Intermediate Capital Group Stock

Good morning. Thank you for joining this webcast covering ICG's results for the 12 months ended 31st of March 2026. The slides are available on our website along with the accompanying results announcement. .

As a reminder, unless stated otherwise, all financial information discussed today is based on alternative performance measures, which exclude the consolidation of some of our fund structures as required under IFRS. This morning, I'm joined by our CIO and CEO, Benoit Durteste; and our CFO, David Bicarregui. They will give an overview of our performance during the year, and we will then take questions.

And with that, I hand over to the Benoit.

Thank you, Chris. Good morning, everyone. Full year '26 has been a good year for ICG. We reinforced our scale, competitive position, beat by some margin, our fundraising targets established a strategic relationship with Amundi and more generally built on our track record of strategic and financial growth. .

Over the next 45 minutes, we will be discussing this in more detail. But first, I'd like to look at this year in the context of what I believe underpins ICG's success. It comes as no surprise to those who have been following us for some time that our first priority remains investment performance. as more capital comes into product markets from nontraditional sources and new fund structure, I think this only becomes more important.

We are not looking to offer clients beta or to take in considerate risk. We want to offer them consistent outperformance with a particular focus on cash returns on realized performance or in industry lingo DPI. We're not looking to grow AUM at all cost. We are focused on delivering significant growth that is built on enhancing the track record and reputation of existing biologies and introducing new strategies with solid foundations, all with a view to generate long-term, sustainable, consistent FRE growth. And this approach is clearly leading to ICG gaining market share.

And we have substantial amount of white space to grow into both in our flagships and our scaling strategies. If we continue to execute successfully on the opportunities ahead of us, this will inevitably translate into strong shareholder outcomes in the form of earnings growth and cash generation.

In that context, our strategy is clear. we aim to reinforce our position as a leader in alternative asset management with a reputation for uncompromising focus on investment performance. We are doing that by scaling up established strategies and scaling out into new areas where we see client demand and attractive investment opportunities. This is reinforcing our position with clients.

And during full year '26, we gained 83 new institutional LPs, bringing our total to over 870. In my view, the number of alternative asset managers that have the potential to be globally relevant to clients is shrinking. ICG has emerged as one of the winners in this regard, and I believe we are positioned to continue that trajectory of outperformance.

Turning to [ portfolio ] '26 in more detail. As of 31st of March 2026, we managed [ $126 ] billion of assets globally. Fundraising in the year outperformed our expectations at $17 billion and fee earning AUM grew 11% during the year. We grew flagship and scaling strategies, established an exciting long-term partnership in the wealth market with Amundi and we continue to hire notably broadening our insurance and North American coverage within our marketing teams and hiring into our European and Asian corporate investment teams.

We are absolutely on the front foot during the cycle. That translated into strong financial performance. We generated $350 million of fee-related earnings, or FRE, that's up 23% and year-on-year. We are also reporting GBP 127 million of performance fee income and GBP 861 million of group operating cash flow, a record level by quite some margin.

To dig a bit deeper into fundraising, which at $17 billion materially surpassed our expectations. We had our best year ever for real assets raising $5.5 billion and for scaling strategies more broadly, which include rail assets, where we attracted $8.4 billion.

In total, 34% of our capital came from North America. This is an interesting trend that I think is driven by 2 factors. Firstly, there's clearly a desire among some American North American LPs to diversify into Europe. Across many of our strategies were natural beneficiaries of this.

And secondly, it is testament to the years of effort we've put into our American marketing capabilities and to the increasing recognition of our performance and breadth. Turning to some specifics. Europe 9 has continued to raise very successfully, both in terms of size and pace and today stands at over EUR 10 billion. We will likely be oversubscribed and will hold a final close by the summer ahead of the initial fundraising period deadline.

In a market environment where many require extensions to fundraising period, this is an impressive outcome. This is also ICG's first ever commingled fund to be bigger than EUR 10 billion. It operates in a space that is increasingly attractive. And I believe it will be the largest structured capital fund of its kind globally. We are also, as you know, a global leader in GP-led secondaries. And I do not know of any other European manager with global leadership in 2 asset clouds. So positive developments for the flagship.

We also had 2 scaling strategies that help final closes for their more in funds, both at or even above their targets and both in real assets. Infrastructure II and METRO II saw big upsizes, high re-up rates and strong cross-selling from existing ICG clients as well as good interest from new clients. successful second vintages are a critical milestone. They are vital to cementing the reputation and position of our strategy.

As a result, we can look confidently to meaningful growth in both strategies in the coming decade. This is a very promising development. We now have visibility on significant organic growth potential in the broad real asset space. And this could be further enhanced by expanding into adjacencies and such as infrastructure Asia, which we have recently launched or others, such as possibly infrastructure debt. Looking ahead, we have high hopes for LP secondaries, which will be in the market for full year '27.

It is also likely we will launch the 6 vintages of both strategic equity and senior debt partners later in full year '27, although the exact timing of those is not certain. Given our fundraising cycle and which funds happen to be in market at a given point in time, we'd expect fundraising in full year '27, naturally to be below that in full year '26.

But as David will talk about later, the trajectory of our fee earning AUM, which drives our management fees and is only loosely related to in your fundraising. It's really the fundraising cycle that matters. And on this, importantly, this year has anchored our performance for this fundraising cycle. And it's clear that we are well on our way to achieving our full year fundraising guidance. potentially even a year early.

Turning to investment activity. Transaction levels remained healthy over the last 12 months. We deployed $14 billion across our direct investment strategies and realized almost $7 billion. The broader point in my view is that while there is always an element of lumpiness in these figures, we have remained very disciplined in our deployment across strategies.

Our investment committees drive this culture. And during the year, these discussions have been some of the hardest in mine memory. We have, for instance, clearly been more cautious than many in direct lending in recent years, although in full year '26, largely by taking advantage of financing opportunities in our existing portfolio. This strategy has deployed close to $4 billion.

And in secondaries, both GP and LP LED, the optimist side has been huge, but we are being incredibly and increasingly selective and in particular, cautious around valuations. Given the macro situation, I do not anticipate a meaningful change in the investment environment during full year '27. And with dry powder of $36 billion, we are well positioned across all asset classes to invest through the cycle and to lean and hard when we see particular opportunities emerge.

Ultimately, what clients care about is realized performance and cash return, especially in higher-return strategies with no natural liquidity. These strategies, which represented 3/4 of our management fees in full year '26 have an established track record of market-leading DPI. During the year, we distributed $9 billion to clients in these strategies, further anchoring fund returns.

On the right-hand side of the slide, we show for a number of these funds has evolved over time. This metric is clearly becoming more meaningful for clients and is a key differentiator for many of ACG's strategies, directly contributing to our continued success in fundraising. Meanwhile, our debt strategies have continued to perform strongly.

I'm going to spend a minute on direct lending, our senior debt partners, the flagship strategy to remind you what we do. And given the noise in the market what we do not do, 100% of our loans from SDP are senior secured cash pay cash flow-based lending. In that way, we're all school. We do not lend to value or to revenue. There is no peak or sub debt in SDP. We have minimal software exposure. I mean, in the unrealized vintages at SDP 5 and 4, it's approximately 5%.

And for the last 2 years, we have not written a single direct loan in the U.S. by choice. From a product perspective, we have no open ended or so-called semi-liquid structures in direct lending. And the consequences here are twofold. Firstly, we are not exposed at all to redemption -- and secondly, we have substantial dry powder to deploy and take advantage of the cycle. And this conservative approach has not escaped institutional investors and is contributing to our enhanced reputation.

Our CLO business, which is also not exposed to redemptions, similarly been performing strongly. This year, we issued 3 new CLOs and are continuing to receive dividends in line with our historical average. So in all, when I look across the portfolios and fund performance, weathering higher-return strategies or debt strategies, I feel we are very well positioned to continue to deliver for our clients and to strengthen our market position and standing with LPs.

That delivery and our clients' confidence in our future potential has enabled us to gain market share in recent years across both our flagship and scaling strategies. This slide is indicative only as market-wide data is never perfect and or entirely comparable. But based on publicly available data, all of these strategies have grown faster than the markets in which they operate.

But let me reiterate, and it goes back to my first slide, I view this as an output of our investment performance. The top quality returns to clients need to growth. And I expect that to continue. Institutional investors with whom I exchange all the time, remain committed to private markets and are looking to grow allocations with the right managers. However, from my perspective, they are increasingly focused on alignment of interest with GPs. They are increasingly aware you have managers pursuing an AUM gathering strategy. They do not want their deployment cycle to be governed by the ebbs and flows of wealth capital in green vehicles or to have to worry about potential conflicts of interest in allocations. In this respect, ICG stands in a differentiated position compared to many of our global alternative asset manager peers.

Looking ahead, the opportunity set for us is huge. Based on our existing client base today, 3/4 are invested in only 1 strategy and fewer than 20% are invested in 2 strategies. As demonstrated by the final close of infra 2 and Metro 2 in [indiscernible], cross-selling is becoming an increasingly meaningful part of our fundraising along with our continued ability to attract new clients. I'm confident that today, we have the investment strategies, scale and client franchise to be beneficiary of institutions seeking to do more with fewer managers.

To conclude, I'm very proud of the results we are reporting today. I view them as another checkpoint in the journey of profitable, scalable growth that ICG has been on for over a decade, and I see huge opportunity ahead. Importantly, our strategy is clear. aligned to what our clients want and how the market is evolving, and we have financial resources and people to execute on it.

And with that, I'll pass over to David.

Thank you, Benoit. I'm going to talk about our evolved financial presentation and then dig into our FY '26 financial performance in more detail. But before that, I want to reinhorse the link between the strategy that Benoit has just outlined and the financial results we're reporting. We have a broad and scaled range of investment strategies across multiple asset classes, which has led over the last 5 years to our fee earning AUM doubling to $87 billion at March 26, all organically.

And due to our focus on growing higher return higher fee strategies, we have seen a very positive mix effect in our management fee rate, which has expanded by 13 basis points over the last 5 years to stand at 98 basis points today. The link to our financial performance is clear: a diversified range of scaled and scalable strategies that meet our clients' needs, leading to growing fee earning AUM at attractive management fee rates. This resulted in management fee growth above that of fee and AUM.

As our strategies scale up through multiple vintages, we see significant operating leverage. That link between our strategy and our financial performance has driven the evolution in our financial presentation that you see today, which focuses on 3 distinct related attributes for value.

The first is fee-related earnings, or FRE, defined as the profit generated from the management fees, less group cash operating expenses. This metric clearly shows the trajectory I was describing on the previous page of growing fee earning AUM, management fees and operating leverage. Shareholders also received performance fee income, which in our financials has no cost associated with it.

And finally, we have the balance sheet portfolio, which coinvests alongside our clients in our funds and seed new strategies and products. Alongside these 3 metrics, we will also focus on group operating cash flow and net debt. Importantly, from a shareholder perspective, we are also reporting these on a per share basis.

Put together, this financial presentation aligns with our business and the drivers of shareholder value. It's clear and simple and it's comparable to other global alternative asset managers. In the coming pages, I will focus on each of these 5 components. Feedback on our FRE disclosure back in November was very positive. And of course, we will welcome any more thoughts on this evolution.

As a result of these changes, we are updating our medium-term financial guidance. We are replacing guidance on FMC margin with guidance that over the medium term, we expect FRE margin, excluding catch-up fees, to expand. Over the last 5 years, FRE margin has grown by 14 percentage points. The rest of the guidance remains unchanged.

And as Benoit said, we're 2 years into our fundraising guidance and have raised $40 billion of the $55 billion, so well on our way to meeting or exceeding this target. And we continue to expect performance fee income over the medium term to represent between 10% and 20% of our total fee income.

So moving to full year '26 specifically and starting with a snapshot of the financial performance, we are reporting FRE of GBP 350 million, up 23% year-on-year. Performance fees were GBP 127 million, including a GBP 72 million transitional gain due to the change in recognition methodology announced in October of 2025. And our balance sheet portfolio stood at GBP 2.6 billion. You can see these on a per share basis on the right-hand side of the page.

At a group level, our operating cash flow was very high at GBP 861 million. This was a key driver of reducing our net debt to GBP 113 million, down from GBP 629 million in March '25, and our net debt to FRE now stands at 0.3x. So before moving to each of these metrics in turn, I'll start with fee earning AUM. This has grown 11% over the last 12 months and today stands at $87 billion. We also had $19 billion of AUM not yet earned fees which would generate approximately GBP 120 million in annual management fees if deployed.

And as Benoit said earlier, in-year fundraising only has a loose link to the in-year trajectory of fee earning AUM. This is clear if you look at this over the last decade. Fan AUM has grown every year, including through a series of macro shocks, which public market valuations and private market transaction activity saw periods of significant volatility.

Over the last decade, our fee earning AUM has grown at an annualized rate of 17% and over the last 5 years at an annualized rate of 14%. The effects of fee earning AUM growth and expanding fee rates is visible in our management fees, which for FY '26 was GBP 685 million, up 13% year-on-year in absolute terms or 17% excluding cattles. Over the last 5 years, management fees have grown at an annualized rate of 20%.

Over that period, we have also seen meaningful shift in the composition of management fees by asset class. As shown on the chart on the left, credit and private debt have grown more modestly over this period, while structured capital, private equity secondaries and real assets have delivered significant expansion. And combined our higher-return strategies account for over 75% of our management fees.

Looked at another way, the 3 scaling strategies that Benoit mentioned earlier, LP secondaries, real estate and infrastructure, have become increasingly meaningful. Together, the 3 of them now account for over 20% of group management fees compared to around 10% 5 years ago. This is an important development. It reflects the success of building these capabilities organically is evidence of the increasing diversification at scale and gives clear visibility on the embedded growth potential within ICG today.

Turning to FRE, which for FY '26 was GBP 350 million or 120p per share. This is up 23% in the year and 30% annualized over the last 5 years. driven by high growth in management fees, alongside strong cost control, with FRE operating expenses up 5% year-on-year. Our FRE margin, excluding catch-up fees over the last 5 years, has grown from 33% in FY '21 to 47% today.

And as I said earlier, over the medium term, we expect to see continued expansion in that FRE margin. Performance fee income was GBP 127 million this year, including a GBP 72 million transitional gain due to the change in recognition approach announced in October of 2025. The majority of the transition gain, GBP 49 million was driven by the initial recognition in structured capital and secondary strategies, including Europe 8, SE 4 and mid-market 1. Realized performance fees that is cash received came in at GBP 96 million in the year due to some large realizations for funds that are in carry.

Looking ahead, as we continue to grow high return strategies, performance fees are likely to become a more visible and significant contributor to our top line. Moving to the balance sheet portfolio, which had an asset value of GBP 2.6 billion as of March. Our balance sheet exists to support the growth in our fee earning AUM, which does through 2 routes. Firstly, co-investing alongside our funds, which accounts for about 90% of the fair value; and secondly, by seeding new strategies and new products.

As a result, the balance sheet performance mirrors that of the funds in which we invest. From a P&L perspective, over the last 5 years, it has generated an average annual return of 10% and including a 5% return for this financial year. During the year, all asset classes, except debt generated between 5% and 8% returns, while debt returned negative GBP 7 million, which is negative 2%. It was driven by a number of mark-to-market movements within our CLO portfolio.

This gives outcome in the context of a challenging macro backdrop underlines the diversification and the resilience of the balance sheet portfolio, which we expect to generate low double-digit percentage annualized returns over the long term. From a cash perspective, not only does the balance sheet benefit from the cash generation of our funds, we have also been deliberately reducing the absolute commitment from ICG plc as strategies become more established.

We have a proven track record of doing this, which you can see clearly on the right-hand side. As a result, organically growing strategies is cash-intensive in the early years and progressively asset light as we move through the vintages. Doing this successfully is highly accretive to FRE per share and the co-investment portfolio has become highly cash generative as vintages have progressed.

This dynamic is now quite visible with the co-investment portfolio generating an average net cash flow yield over the last 5 years of 10%. Indeed, we believe we're in the early stages of a multiyear cycle in which the balance sheet could generate significant cash from our existing product set as older investments realized and funds currently being invested have lower absolute commitments from the firm. Of course, there'll be an element of lumpiness to this, but the structural trend is clear.

Cash received from FRE, performance fees and the balance sheet portfolio have each grown year-on-year in full year '26. This has led to a very strong year for the group operating cash flow which totaled GBP 861 million compared to GBP 533 million last year. And as a result of this profitable cash-generative growth, our financial position has never been stronger. We ended the period with total available liquidity of GBP 1.5 billion and net debt of GBP 113 million.

We have a very robust capital structure and a disciplined approach to managing both our debt and our equity base. So drawing this altogether, we have strategic and financial flexibility like never before to maximize long-term shareholder value. And we have a clear capital allocation priority to execute on that. Our progressive dividend policy continues and our ordinary dividend of 87p per share, full year '26, marks the 16th consecutive year of growth.

Once we reach a position of 0 net debt, we will continue to allocate thoughtfully. In this regard, all options are on the tape optimizing co-investments alongside our existing products and strategies, seeding new products and strategies, making strategic investments, whether in M&A or partnerships more broadly and of course, returning capital to shareholders through dividends or buybacks.

As a management team, we view these options in the round to assess what will generate the best risk-adjusted long-term growth in FRE per share. Taken together, these results give us confidence in the trajectory of the business and in the opportunities ahead.

With that, I'll pass back to Chris.

Thank you very much. Thank you very much. Thank you, David. [Operator Instructions] And I will start with Oliver Carruthers at Goldman Sachs.

I just have 1 question, and it follows on from that Slide 22, David, that you showed at the end. I guess, if we think a part 2 here, that was hitting net debt of 0, which looks like you might be doing this year. So I'm just -- I'm interested a little bit in how you think this capital deployment priority might play out in practice.

And I guess I'm thinking of this also in the context of the new FRE performance fees and balance sheet disclosure that you give and the new guidance to give alignment on this metric on an per share basis. As you say, that the lines you to the global peer set, I think it also highlights how you trade at a discount to the global peer set. And it sounds like you're focused on closing that discount.

So as you say, the balance sheet is at the beginning of this early year cycle of elevated cash flow given maturing investments and the lower commitment needs. So in the context of that, I guess, 4-part capital deployment priority, I'm really interested in how you think about share buybacks in this context.

Yes, good question. I think 2 things I'd say. I mean, firstly, just picking up on one of the comments you made or the implications you made, I think we're very focused on growing the business, investment performance. And as we've said in our presentation, that will drive growth and positive outcomes for shareholders over the long term. That's what we are in control of. That's what we want to drive, and that's our focus, our investment performance first. The other things will follow.

We think FRE per share and FRE in general therefore, gives you a much clearer base of comparison to global peer set. That was one of the drivers of why we think this is an important way to exhibit the growth that we've achieved and the growth potential to come. And then on capital allocation priorities, I deliberately made the comment that we're very committed to the progressive dividend and reach 0 net debt. Those are our near-term priorities. We're clearly not there yet in terms of reaching a net cash position.

And given the operating environment, actually been strategic optionality and extra liquidity is not a bad thing. And so we don't feel under sort of undue hurry around that. You're right, if you play this 400 reasonable assumptions, that will be something that plays out over the next year or 2 as a practical matter.

Yes. If I can add, I agree, David. And I mean we'll see and will tell. And as David said, that's giving us optionality. It may be that we find ourselves in a very strong financial position exactly at the right point in the cycle. As you're aware, there is not everyone is showing the sort of performance that we are showing today.

There is a lot of pain in the broader alternative asset management industry. This could create some opportunities for us. I mean historically, one, we've been cautious. And two, it's been made difficult by -- as you pointed out, the fact that we've always created a meaningful discount to peers. But I could see situations where we could take advantage of the environment and perhaps accelerate our growth in some specific areas. So that's certainly something that we're keeping a very close eye.

Perfect. Thank you, Oli. Let's now go please to David McCann at Deutsche Bank.

Yes, 2 questions from me, really focusing on the new disclosures, if that's okay. The first one really is, as with the changes that have been made, are you going to subsequently make any changes to the Board and other key staff remuneration KPIs in light new disclosures? And if so, what KPIs are now going to matter to the Board and what hurdles need to be achieved? That would be the first question.

And then secondly, just a more technical one, really. Thinking about the definition of FRE that you've now struck. Can you just outline why you're not including shares compensation, depreciation and amortization within the definition of FRE. And related to that, how should we think about the instance of the effective tax rate across the group splitting them between FRE, PRE and the other components?

David, let me take your questions maybe in reverse order. So in terms of the technicals of the definition, we're using a definition that we believe to be quite comparable to market standards. Most firms don't include share-based compensation and FRE. It's meant to be more aligned to a cash view of the world and share obviously on cash. So in that sense, it's comparable.

We do obviously break out all the components. So if you choose to reconstruct the measure a different way or adjust, that's obviously available to you as well. tax effects, they are, it tends to be more about the mix of investment returns versus fees. And obviously, those are hard to predict in a given period, that effectively creates the ETR for the year. Again, you'd have to have a view on mix of revenue to really come up with that answer.

And in terms of the Board, obviously, we're not talking about the Board here today. We're actually talking about external presentation of the FRE metric, the margin and the guidance. But I'm sure, in due course, the performance measurement of the management team will be aligned to the way that we're talking about our medium-term guidance.

Thank you, David. Let's move to Hubert Lam at Bank of America.

I just got 2 questions. Firstly, on costs. Can you just give us your guidance on group cost growth for this year? I think where 26 was only 3% cost growth, which was better than expected. So just wondering how we should think about this year?

Second question is on deployment. I think, Benoit, I think you were a bit cautious on -- correct me if I'm wrong, on deployment this year, similar to last year. Considering you have about $13 billion of dry powder in death and the dislocation we're seeing in that market. Do you see possibly more opportunities to deploy that this year?

David, do you want to add...

Yes. Let me just take the cost question first, Hubert. Yes, I think we've clearly got operating leverage in the business. We've been talking about that for some time. 3/4 of our cost base, as you know, is people and people related expenses. So that's really a view on how much head count and compensation outcomes.

And so we have good control levers around that. I wouldn't take 3% as new normal. I've been guiding more in sort of 5% to 10% range because we are clearly still growing the business. And as we said in our presentation, we will want to make selective hires add to the platform, continue to improve the client experience, all of which implies some cost. But clearly, we've got positive operating margin embedded into what we've already got.

And on your question on deployment. As I mentioned during the presentation, discussions at investment committees these days are lively and interesting. If you think about it, we have to contend with an incredibly complex geopolitical environment, economic uncertainty and you add to that the AI disruption and what this could mean for various industries. So that creates quite an interesting environment.

Within that, listen, our goal is to be finding the opportunities and finding opportunities that work long term. We're investing for long term. And so we're looking through cycles. There are always opportunities. the answer will be different by asset class. I mentioned in direct lending, we've taken advantage of our existing portfolios. We've been doing this for a long time in direct lending.

And so we've been taking advantage of existing portfolios to add financings through companies that we know and with legal documentation that is quite favorable, particularly compared to some of what we see in a number of deals in the market these days. We also have a number of niche are strategies, not in size because they've been growing in size, but certainly in their approach, there are flagship structured capital, I mean, it's precisely designed to deal with an environment like this one. its self-originated transaction. They are nonsponsored deals where we're supporting family owners and founder owners.

So it requires a lot of origination capability, but that means you're less behold into the broader buyout market in that cycle. So it's not a surprise. I mentioned how successful we've been in fundraising there. that shouldn't be a surprise because that's quite an interesting space to be in right now, and we happen to be a global leader.

So you have to pick your spots. I mentioned second raise as well. There is a lot of deal flow in secondaries because, obviously, all the GPs are looking for some liquidity and LPs as well. Having said that, there are still actions around equity valuations. And so we're very, very conscious. So this is an environment where, yes, you want to find the opportunities to deploy, but you also need to be conscious of the risk out there and remain quite selective and cautious, which has always been -- that's what we're known for. That's always been our approach. So we're not going to move away from being more on the conservative side and highly disciplined in deployment.

Thank you very much. Moving on. Nick Herman from Citi.

Can you hear me okay? Can you hear me?

Yes.

Yes. Perfect. Two questions from me. On the first one, I guess, on the balance sheet, you dropped the NIR targets and I hear you that you still expect to achieve double-digit returns over time. But does that imply, I guess, more volatility in balance sheet returns in the short term, potentially from debt returns?

And I guess more broadly, it feels like you're trying to deemphasize the balance sheet a little here this is another strong set of results have been overshadowed by the balance sheet. Is this a -- maybe there's a question for another time, but have you considered other actions to minimize volatility and balance sheet returns?

And then the second question I had was -- you said that you see significant operating leverage and are targeting FRE margin accretion. You're at 51% today or 47% ex catch-up fees effectively at the end of your kind of fundraising cycle. Broadly speaking, but I think where do you think reach by the end of the next fundraising cycle would 50% be a reasonable assumption?

Okay. Let me take those. So I mean, firstly, we haven't changed our view on the balance sheet. Let's be clear. We talk about double-digit returns over the medium to long term. That still remains our view. Why is that? Because as we said, the balance sheet is invest in the funds, and that's what the funds do over a long time horizon. So that in substance, nothing has changed.

This year was a 5% return. I don't think in the environment we're in, that should be massively surprising to individuals, and it shows the diversification benefit of the balance sheet if anything, a vesting across multiple asset classes.

And then on the margin, I tend to agree with your direction of travel in your statement. We are going to accrete FRE margin over time. It will be lumpy in a given year because of the fundraising cycle and the way that management fees are recorded, but fundamentally and structurally, we can accrete FRE margin from here, which is exactly why we put it into the guidance.

I think it's worth mentioning because it's not clear. I mean, obviously, it's in the data pack, but the balance sheet has very limited exposure to direct lending because we practically don't co-invest in the direct lending funds because we don't have to because the LPs understand that the returns are not suitable for our balance sheet. So we hardly co-invest.

And so the exposure is on CLOs, which we've historically discipline ourselves to limit at around 10% of the balance sheet. So our exposure to debt instrument in the debt strategies and the balance sheet is actually quite limited. I think there's a bit of a -- potentially a misconception there. And fundamentally, as David said, the balance sheet is essentially tracking our funds, right?

And again, I think the linkage has not really been made we wouldn't be fundraising and having the success that we've been having and that we've been showing during this presentation for a long time now, if our funds weren't performing well. And that's what the balance sheet is invested in. It just mirrors that. So over a medium -- everything is medium to long term, right, for us. What happens in a given year is largely all even. But medium term, it will reflect what we are doing in our funds. -- which clearly LPs seem to appreciate.

Yes, exactly. And Nick as you will have seen in the co-invest portfolio generated for nearly GBP 500 million of net cash flow. So we should think of cash generation as well on that. .

Moving on. Michael Sanderson at Barclays.

A couple, please. First one, Benoit, you were making some comments about the nature of private wealth and sort of how your institutional angle is particularly strong. I was just interested in how we think about Amundi partnership and the products you're likely to put there and how those will suit your more institutional focus and how you're going to change pieces around the investment process, if at all, around that.

And the second one was just talking about some of the fundraising. You talked about the FY '27 back end, I think, strategic equity and senior debt starting to raise. That feels like a slight bring forward from, I think, previous conversations, but you can correct me, obviously, if I'm wrong. But given the deployment environment were seeming from your commentary to be challenging still. I was quite surprised you would bring those forward in that environment, but feel free to correct me if I've misunderstood previous position.

Okay. Thank you, Michael. Two good questions. First of all, on Amundi, that's a really good question. And the main reason we entered into the partnership with Amundi is that we share a very similar view on how to approach the alternative asset class for wealth, which is largely not how it's been done to date, which is why we're going to take our time to craft the product that we think are adequate and adequately protect the end investor.

So for instance, the evergreen vehicles, I don't think are appropriate for many of the asset classes in our world. They can work in credit and in LP secondaries but with a number of caveats. And I'm not going to do all this, but for instance, I mean, I have some pragmatic rules, for instance, that if you have an evergreen vehicle, it should be investing in parallel to the institutional fund that you have which no one does.

By the way, this is not the way it's been done. And it has implications because it means that you're not going to be rushing to invest any money that's coming through the door in your evergreen, you're just going to wait for the next deal that gets done. So you're going to be holding cash for longer, which has an impact on returns, but it's the right thing to do.

So yes, this is one example, but we're putting a set of our own rules and constraints in what we think is the right thing to do and will only approach the market on that basis. There's another aspect which is fundamentally, I mean, in both communes in our view, is the long-term bigger price, which is -- but it will require education of the market, which is that in many areas of the market, particularly anything that has to do with retirements with pension and especially in Europe, the education will be that some of these portfolios should have a long-term outlook and therefore, be invested in long-term strategies.

And for that, alternative assets are a very good way to diversify, but you need to explain that they are very liquid. And you cannot magically create liquidity out of fundamentally illiquid products. So that's what we're working on. I think long term, the potential is huge. But we're going to remain very disciplined in that way.

And as a result, there is no inconsistency because I think that was part of your question. with how we're posting infrastructure because, in a sense, we're pushing wealth closer to how we're investing institutional investor money, which is as it should be. You're also avoiding all the potential conflicts of interest of allocation between buckets, which I think is a really bad idea to get into that. And we don't want to get into that.

So that's for how we're approaching the wealth opportunity with Amundi, but there's a lot of work going on. Just yesterday, we filed in Luxembourg with the CSFB to create the CCAB will b -- which will be the CCAB for our VRS product. So things are progressing. On the fining front, you're partially correct.

So on direct lending, I think we're pretty much on track with what we expected. It's always difficult to predict the exact timing because it's -- as you pointed out, it's correlated to deployment, but that's pretty much when we expect it to come back to market with SDP sometime this year or maybe early next year. So maybe we're a quarter ahead, but I wouldn't make too much of that.

Strategic Equity, it's true that we're perhaps a bit ahead of what we initially anticipated, which is incidentally is why we talk for a while about launching a mid-market version of that strategy, and we decided to hold precisely because the large cap was going to come back a bit earlier than we thought and we didn't want to create an overlap. We might come back to that in the future. But that's just -- for strategic equity, 2 deals will move the needle.

So again, I wouldn't make too much of that because you're successful on 2 transactions closing and suddenly you're ahead of time or we could -- so happens we're ahead, but you could be laid by 6 months. It doesn't make much of a difference. So yes, I mean, we're slightly ahead on strategic equity. And the scheme of things doesn't really change things.

What really matters is the cycle is how much we raise in the next fund. We have a global leadership in that strategy. That fund is larger than that of peers globally by some margin, I'd like to maintain that head start. So that's going to be the goal for this, for the fundraising of the next strategic equity.

Thank you very much. We have Haley Tam from UBS. Or perhaps we don't.

I think there are no more verbal questions from the...

Can you hear me now?

Haley, yes, we can.

Sorry. I pressed -- I did the classic, I forgot to unmute. So I apologize for that. Can I ask you 2 questions, please. Firstly, on the cash flow generation from the portfolio on the balance sheet, I think there was a significant realization of more than GBP 500 million you flagged this year. Was that all from reducing the co-investments or optimizing the investments? Or was there any particular realizations that we should be flagging? That's the first question.

And the second one, just in terms of the balance sheet investment returns. 8% on structured capital on secondary for 2 consecutive years. Now can I just confirm what you said a few times that is representative of what you're seeing on the flagship funds? And if so, how can we square that with the very impressive IRRs and MOIC you report for those funds?

Maybe I'll just take a realization question, Haley. Obviously, it's the totality of everything that's going on in the funds that's generating that realization as described it's quite high because we had a good year for realizations across portfolios. And therefore, the balance sheet benefited as to LPs from those realizations. So that's why we had the higher elevated level of structural inflows.

But I also described the trend is clear if we continue to allocate less capital to successive vintages, which is what we're doing. The back book of co-investment will be generating more cash and we'll be more positive to pay down the debt and do the other things we talked about. So it's more the trend and are the direction of travel, which I think was particularly interested, but it was a high year for realizations from a balance sheet perspective.

Yes. And on -- the difficulty is always the same is it's very difficult to look at a 1-year performance and draw conclusions on funds because -- and yes, there is a link, but it's not an immediate link I think I've mentioned before that there are a lot of things that come into play in funds. So structured capital in structured capital, our performance is upper teens, right? But this is upper teens over the life of 1 from 1 year to another, particularly if you've had a number of exits, typically, because that's what accounting requires, the closer you get to exit, the more you convert towards whatever exit value would be.

And so once you've achieved that, well, there's no uplift for a period of time because you've recognized it in the past. And also, when you're deploying, you do not recognize any uplift in value for a year unless it's debt and you have interest and you have to recognize the interest accrual. But otherwise, if you have any equity component, we -- our policy is we do not recognize any increase in value for a year. And so the more you deploy less of an increase you're seeing in your NAV at least in the near term, and then you see that catch up later on.

So that's why it's very difficult to look at in your -- it's -- I think it's more helpful and we provide some information on that to look at fund performance because in the end, that's what the balance sheet ends up reflecting it just may be in different years or spread out over a longer period of time. But if the question is, are you seeing a deterioration in the performance of the underlying. So the answer is no, absolutely not. We're not seeing that at all.

And nor should we, in a way, because you're not seeing -- we're not experiencing a recession, we're not. So it would be unusual if we were to see this at this point.

Thanks, Benoit. There's been a written question around whether we see any merit in doing something along the lines that the SRTs that bank has been doing around balance sheet risk transfer. But I mean, David, don't something that we consider within the balance sheet is a valuable...

We can't. Just to be clear, it's not -- that's not a financial decision. We can't. The balance sheet is coinvesting in the fund. That's our con is the alignment of interest. That's our co-investment in the funds. We are committing to the LPs to remain essentially to keep skin in the game. So we couldn't through the back door, derisk the balance sheet, i.e., disalign ourselves with an LP, that's not what they want. That's not what they need, right?

And I think it's important to -- it's really important to understand is in our world are looking for alignment of interest. They're typically looking for 1% to 2% of co-investment in any strategy. Some of it is put in personally by the investment fees. But as you can imagine, if you're raising a $10 billion fund, the teams cannot put up 1% to 2%, that's where you need the balance sheet. But as a result, the balance sheet needs to remain on the hook. We can suddenly start securitizing or doing some fancy off balance sheet derisking.

Great. And there is one written question that we'll close with. Benoit, your [indiscernible] review and your tone today has been maybe slightly more long term, optimistic on the opportunities ahead particularly around the scaling strategies into real estate and LP secondaries. If you were to think 5, 10 years ahead, what could you do with the existing product suite of business...

Well, that's a bit of a crystal ball. The reason I -- maybe I sounded more optimistic. The reason for that is, as I pointed out, you really only know that a strategy has probably taken hold once you're through the second vintage, right?

Raising a first fund, having a first-time fund close is incredibly hard. But your -- even when you've done that, you're not at the wood. It's only once you've raised the second vintage, which is typically much larger than the first one that you've properly established a team, established a credibility, you have an LP base. And you can then get, okay, this -- normally, if things go to plan, normally, you're just going to increase that strategy.

And it so happens that in real assets, so both in infra and in real estate, hopefully, in LP secondaries tomorrow, but we're not there yet in LP secondaries. But in infra equity and in real estate equity, we are now there. And that's why I sound a lot more confident because once you've reached that point, it's a lot easier to start thinking about, okay, I've raised the $3 billion-plus intra-equity strategy for Europe, it's not unrealistic to think that the next one can be $5 billion plus. It's not unrealistic to saying that on the back of that success, I can start looking at Asia. Same thing in real estate and maybe with an eye on the U.S. and Asia in real estate.

But so suddenly, it's more credibly opening the door to growth which is maybe why I'm sounding more confident is just it's easier to be more confident on those. Hopefully, a year from now or 2 years from now, we'll be able to say the same about LP secondaries. And as a result, suddenly, that's creating quite a lot of growth potential, right? Because if you look at -- you just put infrastructure and real estate together, and you put the 2 together. And in the next vintage, the 2 together, the 2 combined could be as large as our historical flagship fund as European corporate. And these are fees on committed strategies. And so it's the same level of profitability, that's a positive outlook.

Well, thank you all for joining us. Thanks for attending today, and this concludes the presentation. Thank you all.

Good afternoon, and good morning to those joining from North America. Thank you for joining us today to talk about ICG Real Estate. I am pleased to be joined by Krysto Nikolic, who joined ICG in 2022 to lead our global real estate business. And today, we want to explain where ICG Real Estate fits within the firm, how the platform has been built and why we believe it will represent an increasingly important contributor to the firm's growth in the coming years.

Real estate is a large and investable market, and we believe our platform is increasingly well positioned to meet client demand in a disciplined and scalable way. We're pleased to share our perspectives with you today, and we'll leave time for questions at the end.

The long-term opportunity in real estate for ICG is underpinned by a number of clear strengths. Across both debt and equity, we have built positions in real estate segments such as net lease, where we see durable investment opportunities alongside client demand and where our underwriting approach is well suited to the risk profile. We invest across the capital structure and consistent with ICG's broader DNA, we are comfortable with complexity where it supports downside protection and managing risk in an appropriate fashion.

A key differentiator, and Krysto will talk about this later, is our ability to originate opportunities through long-standing corporate relationships across the wider ICG platform. Taken together, origination track record and client demand and in the context of an attractive point in the European real estate cycle, we believe the platform is well positioned to grow.

As a reminder, ICG today manages approximately $130 billion of AUM. Nearly half of this sits within structured capital and secondaries, which has been the firm's primary growth engine over the past 5 years. Just under 40% is in private debt and around 14% in Real Assets, where AUM has nearly tripled since March '21. As a firm, we have deliberately focused on building multiple levers of growth to support clients' investment needs across investment -- across different strategies and market environments. Together, alongside our established strategies, we have several platforms that are scaling. Real estate is a core part of that group alongside infrastructure and LP secondaries.

To put ICG Real Estate into context, the platform today represents approximately $12 billion of AUM or around 9% of the firm's total with roughly 2/3 in real estate equity. So this is already a material business within ICG and one that we believe has the potential to continue scaling over time.

A little bit of history. The real estate platform began in 2011 as a U.K.-focused real estate debt strategy. Real estate equity has been built organically since 2019, consistent with ICG's broader approach to launching new strategies. This chart shows AUM growth over the past 15 years, during which time the platform has delivered an aggregate AUM CAGR of approximately 29%. Today, real estate equity represents the majority of AUM on the platform, reflecting strong execution and client demand.

An important factor in launching and scaling new strategies is the ability to seed and warehouse assets. In real estate equity, we've seeded approximately $420 million of assets on a gross basis. Just over half of this has been syndicated to third-party investors with most of the remainder transferred into funds as capital has been raised. As a result, residual balance sheet exposure to those assets was very limited. So it's a really good example of how we use our balance sheet efficiently to grow fee-earning AUM. This approach of seeding, syndicating and scaling has been successfully executed across a number of ICG strategies and real estate equity is another clear example of this capability generating value for our shareholders.

This chart on this slide compares ICG's real estate fundraising with global real estate fundraising, both indexed to 100 since 2020. Over that time, we've raised nearly $7 billion. And while fundraising can obviously vary year-to-year based on our fund sizes and timing, the data clearly illustrates that we have continued to attract capital and to gain market share in what has been a difficult market globally.

From a client perspective, increasing scale and a growing track record are making us more relevant to larger institutional investors. We have expanded our client base in North America and Asia Pacific. We've diversified across client types, and we've seen an increase in average ticket sizes. We show on the right-hand side that relative to FY '20. As strategies scale, this supports broader client relevance and access to larger pools of capital over time. As we've seen in other strategies, European Corporate, Strategic Equity and direct lending, this can become a very powerful and self-reinforcing phenomenon. And we show here some examples of larger client commitments since 2022, highlighting both geographic reach and client diversity. These commitments reflect relationships that have developed as the platform has scaled and ticket sizes that would have been difficult or even impossible to achieve earlier in the platform's life. Generating attractive investment performance at scale matters, both in terms of client relevance and the underlying economics of ICG.

From a financial perspective, growth in real estate equity has driven a significant increase in fee-earning AUM. This has shifted the mix of revenues towards longer duration management fees typically charged on committed capital and at higher fee rates. Over the past 5 years, a roughly 4-fold increase in fee-earning AUM has translated into an almost 11-fold increase in management fees within the real estate equity business.

And so before handing over to Krysto, a few closing thoughts. ICG Real Estate has been built organically, leveraging both the human and financial capital of ICG. And as a result, we've developed a set of competitive advantages, strong corporate connectivity, a focused mid-market strategy in Europe and disciplined underwriting, which together have delivered a strong track record of investment returns. And we've seen evidence increasingly clear over the last 12, 18 months that our approach is generating results for our clients and for our shareholders. And that is why we want to spend more time unpacking this part of the business with you today.

And with that, I'll hand over to Krysto to talk more about our platform positioning in the market.

Thank you, Chris, and thanks to everyone for joining the call today. It's a pleasure to speak to you all. I'm going to do two things. The first is to speak about our real estate platform. And the second is to give a summary of how we see the market today.

Our real estate platform now comprises close to 50 dedicated professionals based in London, Paris and in New York, but working in deep collaboration with the broader ICG platform. Our business skews towards senior originators. We have 31 either managing directors and principals in the group. That drives, we think, really differentiated origination across our business. And we are a full-control investor. In most of our transactions, ICG holds 100% of the equity position in our investments. That necessitates a very deep vertical integration across all of the disciplines necessary to execute our investments, all the way from origination to execution and then full cradle-to-grave management of the investments thereafter.

We operate in both the real estate debt market and the real estate equity market. As Chris says, we are across the capital structure investor. We are constantly assessing the relative risk/return that is on offer as you work up and down the capital structure. And we have across those two strategies since inception of our real estate business just after the GFC, deployed around $16 billion of capital to -- into European real estate markets. That 14-year track record has been across 25 separate funds and SMAs with many of our LPs being with us since the inception of the platform. Very happily, we have been recognized for our activities in a number of real estate publications, both for our fund performance, but also recognition that individual deals can often be standouts in the context of the European investment landscape.

Looking specifically at first, real estate debt and then secondly, real estate equity, we have been a pioneer in the real estate debt landscape since just after the GFC. It seems like today, many alternatives managers have real estate debt platforms. We were one of the very first to establish a real estate lending program in 2014, and that has been one of the most active real estate lending platforms in Europe over the past 12 years.

We've committed over $11 billion of capital into principally first mortgage senior secured lending, always against very high-quality underlying real estate and backing the very best sponsors in the marketplace. That can sometimes be property companies. Increasingly, in today's market, it is backing best-in-class financial sponsors, but the underlying investment discipline is the same, senior secured first mortgages on very high-quality real estate generally delivering double-digit or close to double-digit IRRs. We have had a very active period of realizations in the past 18 months to 24 months, taking our total realized value to close to $9 billion.

Our real estate equity business is somewhat new in its activities. It was established in 2018 and since then has grown to $5.5 billion of gross assets in our business. We'll come on to this a little bit later, but we are a 100% control investor in real estate equity. We invest into a number of sectors that we hold high conviction around. And importantly, we have become a market leader in buying assets directly from European corporates in the form of triple net leases that allow us to construct large-scale diversified cash flows that are typically inflation-linked and are backed by some of the largest and most blue-chip corporates in the European marketplace. And you'll see some of the brands and companies that we've worked with on the bottom of Page 16 here. That $5.5 billion of GAV generates a little under $400 million of annual cash flow back to our investors every single year with a very high degree of predictability.

And as we think about investing both real estate credit and real estate equity regardless of where we are investing in the capital structure, a core principle of our investing is that we imbue it with a very deep sense of the thematics that underlie each of the sectors in which we invest. And you can see the breakdown of those on Page 17. Particularly recognizing that real estate has gone through a meaningful structural shift in the last few years, particularly in the real estate office sector, this has been -- this has never been more important to investing.

And so we invest in and around real estate that is anchored on digital and AI growth. That has pointed us towards being some of the biggest investors in European data centers and logistics. We have invested in line with the growing population densities driven in European cities and urbanization trends that really drive a need for increased housing and essential services, whether that be social infrastructure or food retail. And then as assets and corporates grapple with the really significant funding needs that they have to implement CapEx upgrades, particularly around ESG and energy, we have been one of the largest funders of assets going through that transition process. That has been a very important and large part of our business in the past few years.

I mentioned earlier our real estate equities business focus on triple net lease. This is a style of investing in real estate that allows us to buy or create assets where we are not exposed to the underlying cost volatility of the real estate. So when we buy or we create a triple net lease real estate asset, what are we getting? We're getting a long-term, very predictable inflation-linked cash flow stream backed by a high-quality corporate credit. That allows us to get that cash flow net of insurance, net of taxes and net of repairs and maintenance.

What it creates is a highly visible long-term cash flow that can be financed very efficiently, and with a high degree of visibility, dividended back to our investors on a quarterly basis. As investors think about what they want from real estate investing, particularly after this last period of disruption, they want cash yield, they want predictability, and they want good quality corporate credits backing up those cash flows, and that's what net lease gives us.

How do we get to the net leases? In three primary ways. About 50% of our transactions, we buy directly from corporates. So we will implement an OpCo/PropCo structure with the underlying corporate where we will own the real estate and lease it back to the corporate. That allows the corporate to do a number of things, but principally allows them to receive capital to either improve their balance sheet; fund growth initiatives in their business; in many cases, fund M&A.

Secondly, we will build or create new assets that are built-to-suit and very specific to the underlying corporate occupier. We will be a financing provider in essence, to brand new assets that are operationally critical to the corporate. And then in a number of instances, we are opportunistically acquiring triple net leases in the market. In today's volatile real estate world, we've been buying from open-ended liquidating funds. We've been buying from other distressed or motivated sellers in the marketplace. And that has been a very attractive place for us to access triple net lease over the past period of time.

And you'll see on Page 19, a snapshot of some of the real estate investments we've made in the past period of time. MIRA Tech Park is one of the largest research clusters in Europe, primarily focused on mobility and defense sectors. We have been financing in our real estate credit business, the construction of new logistics and R&D warehouses on site there. We've had a series of exits in that investment that have been very attractive.

The second investment you'll see here is a series of digital infrastructure assets that we own in Central London that are leased back to Vodafone. We own irreplaceable operationally critical digital infrastructure here with a Vodafone 20-year lease. That is an incredibly valuable asset-backed income stream.

And on the bottom of the page, we are one of the largest owners of essential retail and food grocery in Italy. This transaction was the sale and leaseback of 23 Coop food stores in the Italian market, where we worked with a very high-quality institution in the form of Coop to structure a sale and leaseback transaction to release capital back to them. And as a result, we ended up with really pristine high-quality real estate.

Our strategies are easy to explain on paper, but the real-world proof is in delivering good returns for our investors. And I'm happy to say that across the board, we are either top quartile or second quartile across all of our strategies, both in terms of net IRR and DPI. And that relative performance has never been more important as it is today. Real estate has gone through a very difficult period from a performance perspective. And as we go into what we perceive to be a new cycle, that all-weather strategy that we've implemented and the fact that our portfolios have come through the storm very nicely, that's going to account for an awful lot going forward.

So turning to where we see the market today. Our strategies, we think, are very relevant for a market that is incredibly attractive from an investment perspective. First, you heard me speak earlier about our focus on buying real estate directly from corporates. These are corporates in practically every sector in the European landscape. They're typically one of the largest owners of real estate across the board. It's a surprising statistic, but about 55% of all real estate is actually held by owner-occupier corporates in Europe. They are going through a rapid divestment program for a number of reasons. They need capital for CapEx. They need capital to replace bank financing that may not be available to mid-market companies in today's more challenged capital markets.

And increasingly, we're seeing corporates engage in a series of special situations that require them to spin off their real estate to make something happen. These can be M&A processes, these can be strategic reviews, large-scale recapitalizations. There are a number of special sets that drive their need to sell real estate, and we've been one of the biggest buyers of assets out of that type of situation.

And the backdrop is attractive in two ways. First, valuations have reset. We're typically buying real estate at somewhere between a 20% to 30% discount to peak pricing, and that's for the very best real estate. Lower quality real estate has actually revalued more significantly than that. But our basis in the real estate we're acquiring today is down somewhere between 25% to 30%. It's interesting that Europe has repriced more aggressively than other regions around the world, and we think represents even better value than in the United States or in Asia.

But that revaluation would not be attractive if the underlying real estate fundamentals in the marketplace weren't as attractive as they are today. When we think about what drives NOI growth, what drives earnings growth in real estate, it's a fairly simple demand-and-supply analysis. Demand in Europe has continued to be reasonably strong in the sectors that we invest in, backed by some of the secular tailwinds I spoke about earlier. But the really profound driver of NOI growth in European real estate has been the complete lack of new supply. There's been a real lack of new delivery into new European real estate since the GFC. And sitting here in 2026 amidst all of the disruption we're seeing in the markets today, we believe that supply will be constrained all the way through to 2030. And that is a big driver for the demand and supply imbalance that we see driving NOI growth today.

Some of that is already being reflected in how we are seeing investors allocate capital region by region today. Europe has certainly repositioned itself as a very attractive place for real estate capital to be deployed. Some of that is the valuation reset. Some of it is the demand and supply fundamentals that I mentioned. A large part of it is a growing sense that Europe is a reasonably stable place to be investing capital today. All of those things add up to increased flows of capital into the European marketplace.

So in summary, what are we focused on? We'll be buying assets from noncore owners. We'll be one of the biggest financiers of the huge CapEx needs that are burdening corporates today. We're investing behind primarily two very large themes in onshoring, which is completely reconfiguring global supply chains and supply chain fragility is definitely top of mind for corporates. And we're investing in the increased needs for compute amidst the digitalization and AI disruption we're seeing in the marketplace today.

Our business will continue to create value asset by asset and company by company. It's a very intensive process that we lead internally here at ICG. And as I said, we're full-control investors. We'll continue to invest up and down the capital structure. The creativity that we offer borrowers and corporates has become a hallmark of our investing.

Plugging into the ICG corporate DNA and network is a huge advantage for us. It would be incredibly difficult for us to prosecute our strategy as a monoline real estate shop. We really do drive huge benefits by being part of the broader ICG platform. And as I mentioned earlier, one of the hallmarks of our investing is the constant reassessment of risk/return as you move up and down the capital structure. Again, that is something that is difficult for a monoline real estate shop to implement and has been a part of our business since 2014, and it will continue going forward.

With that, I'll pass it back to Chris.

Thank you, Krysto. And before opening up for questions, a couple of closing remarks. So we firmly believe that ICG Real Estate is well positioned for continued momentum. Our funds are performing well on key metrics, and we operate in attractive markets. Institutional investors remain under-allocated to real estate and are looking to increase exposure. And this is something we are hearing directly in client discussions.

As a reminder, we're currently in the market with the seventh vintage of our Real Estate Debt strategy. We're wrapping up fundraising for the second vintage of Metropolitan, one of our real estate equity strategies. And later in the year, we'll be out with the third vintage of Strategic Real Estate, another real estate equity strategy.

Against that backdrop, with a clear investment strategy that Krysto has outlined, some evident competitive advantages and ongoing demand, we believe the platform is positioned to continue gaining market share. As a result, and at an attractive point in the cycle, we believe ICG Real Estate is emerging as another driver of future growth for ICG, attracting further capital from our clients, generating compounding fee streams and increasing operating leverage that will support further FRE growth for our shareholders.

And with that, we are very happy to take your questions.

[Operator Instructions] So maybe while we wait for a couple of questions coming through. One question that just arrived is what impact do you expect the current market volatility to have on the real estate business? Krysto, this is for you.

Thanks for the question. I think it has some short-term and perhaps some medium- to long-term implications. The short term is that capital markets are clearly in a state of volatility. That means that transactions to some degree, have slowed down as both buyers and sellers wait to see what happens in the Middle East. That will clear up either sooner or later and to some degree, [ is out ] with our control.

The broader implications, though, I think, are yet another reinforcement of the sector focus that we have. If you think about the two big issues that the capital markets have faced in 2026, the first is AI and the disruption in the software industry. And the second is the war in the Middle East.

As we think about what that means for how corporates use real estate, it has really meaningful implications. AI is driving clearly a very significant increase in demand for data centers and for logistics warehousing. The effects in warehousing and logistics are to some degree, a second order effect, but they're really profound. As an example, if AI drives another uptick in e-commerce spend, we're going to see what we saw post-COVID, which is that there isn't enough warehousing to accommodate that increase in e-commerce spend.

The war in the Middle East, again, I think, is intensifying the behavior that we see in corporates to protect against supply chain fragility. Corporates have moved from a just-in-time to a just-in-case model of inventory management. And again, that means that they want to have goods onshore, closer to the end user, and they do not rely anymore on complicated global supply chains. That is driving yet another leg up in the demand for industrial and warehouse space. So it's a super fascinating time for the real estate industry to be thinking about these issues.

Thank you, Krysto. We have one verbal question from James Allen at Berenberg.

Can you hear me okay?

Yes, we can.

Perfect. I've got two questions, if I can. The first one is, I think I noticed on one of the earlier slides that the U.K. is a much larger geography in terms of where the AUM is located versus the group average. Is that purely reflective of the demand versus supply imbalance that you're seeing across Europe more generally? Or are there other reasons for that, too?

And then secondly, presumably data centers are very competitive at the moment. What are you seeing in terms of pricing in that market? And how are you ensuring that you remain sensible on pricing and underwriting?

Yes. Thanks for both questions. The concentration in the U.K. right now is really just a reflection of where we see the greatest opportunity set in deal flow. The market here in the U.K. has become slightly more dislocated than on the continent. Rates are higher that has obvious implications for real estate values. And the market has just been a little bit more active and liquid. And so that has driven a higher focus on the U.K. from an investing perspective. But that will shift and evolve depending on where the opportunity set is. There's no structural reason for us to be particularly focused on the U.K.

And in terms of the client concentration in terms of where you -- coming from the U.K. as well, any observations on that?

So we have a growing diversity of clients across the world, both by type and by geography. Historically, the real estate group did have a number of U.K. DB pension funds in its mix. That has, for obvious reasons, moderated in the last few years. And we've diversified the LP base to, I think, a little under 100 LPs now really across the world. So in our most recent vehicles, we've raised capital from the U.S., Europe, Middle East, Asia, Australia as well. Australia has been a big market for us. So it's been a really positive period of diversifying the capital base.

Second, the data center question.

And the question on data centers is excellent. It's absolutely the right question to ask. There is a huge amount of liquidity in that sector. Our focus has been to find very specific parts of the value chain that are relatively undercapitalized.

And if you think about the construction of a data center, there are really three parts to the build. There's the preplanning and pre-power connectivity piece of land where the cost of capital is very high because the venture is very high risk. There is a finished product leased to a hyperscaler with a very great corporate covenant behind it. And that is, too, low risk and attracts all sorts of core and very low cost of capital.

So we don't play at either end of the spectrum. So far, we have been playing specifically in the part of the value creation that is post planning and post power, but before the end product has a takeout, either a leasing takeout or an investment market takeout. And we actually think that, that part of the value chain is undercapitalized, and we can extract really good risk/return playing in that space. And we've actually been playing it quite interestingly in credit investments that have profit participation in them. That's been the primary way that we've invested in the space where we get the downside protection of the credit investing, but we share in some of the ups if things go well.

Thank you, Krysto. Another question that came through the portal. So the Real Assets business has deployed around $2 billion per annum in recent years, clearly in a challenging and uncertain market. Could you give us a sense of how well resourced the platform is and how much you feel comfortable deploying in a given year across both real estate debt and equity strategies?

Yes. So our business, we think, is exceptionally well resourced for the opportunity set that we see in front of us, which, as I mentioned in the main presentation, is very significant today. We think that we have a team that's set up to invest billions and billions of dollars of capital a year, so in excess of what we have invested in the past few years. The opportunity set is great and the team is structured and enabled to do higher levels of volume. And given the pickup in LP sentiment and some of the progress we've made on the fundraising side that Chris mentioned, we feel pretty confident about achieving that growth in the coming years.

And that also directly ties to the final -- the point on the final slide about the significant operating leverage potential as the platform continues to scale.

Thank you. Another question [indiscernible] through the portal. What is the return profile of your Metro fund series? And how does it compare to the Strategic Real Estate strategy? And would ICG consider having a breakout net lease strategy focused just on data center?

So good question. I'll deal with the first question initially, which was the difference between our Strategic Real Estate equity strategy and our Metropolitan equity strategy, there are two or three primary differences. The first is a risk/return difference. Strategic Real Estate targets a 14% gross return. So it is a distinctly mid-return vehicle. Metropolitan targets 18% to 20% gross returns. And so in real estate parlance, we have a core plus value-add product in the form of Strategic Real Estate, and we have an opportunistic product in the form of Metropolitan. They do also have different sector focus. Strategic Real Estate is diversified to invest in every sector and Metropolitan thus far has been exclusively focused on European logistics and supply chain infrastructure.

Would we consider a dedicated data center strategy? I don't think so. We have a great track record in data centers. It's getting a lot of attention, but we can service that through our existing fund series. Although interestingly, we have had LP inbounds and interest in forming dedicated capital around data centers, particularly as an adjacency or SMAs in and around fund series.

Thank you. Another one coming [indiscernible] through the portal, so looking out 5, 10 years, how do you see real estate fee-earning AUM growing? Should this strategy continue to be close to 10% of total ICG fee-earning AUM or more?

Well, I think Krysto can comment on the opportunity for real estate, the long-term trajectory. In terms of the percentage of overall contribution, I think we would expect it to continue to accrete as a percentage of the group, but we're not targeting a specific percentage of AUM coming from real estate. We have a number of strategies that are going to grow. They'll grow at different pace, different speeds depending on the market environment. But I think it's fair to assume that real estate will -- we expect real estate to continue to grow very attractively.

I don't know, Krysto, if you've got a long-term view of what you think the real estate business might look like in a 10-year time frame?

Well, I think the only comment is that we are set up and capable of investing significantly more capital, as I mentioned in my answer earlier. The real handbrake on the business over the last 3 or 4 years has been less about ICG real estate and it's been more about the marketplace, which, as you'll appreciate, has gone through a very significant downturn in restructuring. We're coming out of that downturn in restructuring now. We're very well positioned amidst that. Some of our competitors are having a much tougher time. And so we feel pretty good about the prospects ahead.

Thank you, Krysto. Another one more on the themes that we're investing in. If you can elaborate on the reasons why you're playing some things via equity, for instance, infra, essential retail rather than debt, like living and vice versa?

Yes. Very good question. It's not always obvious why that's the case because people might think that if it's an attractive thematic in equity, it would be in debt as well. That's not the case because flows of capital between equity and credit can behave in quite different ways. So to give you an example, real estate equity in the residential space is incredibly expensive. In many cases, we see cap rates in the 3s and 4s. Some of the risks inherent in residential investing, we don't think are reflected in the price that you have to pay to own a residential building. And so we haven't invested any capital on the equity side in European residential.

We have, however, found a really profound dislocation in the provision of real estate credit to residential construction. So we are being paid equity-like returns to provide capital in a fixed income format on senior secured mortgages to residential construction. So that relationship between risk and return as you move from debt to equity, it isn't a linear one. There are very sharp breaks in that risk/return spectrum that we try to play around. And that's true as we move through each of the asset classes. Residential is probably the sharpest contrast that we see in the market today.

One on performance fee. So performance fee in real estate, how important are they for ICG Real Estate? How are they structured? And do investors expect them? Has there been any change given the recent soft cycle? And linked to that, also on co-investment, is there -- is this a future for the market? And how much is that offered? Is that changing at all currently?

So I would say that real estate doesn't behave meaningfully different to other private markets asset classes. Performance fees are an integral part of the product offering that is widely accepted by LPs. And even during this more difficult period, there's been -- there's really been no pushback on the architecture of the fee construct, either on performance fees or indeed on management fees, where, as Chris mentioned, on the real estate equity strategies, fees on committed capital rather than invested capital continue to be common place, and that's what we achieve.

Co-invest is a part of the program. It's a small part of the program. We try to keep it capped and very focused because the funds are the primary method through which we're deploying capital. And it is part of the real estate marketplace. I would say it's probably less prevalent than in other private markets asset classes, but it is part of the program.

And maybe unlike within certain corporate strategies, real estate co-invest will often have some management fee. That's [ contributed ] to it. Not the full fund level, but it's not all fee free.

Yes. That's absolutely right.

Are there any real estate capabilities that ICG doesn't have today where inorganic growth could make sense?

Potentially. There's a lot of different ways to invest in real estate, and we see smart people doing smart things in the marketplace. There is a lot of growth that remains in our core product offerings, and our focus is on extracting that first. But there are parts of the real estate market, including, as I think an earlier question that was asked, some of the sectors that are more infrastructure adjacent that are certainly areas for growth that could be captured by us over time.

One last question. What level of yields are you buying up now? And how does it compare to the recent peak?

It varies very significantly asset class by asset class and geography by geography. But if we take a middle of the road U.K. logistics asset as an example, at its very, very peak, the very best assets would trade for high 3s cap rates. That has probably moved out to mid-5s cap rates now. So 150 to 175 basis points. Now one thing that people will appreciate is that 175 basis points moving from high 3s to low 5s is very different in terms of its value change -- underlying value change than going from 6% to 7.5%. It's a really profound driver of the valuation reset that we spoke about earlier.

Thank you, Krysto. And with that, I think we are at the end of the presentation and the Q&A. If you have, of course, any further questions, Chris and myself are available to speak one-on-one on the back of it. There will be a recording that will be published on the website in the coming days. Thank you for your time, and have a good afternoon.

Good morning. Thank you for joining this webcast covering ICG's results for the 6 months ended 30th of September 2025 and the strategic partnership with Amundi we've announced this morning. The slides are available on our website, along with both accompanying announcements. As a reminder, unless otherwise stated, all financial information discussed today is based on alternative performance measures, which exclude the consolidation of some of our fund structures required under IFRS.

This morning, I'm joined by our CEO and CIO, Benoit Durteste; our CFO, David Bicarregui. They will give an overview of our performance during the period, and we will then take questions. You can submit these through the webcast message function or by telephone, details of which are on the portal. And with that, I'll hand over to Benoit.

Thank you, Chris, and good morning, everyone. It's a pleasure to reflect today on the progress ICG has made during the first half. And this is an even more exciting than usual results announcement. We're not only reporting impressive H1 results, we're also announcing a major distribution agreement and strategic partnership with Amundi. From a group perspective, our growing breadth and scale is continuing to drive visible benefits for our clients and shareholders. And our deliberate tilt over the last decade towards higher returning strategies is clearly bearing fruit.

Our track record and reputation for an unwavering focus on risk and investment performance are key factors in our recent success. Institutional clients are increasingly scrutinizing performance and in particular, realized performance or DPI. In a market where a number of players' pursuit of AUM and volume is leading to some unreasonable risk taking in our view, predominantly but not exclusively in credit and private debt, our clients recognize that we remain at heart investors squarely focused on consistency of performance through cycles.

All of which means that we see substantial opportunity to grow our existing strategies and our institutional client base. This will drive significant organic growth in the coming years. And we are also well-positioned strategically and financially to continue to innovate new strategies and products where we see opportunities. These strong growth prospects are further enhanced by the announcement today of our strategic partnership with Amundi, which is a meaningful step forward in the development of our wealth strategy and will help shape appropriate product offerings for that market. It's an incredibly exciting opportunity, potentially very additive to both parties, and I'll speak about it further later in this presentation.

I'll start with a few highlights on the last 6 months. Fundraising of $9 billion surpassed our expectations coming into the year with Europe IX raising more quickly than we had anticipated and Infrastructure II having a very strong run into its final close, achieving hard cap at more than double the size of the previous vintage. Our secondaries franchise continues to excite us in an area we have built entirely organically and which is now our third largest asset class by AUM. We are in the market with the subsequent vintage of LP secondaries, so Vintage 2. We are launching a European evergreen secondaries vehicle, and we are also launching a mid-market version of our strategic equity fund, which is our GP-led secondaries strategy in order to further cement our global leadership position in that asset class.

On the financial side, fee-earning AUM now stands at $84 billion, up 6% in the last 6 months on a constant currency basis, and we have substantial dry powder to continue our investment programs. Management fees for the 6 months were up 16% at GBP 334 million, while expenses are being well managed and demonstrating operating leverage. At a group level, our operating cash flow was up meaningfully at GBP 450 million. So in short, we're enjoying significant growth and cash flow generation.

Putting that into a longer-term perspective, you could see how our business has evolved rapidly over the last 5 years and the financial impact that's having. On the left-hand side of this chart, we set out our growth by asset class, which has been diversified, but really driven by higher return strategies in structured capital, secondaries and real assets equity. Private debt in comparison has grown but at a slower pace and remains an area where we continue to be highly disciplined, prioritizing long-term performance over aggressive deployment.

We have attracted substantial capital into these higher returning strategies, leading to almost doubling our fee-earning AUM over the past 5 years, entirely organically. And we have grown our weighted average management fee rate from 85 bps at March '21 to just under 1% today. As a result, we are larger, more diversified, more resilient and more profitable.

A key theme of our strategy has been scaling our higher return strategies, specifically private equity secondaries, structured capital, real assets equity, that's real estate equity and infrastructure equity. This takes time, but the successful execution of this is clearly visible in the middle of this page. In March '21, these strategies represented 1/3 of our fee earning. Since then, they have grown by 3.2x. That's compared to doubling of fee-earning AUM at the group level. And today, they represent 57% of our fee-earning AUM.

From a purely financial perspective, this has been the key driver of the growth in our management fee rate I just spoke about and of course, our operating margin. But the broader rationale is arguably more important. These strategies are inherently more complex with higher barriers to entry. And this allows us to differentiate, generate outperformance for our clients, demonstrate our investment excellence, and in the process, charge higher management fees on committed capital as well as generate over time, more performance fees.

These strategies are also harder to commoditize, which will help protect management fee rates and is reinforcing ICG's brand equity with our clients. These are not volume vanilla products. And what is particularly exciting is that all of these funds or strategies have significant room to grow organically for years to come. As a result of this shift, the future value of our fee-earning AUM is materially higher than 5 years ago. It is earning higher fees and is more relevant to clients' wider markets portfolios. Today, we are proud of our European heritage and of our global reach. We have presence in 18 countries, attract capital from clients around the world and invest in all the largest geographies for private markets, including 1/4 of our deployed capital being invested in the U.S.

From a product perspective, we have a number of leading positions in structured capital, GP-led secondaries, European direct lending as well as an exciting array of earlier-stage strategies, including in real assets. And this has not been by chance. It is anchored in some very basic beliefs about what it takes to succeed in the long term, which is one, a focus on investment performance, always; two, a waterfront of strategies that provides something different to clients; and three, a platform that is scalable to be relevant to the largest investors globally.

I'm proud that today's results show how we are continuing to build that at ICG, how they help underline the success of that execution to date and how they help demonstrate the opportunity ahead of us.

Turning now to the current environment. Fundraising across the wider market remains challenging. Global private capital raised this year is likely to be lower for the fourth consecutive year. And to quote a recent Bain Report, fundraising has never been so hard. The statistic that there is about $3 of demand for every dollar likely to be raised is remarkable. It has existential consequences for many managers, some of whom simply are not and will not be able to raise capital. We're already seeing some firms effectively going into runoff or shrinking substantially, and I expect to see more of that. This will incidentally create some opportunities at the very least for hiring new talent, and we are already benefiting.

One of the consequences of this is that LPs are increasingly selective with many looking to diversify towards Europe and focusing both on certain strategies such as structured capital and real assets as well as being very focused on investment performance and DPI in particular. For firms such as ICG who have a range of products and we're able to raise capital, doing so is reinforcing our position with clients.

Stepping back, the real takeaway from this is that although the market has been challenging for a few years now, for firms such as ICG who have a range of products and are successfully raising capital, this is a very good time to differentiate, gain market share, and it is allowing us to set the firm up for even greater long-term success and growth.

I mentioned the strong focus of investors on realized performance or DPI, how quickly you return cash to clients. And here is a slide that I showed at our Investor Days in London, New York, and Tokyo this past September and October. And this slide really resonates with our clients. To have this number of strategies as top decile or at the very least top quartile from a DPI perspective is highly unusual. It's very impressive. It's a track record we're incredibly proud of and a quantitative validation of how our focus on investment performance is delivering for clients.

Importantly, this is not by chance, right? It is not new to ICG. Our investors know this well. Those of you who have known us for some time will have heard me speak about it many times in the past, how discipline in realizing assets, derisking funds is key to consistency of performance over a long period. Discipline, a consistent focus on risk return performance, not just return. This is what makes a real difference with investors today.

The result of all this is that we are continuing to see strong client demand, and that's reflected in our fundraising. We have raised $9 billion in the last 6 months, which is particularly noteworthy, not just because we have surpassed our expectations, but because as we have previously indicated, we are this year and next at a structurally lower point of our own fundraising cycle. Europe IX continues to raise well with $2.8 billion raised in the period and the fund now standing at $7.5 billion, so well on the way to meeting or exceeding the previous vintage, which was just over EUR 8 billion.

Infrastructure II held its final close in the period at EUR 3.15 billion. So that's over 2x larger than the prior vintage. It has been a standout success. We had a re-up rate of 85% and attracted capital from a wide range of clients. 1/4 of the capital came from North America, reinforcing the growing strength of our brand there and the appeal of high-performing European products for certain North American investors.

From a shareholder perspective, we reduced the balance sheet commitment from EUR 200 million in Fund I to EUR 150 million in Fund II, so moving from 13% of total fund size in the first vintage to under 5% in Fund II. More broadly, over the past 15 months, we have had five funds close at or above their hard cap and not just flagship scaling strategies as well. In any environment, that would be remarkable. But in this environment, with fundraising under such pressure, as we discussed earlier, that's a real achievement. All of which comes from and supports our client growth.

We have continued to attract new institutional clients during the period. Since we announced our fundraising guidance in May '24, 43% of new LPs came from North America and 9% from the Middle East. And looking ahead, we will continue to broaden our reach through innovating new products and diversifying our sources of capital, always with an absolute focus on developing products that are appropriate to those channels where we can deliver attractive investment returns.

Today, as part of that continued broadening of our client base, we're excited to announce a long-term strategic partnership with Amundi. This partnership significantly accelerates our ambitions in the private wealth space and combines ICG's investment expertise and track record of product innovation with Amundi's global distribution capabilities and structuring know-how. We have historically taken a much more cautious approach to the wealth channel than most of our peers.

While there is obviously an enormous potential for capital raising, we have also seen how it can shift investment priorities of GPs towards a more volume-driven approach to the detriment of performance, which is precisely at the opposite end of the spectrum of what ICG is about and what we want to be, uncompromisingly focused on investment quality, risk and performance. And this is where the partnership with Amundi is incredibly exciting.

We have found that we have a like-minded approach to investment to delivering the best results for end clients. We share key values, and this is essential for the success of our collaboration. Our common goal is to be an important force in shaping access for individuals to private markets investments while maintaining an unflinching focus on generating attractive risk-adjusted investment performance. We see a significant long-term opportunity to develop a range of products appropriate to the wealth market and believe that together, we have the right complementary capabilities to execute on that. I'm convinced that by working together in this way, we can create significant value for our clients and respective shareholders.

As you're well aware, Amundi is the largest European traditional asset manager, one of the largest globally with some EUR 2.3 trillion of assets under management and access through its distribution network to over 200 million individual clients. It is the ideal partner for ICG in this transaction, bringing scale, access, and expertise that are highly complementary to our own existing capabilities.

Looking at the two components of the partnership in a bit more detail. The commercial agreement, which covers distribution and product structuring will have an initial term of 10 years. Our immediate focus will be on developing and launching two evergreen funds, one for LP secondaries and one for private credit. Globally, outside of the U.S. and Australia and New Zealand, Amundi will be the exclusive distributor in the wealth channel for ICG's Evergreen and certain other products with ICG being Amundi's exclusive provider for those products to Amundi's distribution business.

Over time, we will seek to develop more products and strategies that are well suited to the wealth market. And this is a very exciting long-term prospect of this partnership. We see a real opportunity to shape the market to ensure that products are appropriate and deliver what investors are looking for, structured in ways that enable returns to be generated over the long term.

To align our interest and reinforce the long-term nature of this partnership, Amundi will acquire a 9.9% economic interest in ICG in a way that is non-dilutive to our current shareholders. The structure is set out in brief here and in more detail in the appendix and in the RNS we released this morning on this partnership. As part of this, Amundi will be entitled to nominate one non-executive director to our Board, and I look forward to working with that individual and the wider Amundi team to make a success of what I consider to be a meaningful alignment of two leading European-based firms to help shape the wealth market for private investments in the years to come.

So looking ahead, future -- our future growth has a number of encouraging tailwinds. Our waterfront of strategies is significantly exposed to some of the fastest-growing asset classes in private markets, providing a constructive backdrop for our strategies. I'm very positive on the long-term opportunity ahead of us and our ability to execute on that, a trajectory that is reinforced by the results we are reporting today and the partnership with Amundi. And with that, I'll pass over to David.

Thank you, Benoit, and thank you all for joining us today. I'm pleased to report that we have published strong results this morning with growth across key financial metrics. Fee-earning AUM grew 6% on a constant currency basis, ending at $84 billion. It has grown every year in the last 5 years in dollar terms and over that period has increased at an annualized rate of 14%. In the past 6 months, we have raised $5 billion for strategies that charge fees on committed capital and deployed $6 billion in strategies that charge fees on invested capital.

We also have $19 billion of AUM not yet earning fees, largely in private debt, which has the potential to generate approximately GBP 130 million in additional management fees. Our visible recurring management fees remain the key driver of revenue growth. As of the 30th of September, management fees reached GBP 334 million for the last 6 months, an increase of 16% year-on-year. As we discussed in October, performance fees are becoming an important contributor to our revenue mix, reflecting the growth of higher return strategies that Benoit described earlier.

In the period, we recognized total performance fee revenue of GBP 98 million, including the one-off impact of GBP 72 million due to the change in recognition method. We received GBP 62 million of cash from performance fees, up from GBP 40 million in H1 of last year. Our total balance sheet returns for the period were GBP 112 million, up 57% compared to the previous year. And preempting the inevitable question on first brands, the impact was minimal, less than GBP 5 million, and the assumptions on our CLO valuations provided by third-party valuation agent are broadly unchanged compared to March.

Stepping back, the revenue profile in the period underlines the trajectory that Benoit spoke about earlier. These results reinforce our continued successful long-term execution. Over 70 -- sorry, 60% of our revenue in the last 6 months is from management fees, which have grown at an annualized rate of 19% over the last 5 years and over 80% of our revenue was fee-based. As we continue to scale up and scale out our investment strategies, I expect this trajectory to continue with the balance sheet remaining an important asset to enable this growth while becoming less meaningful to our revenue mix.

Group operating expenses have grown 1% year-on-year. Over the medium term, we would still expect these to grow at mid-to-high single-digit percentage. We are clearly seeing operating leverage come through as our funds get bigger and we raise subsequent vintages, benefiting from the compounding fees on fees profile. This is a theme we've spoken about a lot in recent years, and it's very visible when you compare the 11% annualized growth rate of OpEx over the last 5 years to the 19% annualized growth of our management fees.

The combination of management fee centricity and operating leverage is even clearer if we look at it on an FRE or fee-related earnings basis. This metric takes our management fees and deduct all of our group cash costs. The precise methodology is in the appendix. There's no entirely consistent market approach, and the team can certainly talk you through this offline. But over the last 5 years, our FRE has grown at an annualized rate of 26%. What this serves to highlight is the visible growing earnings power of our management fees, the operating leverage we achieve as management fees grow, and given its cash is a highly valuable earnings stream for shareholders.

Over time, FRE growth is an important indicator of how successfully we are executing our strategy of scaling up and scaling out. The Amundi partnership we announced this morning is a great example of scaling up our credit and LP secondaries platforms. Management fees generated as a result of this partnership should have strong flow-through to FRE given our high embedded operating leverage. And over the long term, our combined ability to develop new products that are suitable for the wealth market will help to further diversify and grow our management fee base, which again should be visible in our FRE growth, all of which underlines why we think this might be an interesting metric to look at. And of course, we welcome feedback.

As well as our higher earnings, our growing fee income is generating increased amounts of cash, and our balance sheet is structurally cash flow positive. In the last 6 months, we generated operating cash flow of GBP 450 million, up 143% year-on-year, driven by higher management fees, realized performance fees, and total balance sheet returns. We ended the period with total available liquidity of GBP 1.3 billion, net debt of GBP 401 million and net gearing of 0.15x. During the period, Fitch upgraded our credit outlook to BBB+ Stable, and we are now rated BBB+ Stable from both agencies. NAV per share as of the 30th of September was GBP 9.

We have ample liquidity and financial resources, which we can use through market cycles to pursue our strategic ambitions of reinforcing our relevance to clients by scaling new strategies and new products. The current market backdrop is a great opportunity to reinforce our position as a global leader, and we're doing just that.

So drawing this all together, our ability to deliver breadth at scale is having clear benefits, which are visible in our financial results. Since September 2020, ICG has generated over GBP 2.3 billion of cumulative earnings with nearly half returned to shareholders via dividends. We have a clear and disciplined approach to capital allocation, focused on generating recurring and sustainable growth for shareholders. And I look forward to discussing these results and our outlook with many of you in the coming weeks. So with that, I'll hand it back to Chris for questions.

Thank you, David. Thank you, Benoit. [Operator Instructions] And we have a few questions already on the phone, so should we go first of talk to Oliver Carruthers from Goldman Sachs.

I've got two questions from my side. The first one on the Amundi partnership. When you think of the scope and depth of private markets for Amundi's 200 million wealth clients, what level of penetration do you think this partnership could be taken to, particularly, Benoit, given your comments on product appropriateness, but also the direction of travel the industry seems to be -- it looks like it could be kind of moving towards in terms of potentially combining public and private investment content into a single product. So that's the first question.

And then the second question, maybe a 2-part question on private equity secondaries. Obviously, an asset class with a lot of growth. First part, could you talk to the mid-market strategic equity launch in terms of both the timing and the scale of the opportunity? I think this probably has a potential to be pretty accretive to FMC economics because its investment capabilities and deal flow that lines up with your existing strategic equity franchise. And then second part of the secondaries question, your comment, Benoit, on industry consolidation in fundraising and the potential for some GPs to go into runoff, LPs will obviously be quite sensitive to this. So how do you think about that comment as you're growing your LP secondaries franchise? And do you expect this will create investment opportunities on the LP-led secondary side?

Thank you. I think that was three questions, practically put into two. So -- and the first one is quite broad. So your first question on the scope and depth of the wealth market for private assets. I mean, it's early days. And so no one really knows. But in theory, the potential is considerable because up until now, wealth and more broadly retail clients have not had access or very limited access to private assets, which has created a very meaningful divergence between the portfolio composition of institutional investors and that of the wealth channel or more broadly the retail channel. So the potential there is undeniably very significant. But as you rightly pointed out, you mentioned the potential need to structure a product by potentially mixing some private and public.

I think a lot of the growth will be dependent on our ability to structure those products, which is why I'm so excited by the partnership with Amundi because they're thinking exactly along the same lines. I think by and large, today, what the market has done is try to chew on illiquid private products into the channel. And there are significant limitations and perhaps risk as well to that. But it can be structured in the right way where you're providing some liquidity without losing some of the key advantages of private asset investments. And so that's what we're -- that's clearly what we're going to be focusing on.

In a sense, we're going -- initially, we're going for the relatively low-hanging fruits, the easy wins in areas that are structurally more liquid or offer more liquidity, such as credit and LP secondaries, but there's much more that can be done and that we've already started discussing. So I'm very excited. But I mean, you know us, we never want to overpromise and these things can also take time. But if I think long term, I think this partnership has enormous potential.

And for us, it's really important that we're not just part and benefiting from this shift because there are many ways in which we could have benefited from this long-term shift, but that with and we'll be able to actually influence it to actually craft or steer the market in a direction that we think is the most sensible. On -- your second question was on key secondaries, and we don't talk about potential size of fund. But yes, you're right that this should be very accretive because it's not very difficult for us to roll out a mid-market version of our strategic equity strategy, very much in the way we've done that for European corporate.

But having said that, I always a word of caution, even though we are the global leader in the space, and we benefit from a very strong track record, it's still, in a way, a first-time fund. So we always have to be a bit cautious about the speed of fund raise for that. But yes, medium term makes a lot of sense. It should be very accretive. And for us, strategically, it matters a lot as well because it enables us to essentially occupy the whole space in terms of size and so that we keep maintaining the first-mover advantage that we have in that asset class. So yes, very promising.

And finally, you squeezed in a third question on some of the shakeup in the industry with some players will clearly struggle or already struggling. Will that generate opportunities in the secondary space? Perhaps. I'd be somewhat cautious there because if you think about it, we operate in two segments of secondaries, one which is the more traditional LP secondaries. And typically there, you want to be looking at strong managers with strong assets.

Can you develop a more distressed play as part of that? Perhaps, but I'd be wary of that. I mean if a manager has underperformed and gone into one-off, there's probably a good reason. So not so sure for LP secondaries. And likewise, in GP-led secondaries, you clearly want to be backing only very strong assets with very strong managers. So if there are opportunities that come out of some pain in the market, I think it might be a more direct investment potentially in our structured capital strategy. This is where potentially we could see some opportunities. And depending on how broad-based this phenomenon is, we might revise our recovery fund, which we dust off every time there is a bit of a market crisis, but we're not there yet, right? So this is maybe in the future.

Thank you, Benoit. Shall we keep on the phones for now? And should we go to David McCann at Deutsche Bank, please.

Congratulations on the results from the deal. So sticking with the theme largely of Amundi for the first questions really. Amundi on their own slides are talking about 5% EPS accretion linked to the ICG deal from 2028. Is this purely just their share of the profit from their anticipated 9.9% ownership? Or can we read anything into that in terms of the partnership ambition with that? And also sort of linked to Amundi, noting that this is excluding the U.S., would you be looking for a similar partnership in the U.S.? Or how would you -- how do you anticipate to address the U.S. market? That's really the first question.

Second question is a more technical one probably for David. Can you just help us understand the CLO dividend income is obviously very strong in the period, much more so than normal, but that contrasted obviously with some mark-to-market credit losses. So how could we kind of square the circle? Why are we seeing sort of good news on one side, but then sort of bad news on the other side of what is obviously a related piece.

Thanks, David. That was again three questions under the pretending to two. I'll take the first one very briefly. No, you can read nothing into that number. That's a question for Amundi, but there's nothing you can read into that figure as regards to partnership at all. Benoit, do you want to pick up the sort of the wealth strategy in the U.S.? And then David, maybe you talk about the CLO question.

Sure. So a couple of things. One is even though we've generally been more cautious. We haven't been standing still. So we have been addressing the wealth channel in the U.S. for a number of years. You may remember that we were an early investor in case, which is a distributor. We still are, by the way, and that's been -- in itself, that's been a very, very good investment for us. But obviously, that's one way for us to deploy, particularly in secondaries, both GP-led and LP secondaries. But also, I mean, we've had relationship with a number of banks, of large banks distributing a number of our strategies in the U.S. and that is -- that will continue. I think the exclusion here reflects the fact that this is not a geography where we has significant presence. So yes, so that's the answer on the U.S. part of our strategy.

Yes. And then, David, on your more technical question about CLOs, I mean, as you said, I think you have to look at this in the round. The total returns across all the asset classes on the balance sheet were positive, including the credit business stripe. As you say, dividends are actually a little higher than where they've run historically, that tells you more about the performance of the underlying funds being good and performing in line with expectations, hence, the generation of dividends. And we'll continue to mark the book in accordance with the third-party model. And there's nothing certainly in the data that gives us any broader concern at this point.

Hubert Lam from BofA.

I've got two of them. Firstly, on Amundi again. So how much could the Amundi partnership bring you think in terms of flows over the next few years? How should we think about the opportunity here? And when do you think we should start seeing meaningful benefits of flows starting to come through? First question. The second question is on, again, the balance sheet and net investment return. Again, it was pretty -- it was at 5%, I think, for the period. So when do you think we can start getting back to the high single-digit or low double-digit growth, which you're targeting over the midterm?

Well, I'll take the first question, but I think that's the same question as from Oliver at Goldman Sachs. So I'll make the same answer. I think the long-term potential is very significant, but I'm always cautious about overpromising in the short to medium term, particularly since in a number of areas, essentially, we're going to be creating the market. So there are some -- I mentioned there are some easy wins. And yes, we'll benefit from that. But the biggest surprise is what we'll do in the longer term. That's where you'll see some very significant or potentially see some very significant impact. But yes, I think that's -- at this point, that's all that we can say.

On the balance sheet, Hubert, I mean you know this, but the balance sheet is an outcome of how the funds are performing over periods of time. And again, we don't manage the balance sheet is an independent exercise. It's going to be what the funds perform over time. If you look at the NIR over time, 5 years about 9% now and total balance sheet return is about 11%. So clearly, over the medium to long term, it's reflecting fund performance as you'd expect it to.

And I think it might be worth reminding everyone, David, that -- I mean, as you said, I mean, the performance of the balance sheet has to be looked at over the long run because over short periods of time, what's mostly influencing it is our pace of deployment because increased deployment because we keep the valuations flat for -- typically for a year, when we increase deployment, it has a short-term negative impact on the -- or perceived negative impact on the balance sheet performance. But obviously, that evens out over time.

[indiscernible]. We've had a quick question online around the status of fundraising for real estate equity. So as a reminder, we raised just over $1 billion in real estate equity in Europe during this half. But Benoit, do you have any broader observations or comments around the real estate fundraising market at the moment?

Sure. I mean it's been incredibly difficult these past few years because that is -- it is one of the asset class where the pain has been taken. Valuations have come down. And so LPs have suffered some significant losses or at least underperformance in their existing real estate portfolio. So generally, that creates a pause in the fundraising appetite. For us, that creates an opportunity because we did not have legacy real estate equity strategies or funds, which means that we don't have to be firefighting on older vintages. Essentially, we're starting from a clean slate. So it's a very -- our timing is very good in terms of establishing ourselves in the market. It's creating a window. But obviously, it takes a bit longer because the fundraising has been -- environment has been more difficult. It's starting to reopen.

I think I mentioned during the presentation that some of the asset classes strategies that LPs are looking at right now, that includes real assets. There's increased appetite for real assets and real estate. And so we're starting to see that. So it takes time and it's early days for us, but I'm very confident that for us, the real estate asset class is going to be an area of significant growth in the next 5 to 10 years, and we're taking the cycle exactly at the right time. So we're starting to progressively see that it's speeding up. We're raising more. But I think fast forward 5 years from now, I mean, you'll see that our real estate franchise will be a bigger part of what we do.

Thank you. One question online around the economics of the emerging partnership and how that will work. I'll take that. It will obviously vary by product. We obviously don't disclose terms of individual funds and strategies. But as David alluded to or mentioned earlier, we think over the medium term, this is a very exciting opportunity, and there's a lot of value to be created for all of the stakeholders involved in this, including the end clients. That's how we're thinking about the economics of that partnership. Another on the partnership, and this may be one for you, David. Look, the structure looks clear, the end outcome, 9.9% economic share, 4.9% voting rights looks clear. Would you mind just running through briefly the steps of how we're getting there from today to by the 30th of June 2027, please?

Yes, sure, happy to do that. So actually, the best page, if you have it to refer to is probably Page 25 of our presentation, where we lay out a little bit more detail on the steps that will take place. As you can see, as we've discussed, through the steps, Amundi is going to acquire 9.9% economic stake. I think the key point here, though, is that there's no dilution to ICG shareholders and Amundi is going to be paying for all the voting and nonvoting shares using their own cash reserves.

The first step is for Amundi to acquire 4.64% ordinary shares in the secondary market. Then ICG has agreed to repurchase 5.26% of ordinary shares to be canceled with Amundi then subscribing to non-voting shares that basically have the same economic ownership. So they happen in tranches over time. And as Chris mentioned, it will be completed by the 30th of June 2027. So ownership stakes, share buyback activities will be disclosed in the normal way as all of these steps progress. But I also want to emphasize the structure ensures no dilution to existing shareholders and no change to the ICG balance sheet P&L or cash position.

Okay. Thank you. A couple of another question on the phone from Angeliki at JPMorgan.

Just a couple from myself as well, please. First of all, with regards to the Amundi partnership, can you explain the rationale behind the exclusivity in distribution? We know that many of your peers in private markets actually distribute at the moment in Europe across several different distributors. So are you not limiting yourselves a little bit by just going exclusive with only one partner? And second question on Europe IX. You mentioned that the fund is now at EUR 7.5 billion. Can it exceed the EUR 10 billion target? And can you give us an update on when we should be expecting the final close of this strategy, please?

Yes. Thanks, Angeliki. On the I mean, the important part is that this is mutually exclusive, right? So are we limiting ourselves? Yes, you could say we could also distribute through others, but Amundi is by far the largest asset manager, traditional asset manager in Europe, and they're going exclusive with us as well. So I mean, it's -- I think it's incredibly valuable for both parties and should enable us to accelerate our position in the wealth market in a way that we would not have been able to had we gone through just normal commercial agreements on a fund-by-fund basis.

And by the way, I mean, the way typically these agreements work is those distributors always ask for exclusivity at least for a period of time when they're distributing a fund. So even if you're going fund by fund, you're still giving exclusivity to JPMorgan, for instance. You've been distributing some of our products for a period of time. So no, I think it's only on that point, I think it's only positive. I think it's very, very positive for both parties.

On Europe IX, we don't comment on ultimate target. The one thing I would say is that, as always, we're not obsessed with size. I mean, for me, the key criteria on the size of a fund is ability to deploy it well in a 3- to 4-year period. And so as always, when we're sizing a fund, we take a look at the speed of deployment in the first year or the first 18 months of the life of the fund, so in parallel with the fundraising effort, and we're right in the middle of that right now. And depending on that and our own assessment of the market, we either push the size up or we remain more cautious. It's too early to say.

And just to build on -- Angeliki, just to build on the first question. This isn't going exclusive with one person, right? Amundi have got relation, a network of more than 600 distributors and over 200 million individual clients. So this doesn't limit us. This opens up a significant opportunity. So I think definitely, we're thinking about it in that way. We -- there's another question now online around private credit and how we see the deployment pipeline in private credit. Benoit, do you want to make some comments around that market as a whole?

Sure. So broad context is that the buyout market remains slow, certainly slower than it was 4, 5 years ago. And that has an impact on the credit and the private debt market because these markets are essentially aligned with the private equity buyout space. So that's for the general environment. Within that, it's obviously easier if you benefit from a long history and a large existing portfolio because those existing portfolios generate their own financing opportunities.

If I look at where we deploy quite significantly in Europe, we deployed EUR 3 billion, EUR 4 billion per year. Actually, this year, we're on track to be at the upper end. But a significant portion of that, call it, 2/3 to 3/4 is by taking advantage of mining our existing portfolio. So that has a very big impact on our ability to deploy and deploy well. So that's a competitive advantage, if you will.

Overall, it's -- we are cautious in this market environment. I mean, there are areas of the market where we feel it's overheating. It's probably more pronounced in the U.S. than Europe, but Europe is not immune. So we remain cautious in the way we deploy and particularly, we remain very cautious on the quality of legal protections and legal documentations where we're seeing in some instances, things that we find are unsatisfactory and so we stay with.

And then two final questions online, both of which sound like possibly for you, David. First of all, FMC costs were flat year-on-year in H1. How should we -- can you just remind us, and I think you've mentioned this before, how should we think about growth in the medium term and cost base as a whole?

Yes. So as I said in my sort of prepared remarks, I wouldn't read too much into a 1% change in cost base. There has been, as we mentioned in the presentation, there are quite a lot of cost discipline in the system. Our headcount is actually slightly down period-on-period. As we continue to scale the business up, we've made a lot of investments in the past that we've spoken about and actually, a lot of that is now in place. So that's a good and positive backdrop. But I'd still guide people to cost base increase more between the 5% and 10% range at this point because there'll be some seasonal effects anyway when you're looking at this over the 6 months. So that's how I'd guide for the future.

And then what looks like the final question. FRE seems new disclosure this half. Could you sort of talk through a bit about the rationale and why now?

Yes. So FRE, as I said, I think, is another way to think about our business. It's obviously one that many others use to compare asset management companies and their growth potential. So actually having a comparable metric, I think, in the public domain is helpful. Many analysts obviously do it already. So here's us explaining how we think about it internally. It brings together also a number of the themes I touched on in the presentation. If you think about our management fee growth of 19% over 5 years, cost growth of 11% over 5 years, it comes together into a very powerful FRE outcome. It's grown 26%. So for now and for the future, this is probably another one that we should watch and monitor, and we'll continue to evolve our financial disclosure as always, and I appreciate the feedback.

Absolutely. And just for clarity, that's 26% annualized FRE growth over the last 5 years.

With that, we have come to the end of the questions. So thanks ever so much for joining us, and this concludes the presentation. Thank you.

Good afternoon, and thank you for joining us today. As you'll have read in the announcement this morning, over the last 5 years, ICG has doubled its fee-earning AUM. And within that, we have grown our equity-like strategies by 3x. These strategies have higher performance fee potential. And in order to make this component of the revenue more visible and to remove certain elements of management judgment, today, we are announcing a change to the way we recognize performance fees in our financial statements. These changes will be implemented at our H1 results, which we will announce on the 18th of November.

I'm joined by our CFO, David Bicarregui, who will give an overview of the changes we are putting in place, and we will then take questions. The slides are available on our website along with the accompanying announcement.

As a reminder, and unless otherwise stated, all financial information discussed today is based on alternative performance measures, which exclude the consolidation of some of our fund structures required under IFRS. You can also -- you can submit questions verbally or through the online platform. Details are available on the portal.

And with that, I'll hand over to David.

Thank you, Chris, and good afternoon, everyone. I'd like to start with a bit of context. Over the last decade, we have grown organically to become a global player in a number of investment strategies where we believe there is significant runway of growth, such as structured capital, private equity secondaries, private debt and real assets. Over the last 5 years, our fee-earning AUM has doubled. And as a result of mix shift and growing in higher fee strategies, our weighted average management fee rate has grown from 86 basis points in FY '20 to 97 basis points in FY '25. So we are managing more of our clients' capital in higher return, higher fee strategies.

This deliberate strategic decision about where to orientate our growth has positive implications for the future trajectory of management fees and for performance fees. We have 3 revenue streams. Management fees represents the majority of our fee income and are recurring in nature, visible and long term. Performance fees are small but increasingly valuable revenue stream for us. Over the last 5 years, they have represented 12% of our total fee income on average and the fair value movements in the balance sheet investment portfolio, which over the last 5 years have averaged 13%. Today, we are very fee-centric with management fees accounting for the large majority of our revenue line.

So zooming in on performance fees and to recap on how our performance fee model works. On the left-hand side of the slide, we set out an illustrative representation of what performance fee pool would look like for an $8 billion fund, generating a gross MOIC of 2x. As you can see, ICG will be entitled to $280 million of performance fees, which will be received in cash over the life of the fund.

The accounting for this, therefore, has 3 components, which we disclosed in our full year and our half year results. The cash received, in this case, $280 million in total, which is not impacted by today's change. These are sometimes referred to as realized performance fees. Secondly, the revenue recognition, which over the life of the fund will equal the cash received, but the timing will differ. The timing is the P&L component impacted by the changes announced today. And finally, the balance sheet asset of recognized but unrealized performance fees, which will also be impacted by the adjustments today. These 3 components as reported in full year results for FY '25 are set out on the right-hand side of this page. Going forward, we will continue to disclose all 3 metrics at a group level.

Performance fees have been an important contributor to our top line. Over the last 5 years, the cumulative P&L has been almost GBP 300 million, and we have received GBP 210 million in cash. As of the 31st of March 2025, we had a balance sheet asset of GBP 108 million. As discussed at the beginning of the presentation, we have deliberately shifted the composition of our business and our fee-earning AUM moving towards higher return, higher fee strategies as part of our approach to diversifying the business. Our equity-like strategies, which have higher performance fee potential, have grown 3x in absolute terms and now represent over half our fee-earning AUM compared to 1/3 in March of 2020.

Put another way, given the higher management fees these strategies earn along with the higher performance fee potential, the shape of our fee-earning AUM today has significantly more embedded value for shareholders than it did 5 years ago. So looking ahead, based on our waterfront of products today, we expect this trajectory to continue.

The changes we're making today make the value of our performance fees more visible. The main change revolves around timing of when we start recognizing performance fees for a fund and how we will accrue that as the fund matures. Going forward, we will now recognize performance fees for a fund when the subsequent vintage holds a first close and the investment period of the current vintage ends.

So taking a practical example, Europe Mid-Market, you will see Europe Mid-Market II recognizing performance fees once this investment period ends and Europe Mid-Market III holds a first close. We will accrue this on a linear basis, assuming a 12-year fund life compared to 10 years before. The valuation for the purpose of calculating the carry will continue to be based on the fund's current NAV. These changes combined also reduce the management judgment required in the P&L.

On this page, we have set out a modeled example, and the team can talk you through this in more detail offline, if helpful. There are, therefore, 3 factors that feed into the performance fee recognized in any year. Firstly, a binary gate of whether the investment period of the prior fund has ended and the subsequent vintage has held a final -- a first close. The passage of time as the fund moves towards the end of its life and the development of the fund's NAV.

Using the model from a few pages back of an $8 billion fund generating 2x MOIC, resulting in a potential carry pool to ICG plc of $280 million. For simplicity, we've assumed the fund has 10 assets in its portfolio, all of equal size and has the same value creation linearly deployed and linearly realized. As you can see, the P&L recognition starts in year 4, which is when we assume the following vintage has had a first close and the current vintage ends its investment period. At that point, we take the fund's MOIC 1.5x in year 4, best fees and expenses and reduce ICG share by the time factor.

In future years, as the fund accretes value as it does, for example, between years 6 and 7, when the MOIC increases from 1.9 to 2x, the P&L recognition reflects both the passage of time and the value increase. If there's no value accretion, such as in year 10, the P&L is just the passage of time, in this case, 1/12 of $280 million, which is $23 million.

A couple of things I'd flag here. Firstly, cash and P&L are the same at the end of the fund's life. And secondly, nowhere do you actually see the full value of the performance fees to ICG at any time in the P&L, cash flow or balance sheet because it's over a period of time and the in-year movements are small relative to the total.

If we then apply this to one of our funds, here we show Europe VI, we can see how the new and old approaches differ in terms of recognition. Of course, cash is unchanged. Given the practical example, the current approach for Europe VI is based on the previous assumption of 10 years fund life compared to 12 years now, which in practice means the difference between the 2 initial recognition points, A and B is relatively small on this chart that, in fact, be larger. If Europe VI were discounted over the 12 years, but you can see the new approach would likely have resulted in smoother recognition and would have converted to cash quicker.

So to recap on these changes and then looking ahead, there will be no impact to the timing or amount of cash received. We expect a one-off recognition in our upcoming half year results of between GBP 65 million and GBP 75 million to reflect the changes outlined today. This is largely a result of starting to recognize full performance fees for Europe VIII, Strategic Equity III and IV, Mid-Market I and Infrastructure Europe I. For the half year, we expect total performance fees to be in the range of GBP 90 million to GBP 95 million.

We are also increasing our medium-term guidance for performance fees and FMC operating margin. Performance fees are now expected to be in the range of 10% to 20% of total fee income compared to 10% to 15% previously. And as a mechanical consequence of that change, the FMC operating margin is now expected to be in excess of 54% compared to 52% previously.

In summary, as a result of our deliberate shift to high-return strategies over the last decade, there is significant potential value to shareholders from performance fees. The changes today serve to help underline that value and make it more visible in our reported financials.

With that, I'll turn it back to Chris.

Great. Thank you, David. [Operator Instructions] And while we wait for a couple of people to ask questions verbally, a couple of questions have already come in online, David. Firstly, the -- what is the approach for funds with a U.S. style waterfall?

Yes. So good question. The answer is we are using IFRS to produce our consolidated financials. And so actually, the approach will not be different between different styles of waterfall, European or U.S. Obviously, in practice, that means the U.S. waterfalls tend to return cash sooner. But the recognition policy is a global policy and it's done under IFRS standards.

Thank you. And then a question on how does this performance fee recognition methodology affect the probability of a clawback?

So in practice, the biggest governor on the clawback or the unwind, as you're probably alluding to, is the fact that we space out the recognition over a long period of time. In the current model, we use 10 years. In the new model, we're using 12 years. And so the passage of time effect will only put in recognition over time, and we think that's appropriately prudent.

There's a question online from David McCann at Deutsche Bank.

So yes, just a quick one first. I mean you've touched on this partly in the prepared remarks, but maybe you can give us a context as to the why do this. But I guess the part that was may be missing is the why now, like why do it now, not 6 months ago, 12 months ago, 2 years ago because the funds are obviously increasing in size then as well but the ones that could generate performance fees. So yes, just the why now? So I would be interested to hear your answer there.

And the second question, please. Where do you think this new policy will place you versus the accounting policies of peers? And have you specifically benchmarked yourself against any of them? And if you have, would you say that you're sitting conservatively middle of the pack or aggressive versus sort of other listed peers policies on this?

Yes. I think I'll take it in reverse order, David. I think the second question, yes, of course, we've looked at as far as we can discern other people's approaches, and we've done our own sort of internal analysis on that. I'll leave it for others to determine the relative between them, but we think this is certainly works for us and works under the standards that we're applying. So you can take it that we thoroughly thought about this.

In terms of the why now, it's -- as you say, you could have done it 6 months, 6 down the line. It's not really that. It's more that this reflects where the business really is at this point in time. We called out at the beginning of the 3x growth in the equity-like strategies fee earning AUM. And over half now is in that category. So it feels like as good a time as any to make the change.

Thank you. A couple more have come in online. First of all, in the past, you've indicated the FMC operating margin was sort of underpinned as it were in the event there were no performance fees. Is this still the case?

No, I think we just need to remind everyone that the guidance is very simple guidance. It's FMC margin in totality. But obviously, every time we set a floor and an excess statement, then we're taking into account our confidence in that. And I feel very confident in 54% plus as the FMC margin guidance.

And could we please clarify whether the upgrade to performance fees as a percentage of total income, right, from that 10% to 15% to 10% to 20% is all due to the accounting change? Or is there actually an underlying upgrade to performance fee potential due to more funds being eligible for bigger performance fees now?

Yes. I mean we don't want the accounting change itself to be the story. There's a strategic message we're giving here, which is if you play this forward over the next few years, as we do, there's a lot more performance fee potential just inherent in what we've already got, let alone the new funds and the faster-growing funds and the faster-growing parts of the business. So we certainly wouldn't want this to be seen as just an accounting change. It's also full recognition. I used the word visibility a few times because we're talking about visible growth and visible operating margin. That's what you're actually seeing in the numbers, and it's also a sign of what's to come as well.

And then on the operating margin, the upgrade to operating margin guidance from 52% to 54%. Just to confirm, is that a reflection purely of this accounting change described it as mechanical in the prepared remarks? Or is there something else going on as well supporting it?

No, this is just mechanical, as I said. If you do the math and do the recognition change, you can see it's about 2%. So therefore, we got to 54%. But of course, on the go forward, we consider everything that's happened in the business, and we'll update the guidance as and when the business shifts again.

A question on the modeled example that you showed. And as a reminder, if people have detailed questions on the model, Kate and I can happily discuss that offline to make sure everyone understands it. Hopefully, it's helpful as people think about constructing fund models if that's what they wish to do. But a specific question, under the new approach, is it fair to assume that a fund will take 4 years to recognize performance fees from the first -- from the point of the first close?

I don't think you should make an assumption it's 4 years. I mean we've deliberately hooked this off of objective things, i.e. the end of an investment period. So I think you can take your own view on how quickly we're deploying through given funds, and we obviously update on that through our actual earnings announcements and in the data pack. And then obviously, the declaration of a first close of a new fund, that's an objective trigger. So I'd focus more on those things. The full year was purely illustrative and that will obviously change depending on where in terms of market cycles and speed of fundraising and other factors.

And another question on modeling. As I understand, there are 3 components of -- if we look to FY '26 of what's going to drive FY '26 performance fees. There will be the one-off fee, the one-off increase that you mentioned today. There will then be the passage of time, that 12-year spread that you mentioned. And then there will be the impact of the changes in the fund valuations. You've given us the number for the one-off uplift. The fund valuations are obviously unknown. But are you able to put any quantification on numbers around the passage of time accrual if there weren't any changes in fund valuations between FY '25 and FY '26?

Yes. I mean there's a lot of statements in there, but we can probably give a little bit of help here. I mean the -- we've announced obviously what the onetime recognition is. And so that's in the number for the financial year. It's included. Then if you just thought about the passage of time effect, maybe just keep fund valuations flat to FY '25, that's in the range of GBP 28 million to GBP 32 million. And then obviously, on top of that, as you said in the question, you have the potential for fund NAV uplift. But if you didn't have any, you'd be taking those 2 things into account for sure.

Then another question has come in around how performance fees work on evergreen funds? Would we recognize fee-related performance revenue like the U.S. alts?

At the moment, we don't have evergreen funds that have fee-related performance revenues. So that isn't something that we are going into detail on now to the extent we do develop products that have those characteristics, we will provide suitable guidance on how we would account for performance fees for that.

And if there are no other questions, thank you so much for your time as discussed. As mentioned, we're very happy to discuss offline if people would like to go into more detail on this. Otherwise, we will speak to you all on the 18th of November, if not before. Thank you very much. Thank you.