Onex Stock

Welcome to Onex Second Quarter 2026 Conference Call and Webcast. [Operator Instructions] As a reminder, this conference call is being recorded.

And now I'll hand the conference over to Zev Korman, Vice President, Shareholder Relations & Communications at Onex. Please go ahead, sir.

Thank you. Good morning, everyone. Thanks for joining us. We're broadcasting this call on our website. Hosting the call today are Bobby Le Blanc, Onex's Chief Executive Officer; and Meg McClellan, our Chief Financial Officer. Also joining today's Q&A session is Paul Brand, Chief Executive Officer of Convex.

Earlier this morning, we issued our second quarter 2026 press release, MD&A and consolidated financial statements, which are available on the Shareholders section of our website and have also been filed on SEDAR. Our supplemental information package is also available on our website.

As a reminder, all references to dollar amounts on this call are in USD unless otherwise stated. I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors relating to any forward-looking statements contained in today's presentation and remarks.

With that, I'll now turn the call over to Bobby.

Good morning, everyone. I'd like to thank Convex's CEO, Paul Brand, for joining Meg and me for this call and for being available to answer your Convex-related questions when we get to Q&A.

Onex delivered a good second quarter. Convex continued to perform well. Our private equity funds returned meaningful capital to our limited partners and to Onex, and our credit platform grew fee-generating assets under management and posted its strongest quarter yet for structured credit earnings.

Before discussing our businesses in greater detail, I want to spend a few minutes on Onex's strategy and capital allocation priorities. Our strategic plan remains focused on driving long-term enterprise value creation and earnings growth. When we announced the Convex acquisition, we described it as a key step in Onex's evolution. The broader strategic direction outlined at that time can be summarized in 4 priorities.

First, reposition our investing capital towards the direct ownership of Convex and 1 or 2 other additional businesses that ideally have a strategic fit with Convex and/or our asset management business, while providing enhanced disclosure to our investors. Second, utilize our balance sheet more efficiently. Third, reduce the capital intensity of our asset management business while driving fee-related earnings and carried interest growth; and fourth, position Onex to resume returning capital to shareholders through share repurchases.

We've made significant progress against each of these priorities in the first half of the year, and I will discuss each in turn. First, the mix of our investing capital. At year-end 2025, private equity represented $5.6 billion or 65% of investing capital. That has changed quickly over the past 6 months. Between the acquisition of Convex, significant realizations across our private equity portfolio and the sale of Emerald, which closed after quarter end, private equity now accounts for $4.4 billion or 46% of investing capital. That is a 19 percentage point reduction in 6 months. Convex now represents 44% of investing capital.

Second, the balance sheet. Onex historically maintained a significant cash balance in part to support large private equity and credit commitments. At year-end 2025, our net cash balance was $2.1 billion, which was 24% of our investing capital. We deployed a significant portion of that cash and drew $700 million from a NAV loan to help fund the Convex acquisition. Since then, we have used private equity realizations to rapidly reduce the NAV loan to $220 million, leaving us in a net neutral cash position today.

Third, the profitability and, as I just mentioned, the capital intensity of our asset management business. We remain on track to achieve $35 million of exit run-rate FRE by the end of 2026, driven by improved profitability across both our private equity and credit businesses. Achieving this goal is dependent on having a successful first close for Onex Partners VI in Q4, which we believe is achievable.

At the same time, we are reducing the amount of Onex capital required to support these businesses by limiting our participation in future Onex funds to a maximum of 10%, ensuring alignment with our limited partners while allowing for a higher proportion of third-party fee-paying capital. Meg will discuss our FRE trajectory and the related fundraising drivers further in her remarks.

Fourth, how we allocate capital from here. Our strategy will include both share repurchases and deploying capital into 1 or 2 additional investments that can deliver compelling risk-adjusted returns for shareholders and where we will provide a high degree of disclosure and transparency.

As we outlined last quarter, the continued repayment of the NAV loan was expected to position us to restart share repurchases. With the NAV loan now reduced to $220 million, ample liquidity available, and Onex's shares continuing to trade at a significant discount to management's view of intrinsic value, we expect to resume share repurchases immediately.

None of this happens without good partners. Both Convex and our strategic investor, AIG, are proving to be exceptional partners, and both are closely aligned with us on the path to value creation. We recently closed the first allocation from AIG under its 3-year $2 billion commitment to Onex's funds with an investment in OSCO II, and we expect more to follow for future Onex funds, including Onex Partners VI, and to separately manage accounts investing in Onex's credit strategies.

Turning now to Convex's performance. Convex delivered another strong quarter, with premium growth, disciplined and profitable underwriting, and an attractive return on equity over the last 12-month period that continues to exceed 20%. Gross premiums written were $1.9 billion in the quarter, up 8% year-over-year, with growth across both insurance and reinsurance.

Importantly, this growth was achieved despite negative price pressure with year-to-date rate changes at negative 5%. As we forecasted at the time of our Convex acquisition, insurance pricing has softened, in particular in short-tail classes of risk, such as property.

In contrast, there has been rate increases in areas affected by the Middle East conflict and in casualty classes. It is important to reiterate that Convex's underwriting strategy is focused on profitability as opposed to top line growth. Despite market conditions, Convex has continued to increase market share without sacrificing this strategy and expects to continue generating attractive underwriting performance.

Convex generated net income of $169 million in the quarter and delivered an 85% combined ratio. Net investment returns were $45 million lower than in the prior year period. This is primarily reflected by mark-to-market losses on the investment portfolio this quarter, compared with a mark-to-market gain in the second quarter of last year.

On a year-to-date basis, Convex generated adjusted net income of $275 million. Results were negatively impacted by $62 million of mark-to-market losses in Convex's investment portfolio, primarily related to fixed income investments. Excluding this non-operational accounting item, adjusted net income would have been $337 million.

During the quarter, Convex completed the planned transition of its fixed income portfolio to an available-for-sale classification. As discussed last quarter, this treatment is consistent with peers and means future unrealized changes in values will be recorded outside of net income. The last 12 months provide the clearest view of Convex's earnings trajectory.

Adjusted net income increased 38% to $719 million from $520 million in the prior year period, while the combined ratio improved to 84% from 94%, primarily reflecting a reduction in the loss ratio to 48% from 59%. Return on average tangible equity increased 350 basis points to 20.3%.

Looking ahead, as Convex continues to mature and scale, we expect its earnings to benefit from the same structural levers we have previously discussed with shareholders. These include continued market share gains, prudent growth in asset leverage, which remains well below industry norms, improvement in investment portfolio yields, and improved operating leverage as the business continues to scale. We remain pleased with Convex's performance and value our partnership with Paul Brand and the entire Convex team.

On to private equity. Realizations or DPI at OP's 2 most recent funds are well into the top quartile for similar funds of the same vintage. OP V, a 2019 vintage fund, has now returned 1.0 in DPI, which is a very important metric for the OP VI fundraise. Over the past 12 months and including July transactions, Onex has realized approximately $1.4 billion in distributions from Onex Partners, excluding Convex.

ONCAP is also actively working on realizations in Fund IV, which we expect would bring that fund's DPI to more than 1.0. The ONCAP team is also focused on the continued deployment of ONCAP V and has a robust deal pipeline of opportunities with the potential to close this year.

Turning to credit. The team continues to grow assets under management by delivering differentiated and high-performing products and by expanding its investor base. Credit fee-generating AUM has grown by 13% over the last 12 months. And just a few weeks ago, Onex was ranked the 11th largest broadly syndicated CLO manager globally by AUM, putting us within reach of the top 10.

It is worth highlighting once more that direct lending represents only 1% of Onex Credit's AUM. The combination of a long-term and sophisticated institutional client base, together with an intentionally underweight position in direct lending, is allowing us to avoid many of the headwinds facing the industry.

In the first half of the year, the credit team has raised or extended 10 CLOs, representing a total of $4.4 billion in fee-generating assets. And in July, they also successfully achieved a final close for their second structured credit opportunities fund, OSCO II, bringing the new aggregate capital committed to deploy in this strategy to more than $500 million.

Structured credit, which includes CLOs, ONCAP, and the OSCO funds, delivered $19 million in fee-related earnings in Q2, its best FRE quarter to date, and remains well-positioned for continued growth.

Let me close where I started. We said we would reposition our investing capital, use our balance sheet more efficiently, increase the profitability of our asset management business, and position Onex to resume share buybacks as quickly as possible. We have already made meaningful progress against these goals in the first 6 months of this year.

We are not finished. We expect a first close for Onex Partners VI later this year. We continue to look for 1 or 2 more direct investments to be held on the balance sheet, and we continue to strengthen our financial disclosure so you can see the value that we are building.

I am confident in Onex's intrinsic value and believe that as we continue to grow it and make it more visible, the market will increasingly recognize that value. Repurchasing our shares at current levels and future dividends received from Convex should further accelerate value creation for our shareholders.

I will now turn the call over to Meg.

Thank you, Bobby, and good morning, everyone. First, let me provide an update on Onex total investing capital. Onex ended the second quarter with total investing capital per share of $123.99, or in Canadian dollars, CAD 176.02. Excluding the one-time dilutive impact of issuing shares to AIG earlier in the year, Onex investing capital per share has increased by 6% over the last 12 months.

As a reminder, we expect the incremental FRE and shareholder value generated by AIG's $2 billion commitment to Onex private equity and credit products to more than offset the dilution from issuing shares to AIG. AIG's commitment will be deployed over 3 years following the Convex close in the first quarter. Allocations have already begun.

Convex's strong performance is reflected in the value of our investment. Convex's value increased 4% in the quarter and 9% since the acquisition closed in February to USD 4.2 billion at quarter end. This equates to, in Canadian dollars, CAD 76.83 per share.

Convex's valuation continues to be based on a 2x price-to-tangible-book-value multiple unchanged from last quarter. This is supported by Convex's strong return on equity, as well as levers the business can utilize to continue to grow earnings. At this valuation, Convex's implied price to earnings multiple is 9.8x the last 12 months adjusted net income. Convex now accounts for 44% of Onex total investing capital and was a key driver of our Q2 results.

Other investing capital, which includes our private equity and credit investments, as well as cash, near cash, and the remaining balance of our NAV loan, ended Q2 at $5.3 billion, or in Canadian dollars, CAD 99.20 per share. Onex private equity investing capital generated a 4% return over the last 12 months and was flat during the quarter.

Importantly, our private equity team has generated strong realizations. These proceeds have enabled us to rapidly pay down the NAV loan and transform the mix of our investing capital, as Bobby discussed.

Onex Credit investing capital generated a 2% loss over the last 12 months and a loss of less than 1% during the quarter. The losses primarily reflected credit market volatility and unrealized mark-to-market declines in our European CLO investments and opportunistic credit strategies.

Now let's turn to asset management. Fee-generating AUM was $43.2 billion at quarter end, up 6% over the last 12 months and 1% during the quarter. Credit fee-generating AUM was $30.6 billion, up 2% during the quarter. That was driven by net new CLO fee-generating AUM raised. Private equity fee-generating AUM was $12.6 billion, which was flat during the quarter. Run rate management fees were $211 million.

In June, Onex realized $65 million of carried interest from the sale of the Ryan, LLC continuation fund to a new single asset continuation fund to be managed by Onex. This new continuation fund will extend the duration of fee-generating AUM and provide Onex with an additional carried interest opportunity.

Overall, fee-related earnings generated during the quarter were $4 million. Management's primary metric for monitoring asset management earnings is run rate FRE. We believe it provides the clearest and most durable view of the underlying earnings power of the business.

In-year FRE remains an important measure of current performance, but it can be affected by market volatility, the timing of fundraising, continuation vehicle transactions, and private equity realizations. In-year FRE, therefore, provides a useful point in time view, while run rate FRE remains our primary measure of determining underlying performance.

Several key revenue drivers, including our active fundraising pipeline and the expected first close of Onex Partners VI, are projected to contribute more meaningfully to the second half of this year. Assuming we deliver on these fundraising objectives, we remain on track to achieve $35 million of exit run rate FRE by the end of 2026, as Bobby mentioned.

Overall, our focus for the asset management business remains on growing FRE and building a more durable recurring management fee base while maintaining expense discipline. We believe this will increase the value of the asset management business over time.

Finally, on liquidity, we ended the quarter with $287 million of cash and near cash. Subsequent to quarter end, we reduced the NAV loan principal balance to $220 million. We also have access to $600 million of undrawn capacity under our revolving credit facility for capital flexibility.

In addition, we have more flexibility with our pro forma private equity and investing capital balance of approximately $4.4 billion. We only have $275 million of unfunded commitments to funds still in their active commitment period. This is down from $330 million of unfunded commitments at year-end and $403 million at this time last year.

Overall, we believe our liquidity position provides ample capacity to fund our remaining capital commitments and to support the capital allocation priorities Bobby outlined. This includes resumption of share purchases.

In closing, we continue to make progress against our strategic priorities, as Bobby described, and we look forward to building on that momentum throughout the balance of the year.

Thank you. We will now open the line for questions.

[Operator Instructions] Our first question comes from the line of Scott Fletcher from CIBC.

Paul, I want to start with a question on Convex, if you don't mind. You were able to grow premiums 8%, despite what sounds like some further softening in the overall pricing environment. I'm just hoping you could break out some of that growth and maybe give us a sense if there are any specific lines or businesses that are driving premium growth or, on the other hand, if there's elevated contribution from new lines versus share gains. Just some color on the makeup of the growth, I think would be really helpful.

Yes, I'm very happy to answer that. Clearly, we've seen the same market as a lot of our competitors, and there's been a lot of pressure on property in both the insurance and reinsurance lines. And we are a little bit under where we would have been expected to be with those as we've reacted to that softening in pricing. Converse to that, we've seen actually some quite good pricing in some of our casualty areas, and we've also seen very positive pricing in our political violence and terrorism books, which have been obviously affected by the U.S.-Iran war.

So overall, we write a quite diverse portfolio of both specialty insurance and reinsurance business. And if we think with a sort of negative 5% rate, there's both actually still margin in the business overall, and you can see that coming out in the results. And there is room for us to grow, particularly as we focus on our client relationships.

What we're not doing is opening a whole host of new lines of business, because I'm not certain that's the best way to grow in a softening market. You're quite likely to pick up something that you don't fully understand.

Great. That's really helpful color. Then staying with Convex, prior year development, favorable release there was elevated in the quarter versus where it's typically been. Is there anything specific to call out there that might change how we think about that on a go-forward basis?

Yes, we like to reserve conservatively, obviously. So we tend to react to bad news faster than we do with good news. So you can see some of the slightly higher current year loss ratios for both Q1 and Q2 2026, and that's as we're absorbing what we're seeing as a negative price movement.

But then as the portfolio matures, and particularly it matures more quickly for the short tail lines as opposed to the long tail lines, we sometimes see that actually our actual versus expected are actually -- is way less than we'd expected it to be and at that point in time, reacts to it. The story of Q2 is very much about, it's not really about the major events improving, it's really about just not seeing as many losses in those short tail lines as we had expected.

Now, I'm not saying that's a trend. As you say, 8-and-a-bit percent is a bit above what we've seen in prior quarters. But it is if you don't see the losses, then you can't hold onto the money.

Our next question comes from the line of Bart Dziarski from RBC Capital Markets.

Bobby, I wanted to ask around the buyback. So it looks like you're reinstating it. Maybe just what should we expect in terms of the pacing and timing of that buyback?

So you should expect us to start it immediately, as soon as Colin Sam, our General Counsel, tells us it's okay to do so. But we'll start it immediately, and we'll go in through our normal course issuer bid, as we always do.

There's rules around that that make it hard to get a lot of shares within a short period of time. But we'll also be looking for blocks that may come up as well. And I think -- again, I think we have plenty of liquidity being in a net cash neutral position or net neutral position, where I think we can be opportunistic in buying shares like we had been for the last 5 or 10 years before we deployed so much of our capital into Convex.

And I think we have plenty of room just given how much capital there is on the balance sheet to do share buybacks and to proceed with pursuing another very large acquisition or 2, similar to Convex.

Okay, got it. On private equity, the performance was soft this quarter. Like OP was negative 1%, ONCAP was 2%. That is a little bit different than what we have seen with the larger public alts who had really strong PE performance this quarter. Could you maybe talk through what drove that performance? Was it specific investments or any kind of themes that you are seeing in your PE book?

First, when you look at other people's PE performance, be careful that they are not mixing other lines of business with PE. They often do, and it cloudies the comparison. But look, we try very hard, as you know, to make sure our marks are correct. In any given quarter, we can have some 1 or 2 things happen in the portfolio where we want to make sure our marks reflect reality. I am not going to get into specific names, but that was the case here.

There were a couple of names where we felt as though we needed to lower the mark just based upon public comps and other ways that we value the companies. And when that happens, we do it. We do not expect it to happen every quarter, but this quarter resulted in basically a flat NAV quarter for PE. I do not expect that to be a trend, though.

Okay. That's helpful and understood. And if I could sneak in one more, just on the run rate FRE guidance. That embeds an assumption that OP VI has a first close. Maybe just walk us through what you're expecting for that first close and, maybe more importantly, like, what gives you the confidence that we can get that first close end of this year?

So look, we're [ topic ] and myself and the team, I'm feeling quite optimistic about the first close occurring this year. I can't give you sizing. Like, we won't do that. But I can assure you what we're looking at for a first close and quite frankly, demand for a close is beyond the first close for OP with people we've done business with for a long time and some new people. That should result, subject to the world. I'm saying the way it is, in a good result were the human capital we have at OP, that would allow us to have a good margin in that business from very perspective.

Our next question comes from the line of Graham Ryding from TD Securities.

Paul, maybe I could just go back to you for a second. Any visibility on sort of cat losses or sort of one-time outsized losses might be tracking in Q3? Is there anything to call out that could impact ROE?

I mean, there have been some events, but nothing that we are thinking is going to be in a major event category so far in July and August. We're still in the midst of the hurricane season. At the moment, that's been very quiet. But those things can change and change quite rapidly. So yes, we'll keep you posted, but nothing to talk about at the moment.

Okay. Understood. Bobby, just pretty good activity on the PE portfolio realization activity side. Can you give us some commentary maybe on the visibility you have to where -- through the second half of this year on that front? Maybe I'll start there.

Look, for both OP and for ONCAP, there are things in the pipeline that we think will convert to cash between now and the end of the year, and it will be subject to any process necessarily. But we are very focused on making sure on [Technical Difficulty]. We are being very sensitive to the fact that our LPs want us to have -- and not just us, the industry -- to have a very high ratio of DPI to net MOIC. And again, as I said in my opening commentary, we are top decile and well into the top decile on that metric. And I think that is part of the reason there is optimism around the first close for OP this year.

If I could maybe add one more. You talked about further direct investments being either something that would complement Convex or your asset management business. On the latter piece, can you give us some color on what would make sense and what you would be interested in? Because you have had some experience in the past with Falcon and Gluskin where these investments did not work out. So can you maybe share with us what you are thinking there or...

No. So what you should not expect is us buying a multi-billion dollar asset manager. But what we could buy, like Convex and the partnership with AIG, that was synergistic with the asset management business. So whatever the next leg or 2, or the final leg or 2 of the stool might be, we are hopeful that they are synergistic with what we have to date in those 2 things. It does not mean you should be thinking that one of the things we are contemplating is buying a $5 billion asset management business. We are not. But there are -- look, there are tuck-ins you could do in the asset management business that could make great sense relative to our areas of competence that we have talked about in the past. But it is more likely that a large deployment of capital will be in something in financial services rather than asset management.

This does conclude the question-and-answer session of today's program. I would like to hand the program back to Bobby Le Blanc for any further remarks.

Thank you very much for your time. I hope you enjoy the rest of the summer, and if you have any questions, feel free to reach out to Meg or me or Zev, and we will be sure to get back to you quickly. Have a great day, everyone. Thanks again.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Ladies and gentlemen, welcome to Onex Corporation First Quarter 2026 Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the conference over to Jill Homenuk, Managing Director, Shareholder Relations and Communications at Onex. Please go ahead.

Thank you. Good morning, everyone, and thanks for joining us. We're broadcasting this call on our website. Hosting the call today are Bobby Le Blanc, Onex' Chief Executive Officer; and Meg McClellan, our Chief Financial Officer. Also joining us today for our Q&A session is Paul Brand, Chief Executive Officer of Contact.

Earlier this morning, we issued our first quarter 2026 press release, MD&A and consolidated financial statements, which are available on the Shareholders section of our website and have also been filed on SEDAR. Our supplemental information package is also available on our website. As a reminder, all references to dollar amounts on this call are in U.S., unless otherwise stated.

I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors relating to any forward-looking statements contained in today's presentation and remarks. With that, I'll now turn the call over to Bobby.

Happy Friday, everyone. First, I'd like to welcome Megan Onex' new CFO; and Paul Brand, the CEO of Convex, to their first Onex earnings call. Thank you both for being here today. Onex delivered a solid first quarter despite a challenging market backdrop. We remain focused on executing our strategy to drive long-term value creation and earnings growth. .

Our Convex private equity and credit platforms are performing well, and we are experiencing positive momentum across our investing and asset management activities. As I've indicated before, Convex will be the largest contributor to increasing shareholder value in the near term.

In addition, the value of our strategic partnership with AIG should not be overlooked. As a reminder, AIG purchased 7.5 million shares of Onex for a 9.9% ownership stake and has committed to invest $2 billion in our asset management strategies. We expect AIG's capital commitment to be accretive to FRE and to shareholder value.

We are actively working with AIG to determine how capital will be allocated across Onex's private equity and credit products, including Onex Partners VI and ASCO II. We also believe there could be additional opportunities that arise to collaborate with AIG as we continue to build our relationship.

At yesterday's Annual General Meeting, we were pleased to welcome AIG's representative, Jay Cohen, to our Board of Directors. Jay has more than 30 years of experience across the insurance industry ecosystem.

Most recently leading the insurance equity research team as Managing Director at Bank of America. We look forward to working with Jay and to the expertise and contributions he will bring to our Board discussions. Now let's turn to Convex performance.

Convex delivered a strong quarter with underwriting performance, profitability and return on equity all improving versus the prior year period. Gross premiums written increased 5% year-over-year.

However, this headline growth rate understates the underlying performance because Q1 of 2025 was an elevated comparison period, which included unusually high reinstatement premiums convex received following the California wildfires.

Excluding these onetime premiums, which are paid by clients to restore coverage for a subsequent event following a major loss, gross premiums written grew 8%. As we forecasted prior to our acquisition, Insurance pricing has softened with year-to-date rate down 4%.

The softness is concentrated in short-tail classes of risk such as property. In contrast, there has been rate increases in areas affected by the Middle East conflict and in casualty classes. Convex generated adjusted net income of $106 million in the quarter, which included a $50 million unrealized mark-to-market loss on Convex fixed income portfolio amid rising interest rates due to broader macroeconomic volatility.

Excluding this nonoperational accounting loss, Convex generated adjusted net income of $156 million. First quarter earnings should also not be viewed as representative of a full year run rate. As historically, net income in the first quarter of the year is less than we see in other quarters.

Convex currently recognizes unrealized changes in the value of its fixed income portfolio through earnings, our plans to transition to an available-for-sale classification during the second quarter.

This revised treatment is in line with peers and will reduce income statement volatility in subsequent periods. Convex delivered a combined ratio of 87% in the quarter and underwriting earnings growth was largely driven by a significant reduction in the loss ratio as first quarter earnings last year were negatively impacted by incurred losses due to the California wildfires. .

The Middle East conflict has resulted in estimated net losses of $23 million in Q1, which is relatively small compared to our overall earnings. Convex management is actively monitoring the evolving situation and expect rate increases on new policies written in the region to provide some offset against incurred losses. On a last 12-month basis, adjusted net income was $827 million, an increase from $401 million in the comparable prior year period and from 711 for the full year 2025.

The last 12-month combined ratio improved to 83% and ROE increased to 24%. The Convex ROE has steadily increased since Onex's acquisition, reflecting both stronger earnings and a lower tangible book value denominator, following the repurchase of shares completed as part of the Convex transactions.

It should be noted that Convex recorded modest major event losses over the last 12-month period, which has also helped improve Convex overall loss ratio. The value of Onex's investment in Convex increased to $4 billion at the end of the quarter representing an increase of 4% since the acquisition was closed earlier this year. This valuation is based upon a 2.0x price to tangible book value supported by Convex high return on equity, earnings growth and continued market share gains.

At this valuation, the implied price to earning multiples are 8.1x and on the last 12 months adjusted net income basis and 10x on a full year 2025 actual net income basis. Looking ahead, we expect Convex's earnings to benefit from several structural levers, including continued market share gains, prudent growth in asset leverage, improvement in investment portfolio yields and operating leverage as the business continues to scale.

We are pleased with Convex early results and continue to value our strong working partnership with Paul Brand and the entire Convex team. Now turning to Asset Management. Within private equity, our teams made significant progress returning capital to our limited partners last year. We returned more than $8 billion and this momentum has continued into 2026.

Onex Partners recently closed its $1.6 billion multi-asset continuation fund, raising capital from some of the world's leading institutional and sovereign investors including several that are new to Onex.

And just this past Monday, OP announced a full realization of Emerald, with expecting net proceeds to Onex of $230 million. Importantly, these efforts will bring DPI for Onex Partners V to 1.0, making it a positive outlier on this metric relative to other funds of this vintage. Moreover, OP has good visibility into additional realizations and expect CPI to increase by the time Onex Partners VI has its first close, which is expected later this year. The OP Opportunities Fund has now invested about 70% of its $1 billion in commitments with one investment in each of the 4 verticals and has attracted an additional $1 billion in co-investment.

The fund has performed very well to date, particularly on the strength of its first 2 investments that we've held for over 12 months, [ Fish block and Firestone. ]

Our credit platform continues to distinguish itself as a market leader and a relative safe haven amidst considerable industry noise. Across the platform, we have been underweight software and AI exposed credits, avoided exposure to aggressive PIK loans that have come to market in the past 2 years and importantly, have almost no direct lending retail exposure which has gotten a lot of attention to fleet. While the market for new CLO issuances in Q1 was more subdued given recent market volatility, the credit team has been actively resetting existing CLOs and opportunistically placing new offerings.

Over the first 4 months of the year, the team raised or extended HCLOs, including 3 new issuances. Notably, the team recently priced their 50th U.S. CLO. It was just a little bit over 3 years ago that they issued their 25th USCLO. Proof of the team's ability to steadily scale the platform while maintaining their commitment to investment discipline and performance.

And they've done so with far greater balance sheet efficiency, with Onex's 35% share of CLO equity today being half of what it was 3 years ago. Structured credit, which includes CLOs, ASCO and ONTAP, delivered $15 million in fee-related earnings in Q1 and remains positively positioned to grow earnings for the remainder of the year.

As I mentioned, with direct lending being a source of concern in the market, it is worth noting that direct lending represents only 1% of Onex's credit AUM. Moreover, our offerings are focused on liquid, structured and multi-asset credit strategies, which benefit from a sophisticated institutional client base and a proven track record of performance across economic cycles.

Consequently, we continue to benefit from the quality and strength of our credit platform, which is showing up in the form of both new and repeat investors. Finally, let me turn to our liquidity and capital allocation priorities.

As I outlined in our last call, we intend to reorient realize proceeds from our legacy investments into 1 or 2 direct balance sheet investments and ideally have a good strategic fit with Convex and/or our asset management business. These investments will use lower leverage and have attracted risk-adjusted return profiles to drive earnings growth and enterprise value for Onex shareholders.

And of course, as we get closer to fully paying down the NAV loan, Share buybacks will once again be considered as part of our future capital allocation decisions. I am confident that the combination of earnings growth from Convex future realizations from our PE portfolio and the reorientation of that capital and the growing profitability of our asset management business will drive substantial long-term value creation.

I'll now turn the call over to Meg.

Thank you, Bobby, and good morning, everyone. Before I begin my prepared remarks, I'd like to thank my predecessor, Chris Govan, for his help during my transition to this role. I am grateful for his support and partnership. I'm thrilled to join Onex at such a pivotal time in the company's evolution. Convex is now a meaningful driver of shareholder value, our private equity team continues to compound shareholder capital and generate realizations and our credit platform continues to scale while maintaining discipline in challenging markets. .

I'll focus my remarks today on how these themes show up in our first quarter financials. First, I would like to provide an update on our investing capital. investing capital, which includes context and other balance sheet activity at Onex ended the quarter at $9.4 billion, which equates to $122.45 per share or about CAD 170.

The 2% decline in the quarter relative to the 2025 year-end was primarily driven by the dilutive impact of issuing shares to AIG and in connection with the Convex acquisition. Excluding this, investing capital per share would have increased 1% during the quarter and 8% over the last 12 months.

We believe this dilutive impact will be more than offset by the incremental FRE and shareholder value generated through the $2 billion of AIG commitments in our asset management products. and we will also manage a portion of Convex investment portfolio, supporting long-term FRE growth. Convex accounts for 42% of Onex investing capital.

And as Bobby emphasized, was a key driver of our results. The fair value of our investment in Convex was $4 billion at the end of the quarter or $51.87 per share equal to CAD 72.18 per share. This volume has increased by 4% since our acquisition and is based on a 2x tangible book value multiple.

We believe this multiple is well supported by the factors Bobby mentioned, especially conduct strong return on equity and levers that can utilize to grow earnings. These levers are outlined in our supplemental information package.

Our valuation is anchored on price to tangible book value. This avoids overweighting any single period of earnings, which can be affected by timing and severity of loss events. Instead, it reflects accumulated growth in tangible book value and equity value creation over time. This is consistent with how Onex Partners historically value conduct. We also reviewed Convex relative positioning versus property and casualty peers. We believe Convex's return on equity and key financial performance metrics support a modest premium to peer tangible book value multiples.

Additionally, we referenced the valuation against Convex earnings. The valuation equates to 8.1x last 12 months adjusted net income and 10x 2025 net income which are well below Convex peer average. Finally, we compared our context valuation to input from an independent third-party valuation source, which provided additional support on the reasonableness of our estimate and our approach.

Moving on to investments in treasury. This section consists of the non convex remainder of our investment holdings and activity, including our private equity and credit investing capital, cash and near cash and debt. Investments in treasury ended the quarter with $5.4 billion of investing capital or $70.58 per share equal to CAD 98.22 per share. Private equity generated an 8% return on Onex investing capital over the last 12 months and a 1% return in the quarter.

Importantly, the private equity team continues to deliver strong realizations with $317 million of proceeds to Onex from the multi-asset continuation vehicle Bobby mentioned, approximately half of that was received in the quarter, and the balance is expected in Q1 2027.

Subsequent to quarter end, we announced the sale of Emerald and expect to receive $230 million of proceeds to Onex in the second half of 2026. Credit generated a 2.1% return on Onex investing capital over the last 12 months. However, declined 3% in the quarter, primarily due to mark-to-market nonrealized losses in structured credit, particularly CLO equity. I would like to reinforce here Bobby's point that our direct lending exposure is minimal.

With Onex investing capital in this strategy, only $16 million at quarter end, representing well under 1% of our total investing capital. Turning now to our Asset Management business. The asset management story this quarter is straightforward. The longer-term fee-based continues to grow, particularly for credit, while reported FRE continues to reflect private equity fees step-downs and market volatility.

Fees underrating AUM was $42.8 billion at quarter end. Credit fee-generating AUM was $30.2 billion, up 1% from the end of last year. This was driven by net new CLO fee-generating AUM raised despite credit market headwinds. Private equity fee-generating AUM was $12.6 billion, down 10% due to OP V's realization of Convex excluding the impact of the conduct realization, private equity fee-generating AUM would have increased 3%, driven largely by the Onex Partners multi-asset continuation fund.

Run rate management fees for asset management were $210 million. FRE for our asset management business was $5 million in the quarter and overall FRE was a loss of $3 million. The balance of the higher fee-related earnings will not be linear. Several revenue drivers, including an active fundraising pipeline are expected to have a greater impact in the second half of this year.

Due to this, FRE will be back loaded and annualizing Q1 is not representative. Onex continues to prioritize building a more durable recurring management fee base maintaining expense discipline and improving the earnings profile of our asset management business over time to generate value for our shareholders.

Finally, on liquidity, we ended the quarter with $398 million of cash and near cash. We drew $700 million on the NAV loan to support the Convex acquisition. In April, we repaid $200 million, reducing that balance to $500 million. Following this repayment, we retained strong liquidity with approximately $200 million of cash and near cash and $600 million available to be drawn on our revolving credit facility.

Continued private equity realizations, including the sale of Emerald, will support further repayment, reduce interest expense and provide additional capital allocation flexibility. We also have significant flexibility with our private equity investing capital, which totaled $4.6 billion at quarter end.

We only have $255 million of unfunded commitments to funds still in their active commitment period. Overall, we're comfortable that our liquidity position provides ample capacity to fund our capital commitment needs. In closing, Q1 was a positive quarter that reflects our strategy to reorient our balance sheet.

Convex is now reported separately, reflecting its significance as a core investment for Onex shareholders. Investing in treasury continues to show the value and flexibility for the rest of our balance sheet. Asset Management should deliver growing run rate management fees as our investment teams execute against their fundraising targets. And our liquidity position remains solid and flexible.

I'm excited to be part of Team Onex, and I'm committed to providing clear disciplined financial communication as we execute Onex priorities and create value for our shareholders. Thank you, and I look forward to spending time with each of you in the future. We will now open the line for questions.

Certainly. [Operator Instructions] Our first question comes from the line of Scott Fletcher from CIBC.

Wanted to ask a couple of questions on Convex maybe for Paul in particular. Just first, I want to -- just looking at the current accident year loss ratio. It did tick up quarter-over-quarter and year-on-year.

Sounds like the Middle East conflict might have had some element at play there. So I wonder if you could just dig into that and how we should be thinking about that for the rest of the year.

Yes. So yes, you're quite right. As we sort of noted in the materials, there's about a $23 million add-on for the [indiscernible] rand and that just -- yes, and that moves the expansion loss ratio up a little bit.

Okay. Nothing that there's not much to call out there. And then on the net premiums retention, that number sort of came down again quarter-over-quarter year-on-year drove net premiums into sort of, I think it was 9% down year-on-year.

Just wondering what you're seeing in the market that's sort of shifting the posture on premium retention and how we -- again, we should think about the approach there for the rest of 2026.

Yes. So I mean, context a reasonable amount of reinsurance and as we -- and we buy that sort of through the market as we see prices soften, we might expect to see sort of reinsurance purchasing going up a little bit. And we also have outcome quota share, which was slightly under placed in Q1 of 2025. And so that will be affecting that comparative state.

Okay. And then I'll just finish on one more. On the expense side, it looks like -- I'm just trying to get a sense of what the commission costs or the policy acquisition costs should look like. I think there's been -- the numbers have moved around.

It's not a huge data set, but just wondering, to 25% in the quarter, 24.7%,s that a good number to look at going forward. And I'll pass the line after that.

Yes. No, we'll come back down much closer to the -- what you're seeing in the LTM sort of 2-ish my prediction on that. There's just some noise in Q1 in terms of how different parts of the based on sort of the outward premium and the inwards premium and driving that rate that effect.

And our next question comes from the line of Graham Ryding from TD Securities.

Paul, maybe I'll stick with you. Welcome to the call. Just maybe the outlook for gross written premium in 2026, just given your focus on specialty and there is some pricing pressure in the markets overall, maybe your outlook on what your expectations are for the year.

Yes. No, absolutely. as we think about rates are down about 4% year-on-year, and we still believe that, that leaves actually some reasonable margin in the business, particularly as we can alter the portfolio around between the lines of business that are showing against these business are showing greatest rate cuts towards the lines of business that are showing the best sort of rating environment.

And I sort of think about an outlook for the year as we make comments, I think the 5% is a bit understated because of the state reinstatement premiums that we received in Q1 2025, normalizing to that, we're about 8%.

I would expect us to get a maybe a bit higher than that as we get towards the end of the year. And more of the insurance versus reinsurance business to start to bounce in with reinsurance being having a very big Q1 and growing and predicted to grow at a slightly lower rate than we're seeing the insurance business in '26. Okay. So a few quarters to go before we'll be able to print that.

Okay. Understood. And the business delivered a 20% ROE last year. I think slightly higher than that on an LTM basis. Like do you feel like this is a business that should be able to sustain that 20%-plus ROE. Is that a reasonable target?

Yes. I mean I think you kind of have to see what happens to losses. You have to see what's obviously going to go on in the investment environment in an uncertain world. But yes, I still -- as I said, [indiscernible] plenty of margin in the business. And absolutely, we hope to put post another decent ROE in the entire to 2026. I mean I think as Bobby's comments mentioned. If you just look at the LTM and just so we're getting up to 24%, that is slightly flattered by having probably slightly fewer major events during that particular period in Q1 2025 to Q1 2026 that we might expect to a normal period.

But it's the underlying sort of drivers in the business are looking good. As I said, we're seeing good gross premium growth. Our expenses are pretty much in line. Yes, so I don't have to get too optimistic to hope to see something like those types of ROVs that you're mentioning.

And it's important to remember like where Convex is positioned in its evolution, we can pretty much double the size of the current Convex business without adding much to our expense line. There'll be inflation and other things, but nothing meaningful.

So we have a chassis that could grow a lot about incremental cost. Second, our asset leverage is well below industry norms. So we'll be able to grow into that. And that incremental float over time will create more investment income.

As we've talked about, we'll -- it won't get a lot, right, but we'll manage some of our investment portfolio at Convex and alternative assets, which should give a bit of a pickup in yield. And importantly, just given the reaction to convex over last year in the marketplace. We're continuing to gain share given the customer service and data analytics that we're providing to our clients.

Okay. Helpful. Megan, maybe I could jump to you just on the asset management FRE you put a $35 million target for the end of 2026. So maybe I should interpret that as sort of a run rate in Q1 '27 and I think previously, you guys have talked about hitting a $17 million run rate by Q2 of this year.

Does that still hold? And then just bigger picture, what are the key pieces here to sort of get moving into that positive territory that you're targeting?

Yes. So it's a very similar story, and thanks for the question. as to what Chris talked about in the fourth quarter earnings call. So we do expect to hit the year-end run rate. But again, it's back half loaded. We've got a lot of fundraising coming. You'll hear us talk about OP 6 quite a bit. That is a very big component of hitting that run rate. That, along with some credit products and some additional CLO issuance. .

So you're going to have a bumpy path getting there, certainly, Q1 with the credit markets was somewhat bumpy not going to be a linear path. And so it's a little too early to confirm run rate for the full 2026 year.

Okay. And on the PE side, expenses seem to continue to sort of be elevated relative to management fees. Are you looking at the expense on the efficiency side? Or is this more about fundraising and driving the top line higher?

No, it's definitely the latter. As we continue to sell assets out of which, of course, generates DPI, which is very important to our LPs. The revenue goes away on those assets when you sell them. So that -- the expense line ought to be rightsized, if you will.

And that team has done a very good job of rightsizing its expense structure relative to our fundraising expectations. But when we begin to have close at OP6, that will rectify itself.

Okay. Understood. And then sorry, I missed that part. Where are you with the fundraising? And what's the expected sort of what's the initial feedback and uptake for OP VI?

So we said we expect to have our first close later this year. Momentum seems good, but the DPI stat that we've delivered for OP V shouldn't be overlooked. We're at a 1.0 pro forma for Emerald. We think we'll be higher than that when we get to our first close. And the smaller the gap you have between realized MOIC versus unrealized monks the more confident LPs are in your ability to deliver the results that you promised.

The vintage were put up against for that 1.0. We're probably top decile relative to similar vintages, and that's only going to get better given what we have in the pipeline. So that should give us pretty good momentum coming into the first close on an absolute and relative basis.

And our next question comes from the line of Bart Dziarski from RBC Capital Markets.

Great. Maybe sticking with the Asset Management business. I saw that IRR disclosure was dropped. Maybe give us a rationale why an update on net IRR performance on the flagship PE funds would be great.

Yes. Yes. So we've had a couple of instances where the press has gone in and used that sat that doesn't have the benefit or similarly to the way the rest of the industry calculates net IRR. So we have incremental disclosure, so you'll be able to see where we sit relative to carry and give you good comfort that the accrued carry is good, but people were scraping data off that exhibit and just implying quartiles and other things that simply weren't accurate given the way we communicate with LP.

So it's actually putting the OP team at a bit of an unfair competitive disadvantage. So we decided to begin to disclose it in a different way. But we're not -- we -- you'll be able to get to the same place in what you're looking for, which is most likely are we going to collect that the carry that we've accrued and you'll see in the disclosure, we feel very good about that.

But we just -- we didn't -- we wanted to stop these articles from coming out without the proper acclamation that we normally give to LPs.

Okay. Got it. And maybe, Megan, welcome to the call. Just wanted to ask around how we should think about when the buyback could resume. I think you had mentioned you want to pay down the NAV loan. So what should we be expecting on that front?

Yes, I'll take that one. Thanks. So I'm trying to actually make sure that Meg and I and the rest of the team do what we promised to do. And we promised to get that loan paid down as quickly as possible.

I think we're doing quite a good job if you pro forma for Emerald. We'll have a bunch more of a pay down. And I'm already getting very close to the point where -- and I said it in my remarks, we're happily at these prices or share buybacks are going to become part of the capital allocation decision again.

And that's obviously coupled with how to reorient the rest of the balance sheet. But we're getting much, much quicker about having that back in the conversation than I would have guessed even 3 months ago.

Okay. Got it. And then maybe last one just on Convex. So Paul, thanks for joining the call as well. Think the GWP has been decelerating from a growth perspective since '22. I recognize those are hard markets, and we're kind of running at, call it, high single digits now.

It sounds like from your commentary. So maybe what comfort can you give investors that in a decelerating market where you're growing premiums looks like well above industry that you're maintaining your discipline on the underwriting and pricing side to generate that growth.

Yes, sure. I mean it's an entirely fair question. Yes. I mean, I probably spent more of my life in soft markets than hard markets. And we've absolutely have focused on a really strong analytical backbone that gives us good insight as to where both gross margin is in the business and also margins that we see after purchasing outwards reinsurance.

And as I said, we're seeing a 4% rate reduction so far this year. And as you think about how rates went up in the period of time from -- really from Convening in 2019 all the way through to sort of mid through 2025. That note particularly rapid decline. And then against the backdrop of that, as I said, we also buy by reinsurance and the sort of improvement in terms that we're seeing there is in lots of ways, mitigating and offsetting the marginal reductions in prices that we're seeing sort of on the is business.

Again, we don't -- I'm pleased that we're able to grow high single-digit rate even in this slightly more competitive marketplace. And I think that's a signal to the work that come has done on its relationships with its brokers and its clients over the pursuits coming to existence.

No underwriter in convex as a top line goal or target, if you don't see margin in the business that is absolutely fine to step backwards bankers from it.

And as you said, we were growing at faster rates in the super whole phases of the marketplace. And that's partly driven by market share and our ability to open utilize business up. I'm not surprised to see us more normalizing in the market that we're seeing today.

But there's -- but I still sense that there's sort of plenty of room for complex to grow. But we will always put margins and bottom line ahead of [indiscernible] And that's just been a mantra that I've had pretty much all the way through my career.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Bobby Le Blanc for any further remarks.

Thanks, everyone, for being here with us today. And again, thanks, Paul and Meg for joining your first earnings call. Great to have you both here. I hope everybody has a great weekend.

And again, if you have any questions at all, feel free to call Jill, [indiscernible] and we'll try to get back to you quickly. Have a great weekend. Bye-bye.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Welcome to Onex Fourth Quarter and Full Year 2025 Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. And now I'd like to turn the call over to Jill Homenuk, Managing Director, Shareholder Relations and Communications at Onex. Please go ahead.

Thank you. Good morning, everyone, and thanks for joining us. We're broadcasting this call on our website. Hosting the call today are Bobby Le Blanc, Onex's Chief Executive Officer; and Chris Govan, our Chief Financial Officer.

Earlier this morning, we issued our fourth quarter and full year 2025 press release, MD&A and consolidated financial statements, which are available on the Shareholders section of our website and have also been filed on SEDAR. A supplemental information package is also available on our website.

As a reminder, all references to dollar amounts on this call are in U.S. unless otherwise stated. I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors relating to any forward-looking statements contained in today's presentation and remarks.

With that, I'll now turn the call over to Bobby.

Good morning, everyone. In 2025, Onex delivered strong results and made meaningful progress on our business and capital allocation objectives to set the stage for accelerated value creation and earnings growth going forward. Most notably, our recently completed acquisition of Convex and our new strategic relationship with AIG has significantly enhanced our growth prospects and earnings outlook.

Across Onex, we are entering 2026 with momentum and confidence. We're able to do almost 7 years of due diligence on Convex given it was an Onex Partners V portfolio company. This is exactly the type of informational advantage that we look for as investors. Convex is expected to be Onex's largest contributor to value creation going forward. And the accelerated closing reflected a strong commitment and alignment across Convex, AIG and Onex to complete the transaction on an expedited basis.

As a reminder, the transaction valued Convex at $7 billion with Onex and AIG owning approximately 63% and 35%, respectively. In addition, the Convex management team demonstrated their alignment and conviction by rolling approximately $500 million of equity and accrued incentives, which is a major vote of confidence in our partnership and go-forward strategy.

This morning, we released our year-end financial information for Convex. In 2025, the team delivered another outstanding year, continuing to demonstrate their ability to deliver industry-leading growth and profitability. You'll find more information in our Q4 supplemental information package, but here are some of the highlights.

For the year, Convex delivered $711 million in net income and an overall return on equity of 20%. Net income increased 25% versus the $566 million Q3 latest 12 months figure we announced at the time of the acquisition and grew 40% from the $506 million delivered in 2024. This 2025 net income figure equates to $423 million for Onex based upon our 63% ownership position and is updated for Convex's pro forma interest cost on the $600 million of debt raised as part of the transaction.

The team achieved $5.9 billion of gross premium written in 2025, growing 14% year-over-year. Convex's ability to scale to this level of gross premium written in less than 7 years demonstrates the impressive business the Convex team has built and the value they provide to their customers.

Despite the significant growth, Convex has still only captured about 2% of its addressable market, which highlights the significant opportunity we and management continue to see for the business. Convex also delivered consistent and strong underwriting performance in 2025 with an 89% combined ratio, the third consecutive year of combined ratios under 90%.

Management expects to continue growing earnings through cycle by utilizing several structural levers, including: one, capturing further operating leverage as Convex continues to scale into its expense base; two, growth in asset leverage; three, growth in net underwriting profitability; and lastly, yield improvement on Convex's growing investment portfolio. This strong financial performance increased Convex's tangible book value to $3.8 billion at year-end, resulting in a reduction of Onex's effective acquisition multiple to 1.8x tangible book value and 10x 2025 net income.

In our supplemental information package, we outlined more information, including Convex's structural competitive advantages, how management plans to continue to grow through cycle and how Convex should deliver significant value to Onex shareholders. When we announced the transaction, one of our commitments to shareholders was to ensure you receive transparency on our investment in Convex so you can value it appropriately.

Next month, in follow-up to today's earnings update, we plan to publish complete financial information for Convex, similar to the tables we provided at the time of our Q3 announcement. The addition of Convex as a core Onex platform alongside private equity and credit will play a pivotal role in our ongoing transition where we continue to prioritize consistently growing net income and free cash flow to help drive overall enterprise value.

Our future capital allocation initiatives will align with this strategy, focusing on direct investments with strong risk-adjusted returns, low leverage and longer hold periods in sectors where we have a right to win. While we continue to support our private equity and credit strategies to ensure continued alignment with our LPs and co-investors by participating in each fund up to a maximum of 10%, this capital-lighter model will enable a higher proportion of third-party capital in our funds.

This, in turn, will contribute to ongoing growth in fee-generating AUM, fee-related earnings and carried interest. Early in 2025, both of our private equity platforms, Onex Partners and ONCAP completed successful fundraises. And throughout the year, both made progress in continuing to return capital to their limited partners and co-investors, a total of $8 billion in realizations and securing new investment opportunities with high conviction value creation plans.

Onex Partners had an active and successful year and has extended the momentum into 2026. OP announced $7.7 billion in total distributions in 2025, including $4.3 billion to its co-investors. Since 2024, OP has returned $10 billion of capital across 8 realizations and completed 6 new investments totaling $2 billion.

Recently, OP entered into an agreement to create a $1.5 billion multi-asset continuation vehicle with leading global secondary funds and sovereign investors. The transaction is expected to close this quarter and delivered proceeds of approximately $310 million to Onex.

Importantly, we will also bring DPI for Onex Partners V to 0.8x, positioning it very favorably relative to other funds of this vintage. As you all know, there has recently been a lot of news around software and AI disruption. Looking at the percentage of our investing capital in technology-enabled businesses, we feel comfortable with our relative exposure and the embedded protections of our company's business models and competitive environments.

Only 4% of Onex's total investing capital is tied directly to pure vertical software businesses. Looking at it from the broadest perspective, only 14% of Onex's total investing capital is invested in tech-enabled firms. All these businesses have proprietary data and significant competitive moats sustained by regulatory barriers and B2B workflows occurring inside their systems.

Across our operating companies, we are not seeing any meaningful evidence of disruption, but rather they're continuously improving their product value proposition through the adoption of AI and other data analytic tools.

Turning to ONCAP. The team returned $270 million to investors, including Onex in 2025, which was primarily driven by the partial sale of Precision Concepts. ONCAP also recently completed its leadership succession process, which resulted in 2 of its most proven leaders, Adam Shantz and Steve Marshall becoming co-heads of the platform. Michael Lay has transitioned into the role of ONCAP Executive Chair. Congratulations to each of them on this milestone, which ensures long-term leadership continuity for ONCAP.

Our credit team had another outstanding year. Within structured credit, where we are recognized as a global leader, we priced 28 CLOs across the U.S. and Europe, raising more than $6 billion of new fee-generating AUM and extending another $6 billion. Chris will get into more detail on fee-related earnings, but it's worth noting that the team's ability to increase fee-generating AUM has enabled them to exceed our Investor Day run rate FRE expectations.

We have a reputation for delivering strong performance within our CLOs relative to peer firms through a proactive and diligent approach to portfolio management. By heavily investing in our underwriting processes and implementing state-of-the-art risk management tools and processes, we were able to navigate the spread challenged credit landscape and avoid involvement in some of the high-profile casualties like First Brands and Saks Global that impacted the broader credit market last year. The credit team to its credit is also underweight software and AI risk credits across its portfolio.

Across Onex, our success wouldn't be possible without the commitment and dedication of the people who make up the organization. I want to thank them for all they do and also for making Onex a great place to come to work every day. We have strong conviction in Onex's intrinsic value and are intensifying our efforts to have that value reflected in our stock price.

In the supplemental information package, we've included how management views Onex's intrinsic value. At this stage of our capital allocation transition, we believe it is appropriate to utilize a sum of the parts framework. There are currently 3 distinct value drivers for shareholders: Convex, our asset management business and our remaining balance sheet investments.

The slide on the screen is a really important one to focus on. As you can see, when utilizing -- first, the acquisition for Convex, which we believe is conservative given the strong recent performance and then applying a 15x multiple to pro forma 2026 year-end run rate fee-related earnings, and then finally, looking at the value of our remaining investing capital at the Q4 valuation, we believe intrinsic value is $174.

Importantly, our current estimate does not include the value we expect to generate for shareholders over time from reorienting realized proceeds from our private equity investments into 1 or 2 direct balance sheet investments similar to Convex that ideally have a good strategic fit with Convex and our asset management business. These investments will use lower leverage and have attractive risk-adjusted return profiles to drive growth in enterprise value for Onex shareholders.

We will also provide significant transparency and financial KPIs, similar to Convex on each investment to support our shareholders in measuring our performance. Having our intrinsic value properly reflected in our share price is a top priority, and we are committed to delivering the earnings growth, disciplined execution and transparency to make this happen.

I want to thank our shareholders for their ongoing support over the past year and for their confidence as we move forward. The pieces are in place for a solid year, and our team is laser-focused on driving enterprise and shareholder value. I'll now turn the call over to Chris.

Thanks, Bobby, and good morning, everyone. While most of my remarks will focus on our results for the quarter, I will also take some time to provide an update following the completion of the Convex acquisition. So let's start with our investing segment. Onex ended the year with investing capital per share of $124.70, a return of 3% in the quarter and 10% for the year.

The 5-year CAGR on investing capital per share is now 11%. Investing gains in the quarter were driven by strong returns from Onex Partners V and Onex Partners Opportunities of 4% and 7%, respectively, and a 6% return across the ONCAP portfolio. Our credit investments were essentially flat in Q4, driven by spread compression on the CLO's underlying portfolio of loans. With spreads on the CLO's debt fixed in the short term, spread compression in the portfolio results in a reduction in the mark-to-market value of our CLO equity.

However, it's important to note that our CLO investments continue to offer an attractive go-forward return and cash distribution profile. Moreover, we expect any mismatch in spreads to be eliminated by refinancing the CLO liabilities as they come out of their no-call period, which is typically 1 or 2 years.

As Bobby discussed, 2025 was a strong year of private equity realizations for us with the $8 billion of realizations across the platforms, delivering over $800 million to Onex Corporation. Realizations in the fourth quarter included Onex Partners V sales of 54% of OneDigital and 25% of WestJet. In addition, Onex Corp. completed its final realization of Ryan Specialty, netting just over $200 million.

In total, the Ryan Specialty investment generated aggregate proceeds of $1.2 billion for Onex Corp. over almost 8 years, a multiple of capital of 3.8x and a 49% IRR. On the new investment front, activity in the fourth quarter included the acquisition of Integrated Specialty Coverages by Onex Partners Opportunities and ONCAP V investment in CSN Collision. Onex Partners Opportunities also agreed to invest in its fourth portfolio company, a transaction that is expected to close later this quarter.

On the asset management side of the business, Onex ended the quarter with nearly $44 billion of fee-generating AUM, an increase of 24% during the year. The increase primarily reflects the issuance of new CLOs, commitments made to ONCAP V and Onex Partners Opportunities and net write-ups in the PE portfolio.

The Asset Management segment generated earnings of $49 million in Q4, of which $2 million was fee-related earnings from our PE and credit platforms. After factoring in the costs associated with managing Onex Corporation's capital and maintaining the public company, firm-wide FRE was a loss of $4 million for the quarter and $3 million for the year.

Looking forward, credit continues its strong FRE trajectory, ending 2025 with run rate FRE of $60 million. As Bobby noted, this is ahead of our 2023 Investor Day target. And consistent with the Q3 earnings call commentary, we ended the year with firm-wide run rate FRE of $17 million, which includes the benefit of the multi-asset continuation vehicle or MACV that Bobby mentioned.

At the time of the Q3 call, we expected the MACV to be signed up for the year-end, so its impact was included in the $17 million forecast. I should also note that since management fees on the MACV won't start accruing until the transaction closes later this quarter, we don't expect our quarterly FRE to reflect the $17 million annual run rate until Q2.

With that in mind, we're projecting firm-wide FRE for 2026 in the low to mid-$20 million range. And more importantly, we expect to exit 2026 with firm-wide run rate FRE that is more than twice the $17 million from the start of the year. And I think it's important to note, our assumptions around new fee-generating AUM in 2026 include only about 1/3 of AIG's $2 billion of expected commitments and no additional allocations from Convex.

As an aside for those of you wondering about the MACV economics, from an invested capital perspective, Onex's expected proceeds from the sale represent pricing that is about 98% of where we had those investments marked at Q4. However, the MACV has a couple of other benefits. It converts Onex's capital into fee and carry-generating AUM and it extends the life of management fees and carry on third-party capital.

So when we add the present value of these benefits to the sales proceeds, we think of the value to Onex being well above the Q4 marks. Now as alluded to at the outset, I think it would be helpful for me to add some color around the final funding of the Convex transaction as well as Onex's go-forward liquidity position.

At closing, Onex grew $700 million under a NAV loan facility, $300 million less than originally contemplated in a $1 billion draw. The reduced draw was possible due to incremental realizations and distributions from our private equity platforms. Following the close of the transaction, Onex retained approximately $400 million of cash and near cash and maintained access to $500 million of undrawn funds on the revolving portion of NAV loan, providing total liquidity of approximately $900 million.

As a reminder, Onex has almost $5 billion of PE investments relative to $735 million of unfunded commitments, of which only $330 million are to funds in their commitment period. So we're quite comfortable that this liquidity is sufficient to fund our capital needs, and we expect significant net PE realizations over the next few years.

With this being my final earnings call as CFO, I want to close by thanking all of my colleagues at Onex who have supported me over the last 11 years, including, of course, Bobby. And most importantly, thank you, Gerry, for building this wonderful company and giving me the opportunity to serve as its CFO. Finally, a warm welcome to Meg McClellan, Onex's next CFO. I look forward to supporting her during the transition. That concludes the prepared remarks. We'll now be happy to take any questions.

[Operator Instructions] Our first question comes from the line of Graham Ryding from TD Securities.

There's -- I appreciate the disclosure you provided on Convex. And I think you flagged some areas in the presentation, Slide 14, where you think could potentially offset what looks like it might be a softening or is a softening pricing environment. What areas do you think, in particular, are going to have the most impact here? And are you expecting Convex to continue to generate earnings growth in what might be sort of a later stage in the cycle?

Graham, it's Bobby. Like we're viewing 2026 as a sort of minus 4-ish percent rate environment for property and casualty. But just given where Convex is in its evolution, we believe those levers that we have to pull would more than offset that type of rate pressure. Those things include continuing to gain market share. Importantly, we are nowhere near growing into our expense base. So that operating leverage is going to continue as we continue to grow the top line.

And on the left side of the balance sheet, we've really never done anything to sort of optimize yield enhancement, if you will. I think there's a very good opportunity there without taking much incremental risk, by the way, including using some of Onex's products for a small portion of their balance sheet. And finally, the way it works in insurance, as you grow in scale, you also grow into your asset leverage. And our asset leverage has meaningful upside from this point forward. So I feel quite good, absent very strange catastrophic events that you're going to continue to see earnings growth in 2026 from Convex.

Okay. Great. And on the FRE outlook, Chris, that you provided, I appreciate the sort of ladder that you provided to sort of get you to $35 million as a run rate. Is that -- should we interpret that as sort of Q4, you hit that $35 million by Q4 '26? And did you say that 1/3 of the $2 billion from AIG is part of that sort of exit run rate?

Yes. So I'll take the second part first. That's correct. Our budget, I'll call it, has about 1/3 of that capital being allocated this year. And so it would be fully in the year-end run rate, but obviously doesn't fully impact in-year revenues and profitability.

In terms of when we expect to hit that $35 million, yes, we're going to hit it at year-end. But that, again, given it's a run rate, and so you have capital being raised constantly throughout the year, you sort of -- we take the benefit of that all at year-end on an annualized basis, but some of that revenue won't be fully impacting Q4. So you really don't expect -- we don't expect to hit our run rate in terms of in-quarter earnings until the following quarter. So you'd expect something close to 1/4 of that in Q1 '27.

And one other thing, Graham, that those numbers only include 1/3 of AIG, but they also include no dollars coming in from Convex, which I think is a very conservative assumption.

And our next question comes from the line of Bart Dziarski from RBC Capital Markets.

I wanted to ask around the software tech exposure. So thanks for giving that to us, Bobby, 4% invested capital. Just to confirm, is that also 4% of AUM? And could you split that between the exposure within private equity and private credit?

Yes. So that is our overall NAV exposure to software is 4% and things that are on our balance sheet, okay? So for that, it is mostly private equity, in particular, 2 software companies that we have, PowerSchool and Unanet. So we are very underweight on the private equity side software. On the credit side to their -- and I said credit twice when I did the script, and I'll say it again, like they are meaningfully underweight software by more than 200 basis points against their comp sets, which is great.

And I'd be remiss just not to give that team a lot of credit, not only for being underweight software and AI risk type loans, but they're meaningfully underweight in direct lending. And I'm sure you're watching and hearing all of the news around direct lending, particularly in the retail front right now. And they were not in any of the major credits of Tricolor, First Brands and Saks. Like that team has done a very good job of -- we overinvested in analysts, right? And we heavily invested in state-of-the-art risk management tools. But I also give credit just to the judgment and seeing where the puck was going, so to speak, and are really proud of all of our investment teams in terms of where we sit on a relative basis and on an absolute basis with exposure to software.

Yes. And Bart, just Chris, for a second. Just on your total AUM question and the 4%. I don't have an exact number, but I know that the total private equity AUM, the exposure will be less than that 4%. We're a little overweight just in terms of allocations and commitments to funds compared to the platform as a whole.

Okay. Great. That's very helpful. And then just on the FRE guide, so thanks for unpacking that for us, Chris. And wondering, could you give us kind of the latest on fundraising, OP VI. I think that fund has now been launched in Q1, if I'm not mistaken. But maybe just your latest thoughts sizing, timing of that fund.

Yes. I wouldn't call it officially launched, but we're certainly in the process of gearing up for fundraising like real time. We're not going to get into today's size and timing, but certainly, we'd be looking to have a first close at some point in 2026. But there's really not much more we can say on that point. Ronnie is in the market still with his OSCO fund. We expect that to close sometime in the next quarter or 2. I don't see ONCAP in market in 2026, just given they're about halfway through their investment period in their current fund. And then as for the rest of our credit products, we're always in market vis-a-vis trying to sell every day because those are not traditional fund structured products or are things that our LPs and other people can invest in every day.

Okay. Great. And then just one more, if I may. You made an interesting point around Convex Capital coming into Onex. And so maybe just help us understand that like the duration of Convex's liabilities, what assets would they lend themselves to, to be managed by Onex? Like how would that matching work?

Yes. So like -- unlike life insurance, property casualty insurance has less asset leverage, if you will, which is why you see so many people going after these annuity blocks, which we looked at, by the way, and never really could get comfortable with the pricing. And we knew this asset so much better. It's just an easier place for us to be in. But it depends on the person investing the dollars into the funds. People -- insurance companies, which are people -- are firms, obviously, that we're trying to do business with outside of even AIG and Convex.

For those that are overcapitalized that can afford risk-based capital charges, they may be more evenly split between PE and credit. But the riskier the asset, the higher the capital charge for an insurance company when they invest in alternative asset management. So most focus on credit, but a lot also focus on PE and the percent of PE relative to credit or infrastructure, real estate or whatever asset class you want to talk about, depending on the risk profile and their capital base, they may be more aggressive or less aggressive.

But they tend to lean more towards credit than PE. But for what we're looking at with AIG and Convex in the near term, I think it could be more balanced than you would expect from a PE and credit perspective. But we're working on that right now with AIG and Convex. But you should also think about Convex in terms of how much of their asset base would be in sort of noninvestment grade, high quality, like the current portfolio at Convex is like literally a AA+ portfolio. You shouldn't be ever thinking that more than 10% goes into those type of assets. 90% of what Convex does will always be sort of AA+ pristine type assets that are assets matched up against liabilities.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Bobby Le Blanc for any further remarks.

Thank you very much, and thanks for participating on the call. Chris and I are musing, we're going to try to get this to not be on a Friday going forward. I think that will be good for everybody. But before we close the call, I just once again, I want to thank you, Chris, for your partnership and all that you've done for Onex over your career here. You're not going anywhere, so I'm going to start with that.

But as your role changes, I just want to make sure we thank you for all you've done to date. And as for our new CFO, Meg McClellan, we look forward to her joining us, and she'll be on the next earnings call. And I look forward to introducing again. And until then, have a great day and a great weekend. Thanks again.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Welcome to Onex' Third Quarter 2025 Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

I will now turn the conference over to Jill Homenuk, Managing Director, Shareholder Relations and Communications at Onex. Please go ahead.

Thank you. Good morning, everyone, and thanks for joining us. We're broadcasting this call on our website. Hosting the call today are Bobby Le Blanc, Onex' Chief Executive Officer; and Chris Govan, our Chief Financial Officer.

Earlier this morning, we issued our third quarter 2025 press release, MD&A and consolidated financial statements, which are available on the Shareholders section of our website and have also been filed on SEDAR. Our supplemental information package is also available on our website.

As a reminder, all references to dollar amounts on this call are in U.S., unless otherwise stated. I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors relating to any forward-looking statements contained in today's presentation and remarks.

With that, I'll now turn the call over to Bobby.

Good morning, everyone. Before providing my comments on the quarter, I wanted to provide some thoughts on our pending acquisition of Convex and new strategic relationship with AIG. These transactions are a transformational step forward for Onex with the potential to meaningfully enhance long-term shareholder value.

Since becoming CEO, one of my main priorities, beyond optimizing the business and focusing on those areas where we have a right to compete, has been to identify opportunities to deploy our balance sheet to create enterprise value. I truly believe these relationships with Convex and AIG, 2 industry-leading organizations that are well aligned with our own culture and principles, is one of these opportunities.

In Convex, we are not only acquiring an outstanding organization and proven leader in the insurance industry, we are strategically and intentionally leaning into a business and ecosystem that we know extremely well and where we have been able to generate outsized returns. In just 6 years from its inception, the business has delivered well beyond expectations and still has excellent growth prospects. Further, the informational advantage we have built up related to Convex puts us in a far superior position, with much lower risk than if we were acquiring a business we didn't know as well.

What Stephen Catlin and Paul Brand have achieved to date with Convex is truly remarkable. We'd like to thank Stephen and Paul and the rest of the employees at Convex for their efforts and results. They are one of the most talented teams in the industry and we're delighted to remain their long-term partners.

In addition to the strength of the team, Convex has built a differentiated underwriting platform, one that has grown gross written premium by 22% annually since 2022. Profitability has also improved steadily with recent combined ratios in the high 80s to low 90s as the business continues to scale into its expense base. Convex has also demonstrated prudent underwriting and has had consistent favorable prior-year reserve development since 2022.

Importantly, it carries no legacy insurance liabilities having been established as a de novo insurer in 2019 with the support of Onex and our LPs. Convex' efficient cost structure with no legacy technology burden and a focus on outsourcing noncore functions should allow for meaningful incremental operating leverage as the business continues to grow.

As we highlighted in the investor presentation available on our website, Convex' key performance indicators clearly position it ahead of its peers, particularly on an organic growth basis. At our entry price of 1.9x Q3 tangible book value, we see meaningful upside as Convex continues to compound tangible book value through disciplined underwriting and retained earnings.

As we have consistently outlined to our shareholders, we only want to deploy capital in areas where Onex has deep domain expertise and a clear right to compete. We've spent decades building experience and relationships across the insurance sector, and Convex is a great example of our deep domain expertise.

Owning a property casualty insurer gives us 2 powerful engines of value creation. First, from through-cycle underwriting profits, which can be reinvested back into the business or become available for future dividend distribution. Second, as Convex' investment portfolio, which is currently around $8 billion, grows, allocation to alternative assets will grow with it, which will include Onex' own private equity and credit funds. This should drive incremental AUM growth and fee-related earnings for our asset management business.

While the P&C market is not immune to cyclicality, we're comfortable with that risk given we expect to be a long-term owner of the business and Convex is still in the early stage of its growth trajectory. The business has significant opportunity to capture additional market share, underpinned by its high-quality relationships and reputations with brokers and clients.

The combination of best-in-class growth and high-quality underwriting should allow Convex to compound its equity value at attractive rates through the cycle. We see that growth as a meaningful driver of Onex' future shareholder returns and a key contributor to the ongoing expansion of our net asset value over time.

Turning to AIG's investment. This new relationship with one of the world's largest and most sophisticated insurance companies is an incredibly positive development for Onex. Their $2 billion commitment to our private equity and credit funds will contribute an incremental $15 million to $20 million of fee-related earnings, more than offsetting the impact of dilution.

Moreover, this opens the door to a number of other benefits, including the potential to collaborate on future investments and a range of other initiatives that could prove significant over time. Overall, our relationship with AIG not only reflects a shared perspective on both the upfront value and long-term prospects of Convex, but is also an endorsement of the Onex platform and our ability to create future shareholder value.

Across our existing businesses, we are also thinking strategically about how to best enhance enterprise value. Upon closing, Convex will account for 42% of our balance sheet. With the remaining $5 billion of investing capital, we will continue to grow it and deploy it through 2 key areas. First, by allocating up to 10% per fund into our own strategies while relying increasingly on third-party fundraising to scale FG AUM and related FRE.

Second, by pursuing direct on-balance sheet investments. These would be in areas where we have a clear right to compete, but with differing risk-adjusted return, holding period and leverage parameters so as not to conflict with OP and ONCAP opportunities.

Added to this will be a continued focus on growing fee-related earnings. We have made significant gains on FRE throughout 2025 in large part due to the work of our credit team, and we are now positioned to exit the year with a positive total FRE run rate that is ahead of plan. This growth will be accelerated by AIG's commitment to our alternative asset strategies as well as the addition of future investment into these strategies by Convex.

As we work towards our objective of closing the transaction in the first quarter of 2026, we will keep shareholders updated on key developments and we'll continue to look for opportunities to provide the appropriate information to understand and value this transaction, including why we believe Convex deserves to be recognized at a premium valuation within our overall NAV.

And now a few comments on the quarter. Again, credit continues to outperform our expectations this year, led by the ongoing momentum in structured credit. The team priced 22 CLO transactions through October, raising or extending $10.7 billion of fee-generating assets across our structured credit and tactical allocation platforms.

The performance of our CLO portfolio continues to be top tier across important risk metrics. Our private equity teams continue to be active in Q3 with both realizations and deployments, ensuring that we continue to return capital to our limited partners while putting new investment money to work on opportunities that align with our chosen sectors.

Onex Partners announced a sale of approximately 55% of its investment in OneDigital, in a transaction that values the business at more than $7 billion, which was completed at a valuation almost on top of our Q2 mark. In addition, we successfully closed the sale of our 25% stake in WestJet at more than a 40% premium to our mark. Including these 2 transactions and pro forma for the closing of the Convex transaction, Onex Partners V will have reached DPI of 0.7x, a strong achievement relative to the average DPI of comparable funds in this vintage.

Following the sale of Precision Concepts in Q2, the ONCAP team successfully closed their sixth investment in Fund V, which is now approximately 50% invested.

On the human capital front, we announced that Meg McClellan will join Onex as our new CFO following Chris' decision to step down from the role he has held since 2015. We are looking forward to welcoming Meg, who will assume the CFO responsibilities following our year-end call. I'm pleased that Chris has agreed to stay on in a leadership capacity to help ensure a smooth transition and provide continued guidance and support.

I also want to acknowledge Tawfiq Popatia's confirmation as Head of Onex Partners. Tawfiq has always shown great leadership and strong investment acumen and is a true ambassador of the Onex culture and entrepreneurial spirit.

Finally, I want to thank everyone for their condolences and support following Nigel Wright's passing. Onex lost a friend and colleague. Nigel was a gentleman in the truest sense of the word.

I'll now turn it over to Chris.

Thanks, Bobby, and good morning, everyone. While most of my remarks will focus on our results for the quarter, I'll also take some time to address some financial aspects of our acquisition of Convex and relationship with AIG.

So let's start with our investing segment. Onex ended Q3 with investing capital per share of $121.61, up slightly from Q2 and representing a return of 7% for the first 9 months of the year. The 5-year CAGR on investing capital per share is 13%, just below our target range.

Our PE portfolio was up slightly during the quarter. While Onex Partners V, the Onex Partners Opportunities Fund and ONCAP IV continued to generate positive returns across a broad range of their portfolio companies, these gains were mostly offset by losses in Onex Partners IV.

As Bobby said, it was an active period for our PE teams on both realizations and deployments. In September, Onex Partners V announced the sale of 55% of its investment in OneDigital, which is expected to close later this year. We also had 2 partial exits closed since Q2: ONCAP IV's sale of approximately 80% of its interest in Precision Concepts International and OP V's sale of 25% of its stake in WestJet to a consortium of leading global airlines. The combined proceeds to Onex from these realizations will be approximately $360 million.

It is worth noting that the last 13 realizations across our PE platform, dating back to 2022, have been completed at attractive values relative to their prior quarter's mark. In fact, only 1 was executed below the prior quarter's mark, and in that case, at only a 3% discount, and 5 were done at premiums of 15% or more including the recent partial sale of WestJet at a 40% premium.

On the new investment front, in September, the Onex Partners Opportunities Fund announced the acquisition of Integrated Specialty Coverages or ISC. The company is a technology-enabled insurance platform that fits well within the portfolio, with our long history of successfully investing across the entire property and casualty insurance value chain, particularly in founder-led businesses like ISC.

And in October, ONCAP V announced an investment in CSN Collision, a leading network of collision repair centers. As some of you will recall, ONCAP has experience investing in this industry having previously owned Caliber Collision, an investment that generated a 7.5x multiple of capital to Onex Corporation. Both the Opportunities Fund and ONCAP V are off to strong starts with investment pace on target.

On the asset management side of the business, Onex ended the quarter with $42 billion of fee-generating AUM, with private equity and credit increasing by approximately 22% and 18%, respectively, during the year. The increases primarily reflect the earlier commitments made to ONCAP V and the Onex Partners Opportunities Fund, as well as the issuance of new CLOs.

The asset management segment generated earnings of $20 million in Q3, of which $11 million was fee-related earnings from the PE and credit platforms. After factoring in the costs associated with managing Onex Corporation's capital and maintaining the public company, total firm-wide FRE was $1 million for the quarter and year-to-date.

Credit continues its strong FRE trajectory, with an end-of-quarter run rate of $50 million. By year-end, we expect this run rate to increase to approximately $60 million, exceeding our 2023 Investor Day target. With credit FRE ahead of plan, we also expect to exit 2025 with positive firm-wide run rate FRE. As we noted in the presentation we posted last week, our forecast is to exit 2025 with firm-wide run rate FRE of approximately $17 million based on Q4 FG AUM initiatives in process. And this is before any of the benefit that we'll accrue from the $2 billion of allocations to our alternative asset strategies from AIG.

At this point, we're estimating incremental FRE of $15 million to $20 million on this $2 billion of AUM. And we'd expect an increased allocation of capital from Convex to Onex strategies to be additive here. The actual FRE impact will depend on the strategies to which AIG and Convex ultimately allocate capital. But in all cases, we expect a very high conversion of management fees to FRE.

As we've discussed before, we're at a point in both PE and credit where the infrastructure can manage incremental capital with very little in the way of additional costs. As the capital from AIG and Convex gets allocated, we'll continue to update our run rate FRE reporting to reflect the actual benefit.

Now turning to Convex and AIG. As Bobby said, we think this is a terrific evolution of Onex, and we're confident it will allow us to accelerate enterprise value creation for the benefit of shareholders. I thought it would be helpful for me to add some color around the funding of the transaction and Onex' go-forward liquidity.

Onex' funding could be affected by further PE realization and investment activities between now and closing. But at the moment, we expect our $3.8 billion investment in Convex to be funded by a combination of $1.5 billion of cash from our balance sheet, a $1 billion draw on the new NAV loan facility, rolling over our existing $700 million investment in Convex, including carried interest, and finally, approximately $600 million from the issuance of Onex shares to AIG.

After factoring in cash flows from PE transactions we've already announced, we expect to have approximately $300 million of cash on Onex' balance sheet at close. In addition, Onex will have $200 million of undrawn capacity on the NAV loan. We're very comfortable that $500 million of liquidity is sufficient in the near term. And if you look out over the next 1 to 2 years, we expect Onex to generate meaningful additional liquidity, mainly from net PE realizations.

As I mentioned, we expect to generate positive overall FRE going forward. And our credit business will continue to grow without the need for meaningful net new allocations of Onex capital. So that leaves our PE investing as the key driver of medium-term liquidity.

Ignoring Convex, Onex has approximately $5 billion of PE investments in the ground, relative to only $750 million of unfunded PE capital commitments, of which only $400 million are to fund in their commitment period. So with that ratio, we expect meaningful net realizations from PE will allow Onex to pay down the NAV loan in relatively short order.

Overall, the acquisition of Convex and strategic relationship with AIG position Onex to create long-term enterprise value. In one fell swoop, we're better leveraging our balance sheet to reduce the historic cash drag, allocating about 40% of our investing capital to an investment we know really well that will compound value over the long term, and paving the way for strong growth in FRE by demonstrating our commitment to an asset-lighter model and securing significant new AUM from AIG and Convex.

That concludes the prepared remarks. We'll now be happy to take any questions.

Certainly. And our first question for today comes from the line of Bart Dziarski from -- research analyst.

Great. It's RBC Capital Markets. Wanted to ask around the -- with the AIG new partnership, Bobby, would love your thoughts in terms of how you're thinking about this having the impact around fundraising. Does it change any of the outlook in terms of OP VI timing, sizing, et cetera?

Yes. So look, I think having an organization like AIG look at where we brought our asset management business to over the last couple of years and want to invest in Onex Corp., it's a really strong endorsement. And I think it's only additive or a positive for fundraising going forward.

I don't think it impacts timing of our fundraisers coming up for OP, ONCAP or credit. Specifically for OP, I would still target sort of mid-2026 as a fundraising launch date. And again, Chris mentioned it, the 0.7x DPI is a very significant stat for that platform, and it looks very, very good relative to other PE firms in that vintage.

Okay. And could you remind us, like what percentage of the fund are you in OP V? And would that be a similar percentage for OP VI that Onex invests in? Or are you thinking maybe more capital-light direction where you'd be a lower percentage of that fund?

Yes. So for OP V, we were $2 billion, of about $7 billion. And again, we expect to be up to 10% of our various funds going forward. So it will be a much more capital-light model, if you will, from Onex Corporation's perspective and balance sheet perspective.

Okay. Great. And the last one for me is, we're hearing lots around the kind of this private credit narrative within alternative asset managers. I would love your thoughts around are you seeing anything in your portfolio? Maybe walk us through how you differentiate in terms of origination to protect the book. Any thoughts there on private credit?

Yes. So private credit has had a couple of big blow-ups over the last couple of months. I'm happy to report that our credit team had no exposure to those blow-ups. I think Ronnie and the team have a "protect the downside" mentality. And when they see problems come up, not in those particular names, because we weren't in those names, but they tend to move very quickly when they see a problem and not wait for the problem to get confirmed.

So I don't think it's systematic on what we're seeing. I think there were reasons why those credits went bad from governance, control and other reasons. But from our own portfolio, we haven't been in any of those to date, which I give again the credit team a lot of kudos for.

And our next question comes from the line of Graham Ryding from TD Securities.

Can you just talk about the strategic shift underway here with this Convex acquisition? So if we look out over the next 1 to 3 years and you are successful in monetizing some of your existing PE co-investments, should we expect a similar strategy going forward where you make some further concentrated investments in sort of majority type positions? And if so, what's the right mix? How many of these would you think would be the right mix to sit within your NAV?

Yes. So again, just to step back a bit, but I'll answer that specific question, there's really 3 things that I'd like our shareholders and fellow owners to focus on in the near term. First is the acquisition of Convex, we'll own 63% of it on the balance sheet. And again, we have controlled that company for 6 years, so the informational advantage that we had going in, in terms of doing 6 years of due diligence, essentially, and the fact that AIG invested more than $2 billion in the Convex at the valuation that we had, makes me feel very good. At least initially, right? That part of our NAV ought to be looked at very differently than our NAV has been looked at going -- historically, sorry.

On the asset management side, I think it's nothing but positive to have AIG and incrementally more Convex dollars coming in, I think, is going to help our PE platform, is going to help our subscale credit products that I've been talking about wanting to get the profitability to get outsized FRE growth. And just the endorsement of those organizations on our overall platform, I think, is going to be a net positive for fundraising.

But you point out a very important third leg of the strategy, and that's as we become more of an asset-lighter model in terms of Onex Corp.'s balance sheet commitment to our various products, there is an opportunity, and I use the word opportunity, to redeploy, or reorient is a word I like to use, that $5 billion of capital into Convex-like transaction, that will -- my goal would be that would make perfect sense to our fellow owners in terms of where we have a demonstrated right to compete as that capital gets deployed. But think about it in terms of lower to no leverage like a Convex. It could be a junior security, it could be a control position. But we'll have enough influence in whatever we're doing to make sure that we have the ability to explain it well to our shareholders.

And importantly, you're going to much, much more transparency around those types of investments. You'll notice what we put up on our website in terms of the transparency around Convex and all the financial metrics that one looks at to evaluate a company like that, you'll see that for anything that we do on the balance sheet, so again, so our fellow owners will know how to value the pieces.

But I see it being very concentrated, just so you understand, maybe 1 or 2 other ones. Insurance obviously is a very natural one for you to think about. But there's other things that we really have done remarkably well over the years that we would be open to as well. But it will not be something opportunistic that isn't one of our demonstrated areas to have the right to compete.

Okay. Great. And you talked about having a 6-year sort of due diligence period here on Convex. Going forward, would it make sense for you to follow a similar pattern here and look closely at your existing portfolio companies as likely candidates for further kind of concentrated investments?

Yes. The one thing that made Convex different, because it was a de novo, it really was never a leveraged buyout, even though it had a PE return for Onex and our LPs. I think it will be very difficult for me to do a traditional PE-type deal with a huge chunk of our capital, i.e., something I need to do 5x leverage or something like that to get the appropriate return. So I see -- I don't see immediate opportunities where the next one would come from that set of opportunities, but I would never close my mind to it because you never know.

Okay. Understood. On the FRE side, Chris, I just want to make sure I'm understanding the guidance correctly here. You talked about in your presentation last week of a $17 million overall FRE run rate as you exit 2025. Should I be -- or should we be expecting sort of Q4 25 FRE annualized to be $17 million? Or is it more like Q1 2026 annualized?

Yes. No, not Q4, because it is a run rate calculation so there's always a little bit of a lag effect. Just -- so I would think you'd probably see us grow into that on an annualized basis, probably more in Q2 when the stuff -- the capital we raise between now and the end of the year is kind of fully online and fully fee-paying.

And Chris, just -- sorry, shareholders, just define run rate and what it actually means, so people truly understand it.

Sure. What -- in a lot of cases, when we raise capital and start earning management fees, there's just a lag associated with when the management fees actually kick in versus when the capital is allocated or invested. So we're simply looking at our fees -- or excuse me, our FG AUM that's sort of in the house and in the ground, and calculating what the management fees are on that capital sort of on a fully deployed basis.

And then we also obviously just look at our expense base sort of as where we are at that point in time given what we need to spend to manage the capital that we're calculating the fees on. So it's a bit of a forward-looking calculation as opposed to backwards-looking calculation.

Okay. And essentially, by Q2 2026 then, not Q4 2025, you're expecting to be delivering kind of a $4 million plus FRE in the quarter?

That would make sense. But again, the run rate will again have probably grown from annualized $17 million to something much better than that at the end of Q2. But yes, I think in terms of actual reported in the period, that would be a pretty good estimate.

Okay. Understood. And then my last one, if I could, just fundraising on the credit side. I always find it a little bit confusing when you make reference to sort of extended AUM and new AUM. Can you give us a bit of an update on what's the sort of new AUM fundraising in the quarter and year-to-date on the credit side?

Sure. Let me just get that data pulled up for you.

While he's looking for that, they're also having really good success on OSCO II, which is our structured credit fund; ONCAP, which is our dynamic credit fund; and again, the high yield and senior credit. The fundraising for credit has been pretty good across the board. But Chris, go ahead if you have those answers.

Yes. So across credit through the end of Q3, FG AUM -- new FG AUM raised was, call it, just over $5 billion in the year.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Bobby Le Blanc for any further remarks.

Thank you for your time today. We are truly excited about the strategic steps we made last week with the acquisition of Convex and the new partnership with AIG. We look forward to having a dialogue with you in the coming months to answer any of your questions and make sure you fully understand exactly how we're thinking about Onex going forward. But we think it's a very exciting time.

Have a great weekend, everybody. Thanks.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.