization.

So moving into the client side, we continue to see a long-term growth potential within private wealth. Private wealth represents about half of the global wealth, and only 1% is allocated to actively manage alternative assets, which we, like many others, expect to increase over time. For us, this is a significant opportunity as private wealth today represents less than 10% of our commitments in the close-ended funds and we do not have any semi-liquid funds.

As most of you know, private wealth and especially the semi-liquid market is currently experiencing some headwinds, which we are closely monitoring. We’re focusing our efforts within private wealth on increasing the share from private wealth within our close-ended products by strengthening the relationships with our key distribution banks. And in addition, we’re also working — continuing to work around semi-liquid structures, and we expect to launch certain products during the course of this year.

I will now hand over to Olof to share a little bit more details on the ongoing fundraises.

Olof Svensson

Thank you, Gustav. Having raised EUR31 billion in 2022, the market is becoming more challenging, as we said. But we raised EUR31 billion over the past year, and that includes Ventures III at hard cap, EQT growth above target, the EQT Exeter’s fourth US Core Logistics Fund, and its second Office and Life Science funds. BPEA VIII closed at hard cap and we progressed various fundraisers, including our flagship fundraises.

If you look at EQT X, which was initiated in January 2022, this has commitments of EUR16 billion as of today, including commitments of about EUR1 billion confirmed in the first weeks of this year. We expect EQT X fundraising to be substantially completed during the summer. When it comes to BPEA, we are establishing a mid-market growth strategy. And as you know, we launched Infrastructure VI late 2022 and we have closed out about EUR3 billion. We expect a similar pattern to EQT X for Infra VI, with strong re-ups in the first close. Demand for Infrastructure is healthy, and we expect the vast majority of our Infrastructure fundraisings, including Active Core in 2023.

With regards to EQT Exeter, we raised $4.5 billion for EQT Exeter’s US. Industrial Value VI Fund and expect to wrap up fundraising above the original $4 billion target. And we have two further EQT Exeter fundraisings in the market currently.

If we look at our AUM development, in 2022, AUM increased by EUR39 billion or more than 50%. About half is attributed to BPEA. BPEA had AUM of about EUR22 billion as of closing. Step-downs of EUR9 billion refer primarily to the activation of EQT X and Infrastructure VI. EQT IX saw step-downs of about EUR2 billion and in Infrastructure V, step-downs impact about EUR5 billion. But Infrastructure V has made investments which had not yet closed and has capital earmarked for CapEx rollout, and this will actually increase the AUM by about EUR2 billion compared to the year-end numbers in our report.

Closed exits in 2022 reduced AUM by almost EUR6 billion and the AUM number is also affected by FX. The BPEA funds are USD-denominated and at the current FX, the BPEA euro equivalent AUM number is about EUR20 billion. And the EQT Exeter funds are largely USD denominated and the equity and infrastructure funds also have USD sleeves, which are converted to euro as we report our AUM numbers.

Let’s next turn to the investment activity. After a busy year in 2021, we saw investment activity drop by 40%, while exit volumes dropped by 60%. Broader market uncertainties resulted in a gap between buyer and seller expectations and financing markets were clearly constrained, which limited the scope for larger deals, in particular. We still did certain thematic investments in 2022 and EQT X is now 10% to 15% invested. Infra VI announced its first investment in December and is 0% to 5% invested. And deal activity remained solid in Asia, as Gustav said, with BPEA VIII being 15% to 20% invested.

Financing markets remain constrained and the rates are considerably higher compared to a year ago, of course, but there are signs of a marginal improvement in the debt markets. We continue to see debt packages of EUR2 billion to EUR3 billion being feasible and for the right situations, there could be scope to do larger debt financing, including bank funding we think.

With regards to our existing portfolio, financing structures remain robust. Infrastructure, we recently completed certain refinancings, which were done at substantially similar terms to what we saw prior to the downturn. We have no material refinancings coming up, although we typically swap floating rates to fixed, which means we have some hedges being renewed. Whilst we expect near-term activity to be muted, it’s a dynamic market with some signs of improvement. We may consider realizing certain infrastructure assets for example where demand for inflation and downside-protected assets is strong. We may pursue certain exits in private equity across the world as well.

With regards to new investments, we are actively evaluating several thematic opportunities. In private capital, we’re evaluating deals in our core sectors, including healthcare and tech. In real estate, we’re active — in real assets, sorry, we’re actively looking at digital infrastructure, energy transition themes and we think it’s possible, based on the investment pace that we currently see in our flagship funds that investment cycles are close to the three-year averages, which we have seen historically.

Lastly, real estate activity levels have slowed down significantly and we are mainly doing smaller transactions at the moment, but see interesting opportunities as we said.

Before handing over to Kim, let me also mention that lockups on about 7 million equity shares expired in 2022. The shares are held by Exeter employees, and the expiry is in line with the agreements set at the time of the combination with Exeter. To the extent any of these or other previously released shares were to be sold, the process would be coordinated by EQT AB.

And with that, I’ll hand over to Kim.

Kim Henriksson

Thank you, Olof, and good morning, everyone. Let’s start by reviewing our fund valuations over the past year. Fund valuations were largely stable for infrastructure and for BPEA, and somewhat down for our private equity business outside Asia. Our equity and infrastructure companies grew their top line on average at over 20%, and saw EBITDA growth of approximately 18%. Around one-quarter of this growth came from add-ons. So the underlying organic growth remains solid. Almost all of our companies in the key funds were EBITDA positive. So it’s a robust portfolio with long-term financing in place and a strong ability to pass on inflation.

Our core sectors and focus areas, such as healthcare, digital infrastructure and tech see continued robust interest and transaction multiples. However, a few portfolio companies saw headwinds impacting EBITDA growth in ’22. We do expect to hold companies on average longer than in the recent past. This could result in somewhat lower IRRs, but gross MOIC expectations are largely unchanged.

Next slide, please. Let’s next break down the valuation drivers using three of our key funds which are fully invested and in value creation mode as examples. As mentioned, strong operational performance supported valuations in 2022, which is the case in all these examples. In EQT VIII, this was offset by lower reference valuation multiples. Across the key funds multiples were down by about 10% year-on-year. Not all multiples are down, some relevant transaction multiples and infrastructure are higher. Infrastructure valuation methodologies include both multiples and discounted cash flow analysis, and valuations are typically resilient. We have a few listed holdings in our private capital funds, in EQT VIII in particular, which are valued at the last closing share price of the period. On an average basis, our listed holdings traded down in 2022.

On a general note, a meaningful portion of our equity and infrastructure funds, especially the earlier vintages, have already been realized. As those exits are cemented in the underlying valuation of the funds, this means only a portion of companies in those funds are actually seeing valuations move. On average, exits in 2022 were made at a 26% premium to the valuations of these assets in our funds, which supports our view that we had cautious valuations in our books coming out of COVID.

Next slide, please. The lower exit activity and flattish valuations translates into lower recognition of carried interest and investment income in 2022. Management fees increased by 22% versus last year or 15% excluding BPEA. On a combined like-for-like basis, the growth was around 23%. In the reported numbers, EQT X was included only for five months, BPEA VIII only for two and a half months and Infra VI only since mid-December, meaning that we expect the growth to continue into 2023.

As a result of a lower carry and FTE growth in 2021 and ’22, our total EBITDA and EBITDA margin is down versus 2021. Excluding carried interest and investment income, however, the margin continues to grow as we have activated our latest generation of funds and we continue to scale our platform globally. We were very strict on our cost development in this market environment and have taken actions during the year and slowed down hiring, which I will revert to.

Next slide, please. The closing of BPEA took place in mid-October, meaning our financials include two and a half months of contribution in ’22. As previously communicated, the business model and financial profile of BPEA is similar in many ways to our own. The transaction is accretive as of closing, even though we do not expect any material cost synergies. Looking at our combined financials, i.e., if closing had occurred on January 1, then we would have had combined management fees of EUR1.6 billion and an EBITDA excluding carried interest of EUR826 million, which is equivalent to an EBITDA margin excluding carried interest and investment income of 51%. Including carry, the EBITDA margin would have been 57%.

BPEA VIII started generating management fees in September ’21 and the final close at hard cap occurred in September ’22. Commitments raised during ’22 generated slightly above EUR10 million of catch-up phase prior to closing of the combination. The increase in management fees year-on-year for BPEA’s full year number is largely driven by the full year effect from BPEA VIII.

As you may have noticed in the report, our effective fee margin increased compared to H1 and was 1.48%. This was driven by BPEA’s effective management fee rate, which in general is higher than our other funds. Fund VII entered carry mode in 2022, driven by a combination of exits and rebounding valuations, driving the fund from 1.8 times to 2.0 times MOIC in Q4. BPEA VI also contributed to the full year number.

Next slide, please. Around two-thirds of our cost base consists of personnel costs. Around half of the FTE increase in 2022 came from business combinations including BPEA, LSP, Bear Logi and Redwood. The other half is from organic growth, in anticipation of our next generation of funds in strategic growth areas, such as capital raising and private wealth, and in our future-proofing capabilities.

As mentioned, during the year, we have slowed down the hiring pace significantly. We’re focused on efficiencies and scaling the EQT platform. Areas where we may consider further hiring include private wealth and North America and APAC. Total cost per average FTE in 2022 is somewhat lower than in 2021. Variable compensation levels are lower for the year and the variable compensation going forward is depending on how the performance develops. With growth in headcount in more expensive regions and functions, the average cost could increase from levels seen last year, everything else equal.

To summarize our financial year in 2022, our total profitability in 2022 is impacted by lower carried interest and investment income. Revenue growth excluding carry remains high and profitability is increasing. When looking into 2023, we expect this to continue following recent fundraisings, and a very cautious approach to cost growth. In an environment with significant uncertainty, we have a solid cash position and we are receiving our contractually recurring management fees in January and July.

In addition, if we were to need it, we have an undrawn revolver of EUR1.5 billion. Carry expectations follow the same pattern as mentioned before, i.e., in the near term, carry is likely to be delayed, given market developments, but our carry expectations over the longer term remain.

With that, I hand back to Chris for a wrap-up.

Christian Sinding

Thank you, Kim. So in summary, the market environment [indiscernible] 2022, but during that time we really strengthened our global platform. Our industry is seeing long-term growth and there will be a rebound in activity levels. And we saw some really bright spots here during early 2023. Overall, we’re in a good place. Our deal flow remains strong, we had an active fundraising year in 2022, and we have a significant amount of dry powder to deploy in this market.

The majority of our fundraising in 2023 is in infrastructure, where demand is robust and we are confident in our targets. With BPEA, we’ve created a scaled global platform, and I’m quite confident that we’re in a solid position to navigate this market and use it to further strengthen our firm and deliver for our clients.

So with that, we’ll open up for questions. Thank you.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And your first question comes from the line of Hubert Lam from Bank of America. Please go ahead, your line is open.

Hubert Lam

Hi, good morning, thanks for the presentation. I’ve got three questions. Firstly, can you give us your outlook for FTE growth? I know you’re saying it’s — you have more selective hiring now. What’s your — how much should we expect in terms of net hirings for this year? That’s the first question.

The second question is on the guidance of fundraising for BPEA and Exeter. For BPEA, you mentioned the launch of the mid-market growth strategy. How big should we expect that fund to be and do you expect that to close this year? And also for Exeter, you have a number of fundraisings going on as seen in slide 18, just wondering how much should we expect from these funds this year in terms of fundraising.

And the last question is on management fees. Were there any late management fees in the second half, managed fee number? And also, should we expect late management fees to have an impacted in management fees for this year? Thank you.

Christian Sinding

Thank you for the short questions. Kim, will you take those and possibly with Gustav?

Kim Henriksson

Yes, I’ll take number one and three, at least. Yeah, on the FTE growth, you will see that — I mean, we’re not giving exact guidance on the headcount growth. You will see that the quarterly increase in headcount has continued to be smaller and smaller, and that probably gives you a pretty good idea of what it will look like, based on what the market looks like right now. We are an agile firm and should things change dramatically during the course of 2023, we will adjust accordingly, be that up or down. But I hope that increase, quarterly increase, and the trend in that increase gives you a pretty good idea of how FTE growth will develop.

In terms of late fees during the second half, there were no significant late fees in our numbers here in 2022 second half. Next year, we will expect some late fees, but given, for example, Infra VI was activated here on the last year side, but how much that will be? We will have to come back to.

Gustav Segerberg

And on the fundraising for BPEA and Exeter, for BPEA, we don’t have the sizing on the page that you saw, because we don’t include that for funds that are below EUR1 billion. So I think that’s an indication of the size that it will not be above EUR1 billion. We have raised some capital for that at the end of this year and expect to continue that throughout 2023 and wrap it up before year-end.

On the Exeter side, as we said, the Value Fund VI is — we’re wrapping that up as — in the first quarter here and we have two other funds with the — Core Plus fund in Europe with a target of EUR2.5 billion, and a multifamily fund in the US with a target of EUR1.5 billion, and we expect to fundraise those throughout 2023. And in addition to that, we’ll probably have one or two additional funds being started during the year.

Hubert Lam

Great. Thank you very much.

Christian Sinding

Thank you.

Operator

Thank you. We will now go to our next question. One moment, please. And your next question comes from the line of Arnaud Giblat from BNP Paribas. Please go ahead, your line is open.

Arnaud Giblat

Good morning. I’ve got three questions, please. Firstly on deployment, in the context of a challenging market for deployment. I mean, we talking about wide bid-ask spreads, changing financing markets which have affected frequent data with a substantial slowdown. That hasn’t affected you as much. So could you perhaps talk about how you’ve been able to source assets, where others have had more difficulty? And then in the context of a more robust pipeline that you’ve talked about, could you indicate where — whether the future opportunities may lie?

My second question is on FTE growth. So clearly, it sounds like you’ve done most of the hiring. Are you today sized to be able to do PE — I mean, all strategies and core strategies on a global basis? Is the current FTE base sufficient for that, or is it just a case where you’re slowing down and building it out into the future?

And my final question is, thank you for giving us an indication of where EBITDA growth has been. I think you said 18%. What’s the outlook on that EBITDA growth for your portfolio companies for the next few years? Thank you.

Christian Sinding

Thank you, Arnaud. On the first one, and then Kim will take the others. On the deployment, of course, that’s — it’s always difficult to make an exact prognosis, but if you look over the cycle, over the last 30 years or so when we’ve been operating, the typical cycle — the average cycle is actually three years. When times are good it’s a little bit slower — sorry, it’s a little bit faster, and when times are weaker, it’s a little bit slower. Given our deal flow, how much we’ve invested in the major new funds, I would expect that we’re kind of back on that average three-year deployment cycle, which actually is a positive, because in the recent cycles we’re closer to two years. First of all, it’s quite challenging for us, because here you finish one fundraising, you go immediately to the next one. But it’s even more challenging for our clients because they have a setup which is based on more of a three or a four-year cycle, which is closer to the average of the industry.

How we’re generating deal flow? Well, we are in this quite unique position where we invest behind long-term secular trends in different sectors and sub-sectors around the world, with global sector teams and competence, but then we’re doing that in every single country we’re investing in with local teams. So I was in Japan last week, for example, and we had a meeting with a company that we’re looking to invest in. And, of course, we’re doing that with the local teams. So when I’m there, I need a translator, but of course, when the local teams are there, it’s totally connected [indiscernible] local language. So it’s the combination of those two things that give EQT that uniqueness that we pretty much always have strong deal flow regardless of cycle. Kim?

Kim Henriksson

Yes, thanks. And on FTE growth, I’d say that we are in a very good spot given the investments into personnel that we have done over the last couple of years. So we are well-sized to capture the opportunities that the large funds we have available can be deployed. There are a few areas where we will continue to invest and those are the ones that I mentioned, i.e., private wealth is one area where we will have — where we will increase headcount. And we will also selectively increase headcount in Asia Pacific and in the US, which are areas where we are still not as strong as we would like to be. When it comes to the sort of more central part of the organization, there will be very limited, if any, growth and the headcount going forward.

EBITDA outlook for the companies — portfolio companies and growth outlook for those, we don’t really go into that level of detail. We’ve said what the EBITDA has been historically. And you have seen the valuation effect of that. To the extent, it would be dramatically different from these numbers. I guess it would have had a higher impact on our valuations. So that could give you a hint of it.

Arnaud Giblat

Okay, thank you.

Christian Sinding

Thank you.

Operator

Thank you. We will now go to our next question. One moment, please. And your next question comes from the line of Ermin Keric from Carnegie. Please go ahead, your line is open.

Ermin Keric

Good morning, and thanks for the presentation and taking the question. The first one would be on the semi-liquid funds that you mentioned, or [indiscernible] you mentioned that you expect to launch in 2023. Could you give us any more color on that and how it will be distributed?

And then another question is on the EBITDA margin. So excluding the carry, you say that expanded again. How much more do you see that being able to expand from here, or is there any cap on how much operating leverage you can actually achieve in the business over time?

And then lastly on the Q4, we saw an increase in exit activity. Was that seasonally driven or is that more to do with, as you mentioned, the bid-ask spread has now maybe narrowed a little bit with market settling a little bit?

Christian Sinding

Thank you. Gustav will take the first one, Kim the second and I’ll take the third.

Gustav Segerberg

Yes, sure. So on the semi-liquid side, where we are currently is that we are, as I said, planning for launches this year. We have — we’re starting to have the teams in place and also the structures. What we see is that, it will probably be a mix of both asset-specific funds, as well as more, let’s say, broad private market structure. And I think the main distribution here is through the distribution banks, but of course, also through their existing clients, especially on the family office and private wealth side that we have already today.

Kim Henriksson

And in terms of margin, sort of FRE margin, as you call it, outlook, I’d say that in the short term you will see an effect from the large fundraisings that we have done or are in the process of doing, combined with the cost conscious and cost efficient way of operating that we have. That’s in the shorter term. Our long-term margin target is, as you know, 55% to 65%, including carried interest, and we haven’t changed that. But we do see potential to work further on our margin over time, but I’m not going to be able to give you a specific number on that. Chris, you on exits.

Christian Sinding

Yeah. I mean we’re — given the fact that we are investing in these thematic sectors that are pretty robust over the cycle, if you look throughout the year, actually we are able to do different types of exits, whether it was dividend recaps, sales to strategics, sales of stakes to other financial firms and other private equity exits. So kind of the whole spectrum except for IPOs. Well, the IPO market was closed last year.

So Q4, yes, probably some positive effect of people seeing that the macro conditions in the world are possibly improving now, or at least getting less worse. The IMF today came out and — with a prognosis that Europe won’t go into a recession this year. The US is not expected to go into recession. Asia has been pretty robust and China is opening up again. So that has, of course, helped the capital markets, as you all know, which means that — I didn’t comment on this earlier, but also means that the financial markets on the debt side are starting to open up a little bit. And there was an IPO launched in Germany last year — I’m sorry, yesterday. And there are some more IPOs that people are talking about coming into the pipeline. So, we’ll see how the markets develop, but probably there is — whether that little — we said in the presentation that we are seeing some bright spots in some of — those are some of the bright spots that we hope, of course, will lead to a more sunny picture. But we remain paranoid and quite thoughtful about how we manage our portfolio.

Ermin Keric

Thank you. If I just may, one quick follow-up on the carry for H2. Am I thinking right about it that it’s basically just BPEA that’s contributing and none of the EQT funds from before?

Kim Henriksson

I can comment on that, Chris. There’s a very little carry contribution in H2 from funds outside BPEA, you’re right in that. And there has been a few transactions here later on in the year, such as GETEC and Saur which have not closed yet. And as you know, we are booking carry in most cases only as and when the transaction is closed. So there are some, how should I say, accruals there, but that’s the status right now.

Ermin Keric

Thank you.

Christian Sinding

Thank you.

Operator

Thank you. We’ll now go to our next question. And your next question comes from the line of Michael Werner from UBS. Please go ahead, your line is open.

Michael Werner

Thank you very much guys for the presentation. I have two questions. One on fundraising. Just focusing a bit on Infra VI, I think you really started the fundraising process at the end of August. You raised about EUR2.8 billion through year-end. How should we think about that run rate, which is a little less than EUR1 billion per month, especially for a fund that you’re targeting for EUR20 billion? And is this one where because you’re out there with EQT X at the same time, that’s having an impact? And do you expect a bit of an acceleration as we go through 2023 in terms of the pace of fundraising there?

And then second, just a follow-up on those semi-liquid structures at BPEA. How should we think about the pricing, the management fees on those relative to other AUMs managed by BPEA? And then, ultimately, is there a target in terms of size of those total semi-liquid structures for the year? Thank you.

Christian Sinding

Thank you. Very good questions, I’ll take the first one and Gustav the second. When it comes to the fundraising cycle, it’s not like a public company situation where it’s maybe more even month-by-month. These are — and we have about 1,000 institutional clients around the world. And investors come into the fund at different times when they’re done with their kind of internal process. And that’s typically why you see these smaller rolling closes, until we get to the formal first close, which is quite significant, and that was around EUR15 billion or so for — if remember right for EQT X. And then thereafter other investors start to come online and other channels, like private wealth, et cetera start to come online. So, there is no straight line or seasonality, and this is really depending on this whole process and lots of internal decisions at the investors.

So I would say that the Infra VI fundraising is so far having that normal pattern, but both EQT X and Infra VI in this market where it is more complicated will take more time than it would when markets are really hot. And that connects to those comments we had on investor liquidity and other factors. Next, Gustav?

Gustav Segerberg

Great. Yeah. On the semi-liquid side, I would say, on the management fee level, it’s fairly similar to the levels that we have on a Group level, maybe a little bit higher, but in general about the same. And just to clarify, it’s not specifically to BPEA, but the semi-liquids are — if that was the understanding, it’s — they are a general across EQT.

I think on the sizing question, we will not go out with a specific target. I think you should see this as a long-term potential. We will launch it during this year, it will not have a material impact on the size of equity in the beginning, but rather over time we see this as a good way to, let’s say, target the private wealth market.

Michael Werner

Thank you.

Christian Sinding

Yeah. Thank you.

Operator

Thank you. We’ll now go to our next question. One moment, please. And the next question comes from the line of Oliver Carruthers from Goldman Sachs. Please go ahead, your line is open.

Oliver Carruthers

Good morning, thanks for the presentation. Two questions for me. If we jump to slide 20 on your investment and exit activity, and simplistically across all your funds, but given that you highlighted, you are a net seller of assets at the Group level into the strong markets of 2021 and you’re obviously at parity last year, through 2022. So if we join the dots in everything you’re saying, EUR50 billion of dry powder, robust deal flow, and a fairly young existing portfolio, should we expect you to be a net buyer at the Group level across all your funds through this year? That’s first question.

And then the second question on Infrastructure, given both the need for private capital [indiscernible] but also the general positive shift towards ESG, what are you seeing in terms of interest for your latest Infra funds from new clients to EQT, either in Infra VI or in Active Core? I think some of the larger sovereign wealth funds who’ve historically shied away from committing capital to private equity funds are now more open to say renewable infrastructure as an example. So any color there would be helpful, too. Thank you.

Christian Sinding

Thank you very much. Interesting question. And we try not to, let’s say, guide too specifically in exactly how deployment will be and exits will be in a given year. But depending on how the markets develop and given the amount of dry powder that we have across the world, and you’re exactly right, having made a very large number of exits across EQT Exeter and BPEA, an overweight towards deployment would be likely. So I think that — you have a logical conclusion, although we’re not going to comment on specifics.

When it comes to infrastructure, yes, as you saw from the video, it is a very, very interesting space that Infrastructure is investing in are spaces across the energy transition, transportation transition, social infra, digital infra, and a lot of capital have also moved into that asset class, also from new investors, yes, and that goes for Active Core and Infra VI. And also, when times are more uncertain, infrastructure is a really nice asset class, because you have typically stable inflation-protected assets where we apply all of our toolbox to grow and develop those assets and create more value and drive that excess return. And as you know, we’ve been delivering something like 19% net returns in that strategy since inception. And we’re one of the clear global leaders. So also there thematically you’re right, but still it will take some time to finalize the funds, but we’re having nice dialogues with new investors and very solid dialogues with existing. Any follow-ups?

Oliver Carruthers

No, that’s very clear. Thank you.

Christian Sinding

Thanks a lot.

Operator

Thank you. We will now go to our next question. One moment, please. And your next question comes from the line of Magnus Andersson from ABGSC. Please go ahead, your line is open.

Magnus Andersson

Yes, thank you and good morning, guys. Just on — starting on fundraising, I was just wondering whether you could comment about what markets are the toughest, the US or the European one, and also if you can say something about how different the Asian market is. And related to that, if you could tell us — remind us about your geographic split of your fundraising, for example, for EQT X and Infra VI. That’s the first one on fundraising.

Secondly, just a follow-up on Ermin’s question, that was on carry. When I compare your IFRS accounting with your adjusted numbers, we can see that the adjusted carry was EUR45 million, while the IFRS carry was EUR6 million. Is it fair to assume that the difference there is made up of BPEA?

And finally, perhaps, I note that your net — adjusted net profit was much lower than the general expectations and it looks like you had a quite high tax rate this quarter. If you could comment whether that was a one-off or if we should expect a higher tax rate going forward? Thanks.

Christian Sinding

I’ll start, and then I guess, maybe, Kim, you guys can take over and Olof also. On the fundraising market, I would say that the most mature market in the world, that’s the US market. And that means that a lot of investors have been more highly allocated, some fully allocated to private equity. You’ve probably heard of the denominator effect and those investors have felt the denominator effect, whereas market valuations fall in the public markets and private market valuations have been a bit more robust, those allocations are impacted. So that’s probably the market where there is kind of the more complicated discussions in the market between the different market participants. But it is, of course, the largest source of capital in the world, and a lot of those funds are continuing to grow and will continue to be very large investors in private equity and private markets for the long term.

If you look at Canada, it continue to be a very strong market and the Middle East as well, and Asia. And in those markets, typically, a lot of institutional investors are still growing their AUMs, and they’re growing their allocations to private equity and private markets in general, including infrastructure, real estate, et cetera. So that’s basically how the market is playing out. Now, we’re — historically, you might remember that we have a relatively lower share of our capital from the US and a relatively larger share from other regions in the world, and I didn’t comment on Europe, Europe is somewhere in the middle, pretty okay. So from that point of view, we’re having positive dialogs around the world. And I’ll let my colleagues comment on some of the specifics.

Kim Henriksson

Thanks. On carry, just a reminder that adjustment to carry is in order to make the carry that we have acquired comparable in accounting treatment to the carry we have had from before. So it is from acquired carry, in this case BPEA, you’re right. And in terms of the tax rate, I mean, the general trend for tax is always upwards, there hasn’t been any dramatic changes over the year to that and our tax rate on management fee earnings was in the region of 16 — 15% to 16% for the year, maybe slightly higher than before, but not dramatically so.

Magnus Andersson

Okay. Thank you. Just my follow-up, if you could give us a feeling for the geographic split in, for example, EQT X and Infra on the fundraising. And secondly, just on the tax, so there is no one-off, we should expect 15%, 16% on — is reasonable to assume going forward.

Kim Henriksson

There is no one-offs involved there, no.

Magnus Andersson

Okay, thanks.

Operator

Thank you.

Kim Henriksson

And on the split?

Christian Sinding

Sorry I was on mute here. Go head, Kim.

Kim Henriksson

No, we don’t give exact split by funds, but it’s about one-third from Europe, one-third from Americas, and maybe 25% from APAC.

Christian Sinding

Yeah. And the rest is from the Middle East. And you could also say that if you look at the global market for capital sources, the US market is a little bit over 50%. So that shows you the skew that we have. Thanks.

Magnus Andersson

Okay. Thank you.

Operator

Thank you. We’ll now go to our next question. One moment, please. And your next question comes from the line of Bruce Hamilton from Morgan Stanley. Please go ahead, your line is open.

Bruce Hamilton

Hi, there. Thanks. Good morning, guys, and thanks for all the slides and the Q&A. Just a quick follow-up on the wealth opportunity. I mean, I agree, we think that that’s quite significant longer term. But in terms of the how you would manage that product, so [CP REIT] (ph) is seeing some pressure. So how are you thinking about the approach in terms of liquidity terms, where you might sell it? I think Asia has been more volatile to [BREIT] (ph), for example. Or is it really down to investor education that is going to be the critical thing in ensuring that there’s no misstep? And I guess also any — what concerns would you have around any regulatory backlash given what’s going on with be BREIT at the moment? Thank you.

Gustav Segerberg

Yes, I can take that, Chris.

Christian Sinding

Go ahead, Gustav.

Gustav Segerberg

No, but I think first off, we don’t have any products today. So, of course, the benefit that we have is that we can start off on a little bit of a clean slate. I think in general the semi-liquid markets will develop as a result of what we’re seeing in the market right now. And that it will also be clearer for all participants what type of product this is, i.e., that it is a semi-liquid product and not a liquid product. So I think from that perspective, we see this as a pretty good time to actually start off because, of course, it will mean that we will not have a legacy portfolio, and we don’t have a legacy impact of it.

I think from a general point of view, in terms of where we see demand, I think, it goes — we see this as a global product, but of course, our strong foothold from a branding perspective is, of course, initially in Europe and over time it will also be stronger in Asia and North America.

Bruce Hamilton

Great. Very helpful. Thank you.

Operator

Thank you. We will now take our next question. One moment, please. One moment. And your next question comes from Angeliki Bairaktari from J.P. Morgan. Please go ahead, your line is open.

Angeliki Bairaktari

Good morning. Thanks a lot for taking my questions. Just a couple of follow-ups, please, on my side. Your outlook for fundraising reads quite bearish in your Q4 report, but you have mentioned today that you are seeing some bright spots in the beginning of 2023 when it comes to sort of deal activity, capital markets, et cetera. And I guess, more long term, from the conversations that you’re having with your LPs, do you see that they still expect, overall, their allocations to the alternative asset class to private markets to continue increasing, or do you sense that some LPs are actually now taking some — changing their thoughts given the interest rate environment appears to be somewhat more persistent and we effectively have a different backdrop? That’s my first question.

Second question on EQT X and Infra VI. What percentage of the existing capital commitments are from returning investors, from previous vintages, if you can disclose that, please? And then third question, the amount of leverage that you use now in deals today, given a more difficult financing market, at least until the end of 2022, has that changed at all versus history? I think, historically, you have indicated around 50% equity, 50% debt. Is that different today? Thank you.

Christian Sinding

I’ll take one and three and Olof you can take the middle one. The fundraising outlook, there was a strong word there, bearish. I’d say that what we mean is that we believe that the fundraisings will take somewhat longer time to complete than in a very hot market. Most of that is due to, of course, volatile financial markets, on the one hand, less liquidity with investors on the other hand. But we don’t see any tendencies, to the bigger question you asked, which is, are allocations shifting away from private markets? No, we don’t see that at all. Actually, we think it’s the opposite. We think that the long-term trend is truly intact. A lot of investors around the world and also, of course, private wealth is very under-allocated to the asset class. I think this period of volatility has shown that private markets actually over-delivers in returns, as it has done over all cycles, and people want to have access to that. And I think also the volatility in the public markets probably will continue to drive capital to the private markets and many companies will stay private for longer. So we think that kind of ecosystem around private markets is very robust. So this is more relating to the market conditions and the time that it takes to raise funds than anything else.

On the latter question, on leverage, leverage is probably not that different. We’re a growth and transformationally oriented investor. So we’re typically not maximizing leverage, but the size of transactions, the size of debt that’s available is still lower than in the boom times. But in this market, you can raise EUR2 billion, EUR3 billion, maybe EUR3.5 billion of debt, which means we can do deals between a few hundred million and possibly EUR5 billion. So, the market is starting to be a little bit more open for kind of our sweet spot range. Olof?

Olof Svensson

And then on the re-upgrades for the flagship funds, I’m not going to give a specific number of that, but what you see is typically in the first close is that you have a substantial portion of re-ups from existing clients, and that has been the case in EQT X. And as we mentioned in the presentation, we expect that to be the case also for Infrastructure VI. And then, say, the last quarter the fundraising comprises different sources of capital as we were alluding to, including private wealth and to some extent, new clients. And in this environment, as we’ve said before, we probably had a slightly lower conversion of new clients than we have had in an environment where there is more liquidity on the client side.

Angeliki Bairaktari

Thank you very much.

Christian Sinding

Thank you.

Operator

Thank you. We’ll now go to our next question. One moment, please. And your next question comes from the line of Nicholas Herman from Citigroup. Please go ahead, your line is open.

Nicholas Herman

Yes, good morning. Thank you for the presentation. I’m a bit cheeky, and also four, if that’s okay. So, one on fundraising, one on Asia, and then two just quick — hopefully quick technical questions. On fundraising, I guess, given the challenging fundraising outlook, are you confident in hitting the hard cap to EQT X? And also more broadly for the industry, LP congestion was a theme we talked about, I guess, early last year. I hear you on why the allocations, but I guess, do you see a risk that LP congestion remains a factor for longer and maybe impact ’24 allocations given 2023 allocations have been impacted by market uncertainties, denominator effect and so on? That’s the first.

On Asia, we are seeing signs of China reopening. Do you see this impacting you from an investment perspective in the near term? But also just curious if there are any triggers your Asia-based LPs are looking for and what they’re telling you.

And then just the last two. One on the fee rate and one on costs. I heard you before say that there were no material catch-up fees in the second half. But it looks to me like the realized fee margin [Technical Difficulty] an effective fee rate of 148. So how do I reconcile those two, given there were no material catch-up fees?

And then the last one, please. I guess, a lower dollar is unhelpful for you overall, but from a cost perspective, after BPEA, could you just remind us please, what percentage of your cost base is dollar-denominated? And, I guess, that might be helpful for keeping your — weaker dollar will be helpful for keeping your costs lower. Thank you.

Christian Sinding

Okay. I’ll start on the first two and then Kim, you could take the rest, and maybe Olof wants to comment also on the first one. And your cheeky question is good. We typically don’t talk about whether we’re going to reach the hard cap or not. The hard cap is something that we set in negotiations with our clients. We do talk about our targets, we’re confident that we’re going to meet our targets. And I’m not sending any signals there at all, just stating facts.

When it comes to the trends with investors, in general, I don’t think we can add much more than we have said. We remain one of the best performers in the industry. We have very thematic investment strategies. We’re raising capital in areas which are long term quite resilient and we believe we will deliver strong returns in the future as well. So I think we’re in a pretty solid position in this more complex market.

Then on the Asia question, I don’t think China’s reopening necessarily changes how we invest or necessarily where we invest. But for our Asian business, and actually for the global economy, the fact that China is going to be coming back online, I think will help both in terms of demand, but also in terms of supply with supply chains opening up and becoming — let’s say, flow better. And it may be that some more opportunities will arise in our Asian business that as you’ve seen is performing well and where deal flow is strong and were today 15% to 20% invested. But we’re going to remain quite diversified across that region and across the world in the way we invest.

Olof, do you have anything to add on fundraising? If not, we can go to the other questions.

Olof Svensson

No, I think the other question you had was whether congestion in fundraising, as you put it, would continue. And I think I’d go back to what Christian talked about in terms of liquidity for the clients. When we have this period of lower realizations, if that picks up, slowly you will see this improving as well.

Kim Henriksson

And on the more technical questions. On fee rates, to start with, there’s couple of elements impacting that, which are not one-off, I’d say. One is BPEA, that has a higher fee rate than the legacy EQT has, and that is part of the uptick. And the second part is that there is a slightly larger portion of Exeter there than historically and they also have a somewhat higher fee rate than average in the portfolio. So those are the reasons.

In terms of costs, and I’d rather look at it actually on both revenues and costs. And, going forward, if you look at it on a sort of pro forma basis for the combined new EQT, we are very balanced when it comes to dollar exposure, because we also have significant revenues in dollars. Most of the Exeter funds, the BPEA funds, and the large flagship equity and infrastructure funds also have dollar sleeves in there. So it’s about 45% — 40% to 50% dollars in both revenue and costs.

Nicholas Herman

That’s helpful. Thank you very much.

Christian Sinding

Thank you.

Olof Svensson

Conscious of time, I think we should start to wrap up shortly, but let’s take a few last questions, but let’s try to keep it short.

Operator

Thank you. I will now go to the next question. One moment, please. And your next question comes from the line of Jakob Brink from Nordea. Please go ahead, your line is open.

Jakob Brink

Thank you. Most of my questions have been answered, but just one final on the carry recognition. I seem to recall, Kim, that you said in the Q3, I think it was, or it was Q2 conference call that there was still some carry left to be booked from the first half year that wasn’t recognized back then. Then given the relatively low carry in the second half, I’m just a bit surprised that there is nothing left there.

And also, could you may be just — as Ermin said, there was quite a few exits towards the end of the quarter and I think especially, one of them was an internal transaction to EQT Future. Why wasn’t that one booked now, just so I understand your methodology? And then lastly on the methodology. Looking at the MOIC development in your funds in private capital, they were slightly down or flat, while public markets were up. Could you just explain that sort of lack of correlation, please?

Kim Henriksson

Yeah, on carry recognition, I can’t recall exactly whether I’ve said that, it doesn’t ring a bell. There was one or so transaction as of H1, which we had not closed. And, obviously, carry recognition is not only a function of closing deals but also of the evaluation performance in that fund over the rest of the period. So it’s not a one-to-one exercise. And when it comes to the methodology, it’s just prudent to have a closing as the date when we book carry, then you don’t need to form a view on whether there is risk to closing or not. Typically, they wouldn’t be. We would typically not have that. But that’s the way we operate. That’s on carry. What was the other question?

Jakob Brink

Last one was just on the lack of correlation between public markets and your MOICs in private capital in Q4.

Kim Henriksson

Well, I think we went through the valuation methodologies in some detail here before. It’s not one factor impacting a big portfolio of companies, there’s both the public market references, there is the public investments we have, and then there is the performance of the underlying companies and other aspects. So I can’t give you more of an answer than that really.

Jakob Brink

Okay, fair enough. Thank you.

Operator

Thank you. We have one further question in the queue. One moment, please. And the question comes from the line of Marcus [Lejael] (ph) from SEB. Please go ahead, your line is open.

Unidentified Participant

Yes, thank you. Good morning. Just finalizing with some short follow-ups. On the items affecting comparability and also the relatively large delta in amortization and related to intangibles in this fourth quarter here. How much of that should we see as really temporary or how much will remain going forward? Thanks.

Kim Henriksson

Well, there is about EUR80 million of one-off items in there, primarily relating to the acquisition related expenses for BPEA. And the rest of the adjustments are more of an accounting technical nature. Happy to go through those in detail with you offline.

Unidentified Participant

Okay, thank you.

Operator

Thank you. There are no further questions.

Christian Sinding

Okay, thank you everyone for the engagement. Great questions and a good discussion. And wish you a good day.

Olof Svensson

Thank you.

Christian Sinding

Bye-bye.