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Edited Transcript of APAX.L earnings conference call or presentation 3-Mar-20 9:30am GMT

Full Year 2019 Apax Global Alpha Ltd Earnings Call

ST PETER PORT Mar 25, 2020 (Thomson StreetEvents) -- Edited Transcript of Apax Global Alpha Ltd earnings conference call or presentation Tuesday, March 3, 2020 at 9:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Ralf Gruss

Apax Partners LLP - Partner & COO

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Conference Call Participants

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* Matthew Lloyd Hose

Jefferies LLC, Research Division - Equity Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the call for Apax Global Alpha, the Annual Results for 2019. My name is Maxine, and I'll be coordinating your call today. (Operator Instructions)

I will now hand you over to your host, Ralf Gruss, CEO (sic) [COO]. Please go ahead when you're ready, Ralf.

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Ralf Gruss, Apax Partners LLP - Partner & COO [2]

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Hello. Good morning, everyone. Thanks for joining AGA's 2019 Annual Results Call. My name is Ralf Gruss, I'm the COO of Apax Partners and also a member of Apax Global Alpha's Investment Committee. I'm looking forward to taking you through the presentation. And as usual, I'll answer any questions that you might have at the end of the call.

But let's start with the financial highlights, which are on Page 3 of the presentation. AGA's performance in 2019 was the best since its IPO in 2015. The total NAV return was 22.7%, and the adjusted NAV grew almost -- to almost EUR 1.1 billion. Now if you translate this on a per share basis, the adjusted NAV now stands at EUR 2.22 or GBP 1.88 if you use the year-end exchange rate.

We are particularly pleased with the performance of the Private Equity portfolio during the year. It fully delivered an exceptionally strong total return of 33.9% for AGA. In light of the performance, the Private Equity portfolio has delivered for some time now. The return achieved in 2019 shouldn't be a surprise to those of you who follow us regularly, but it's obviously something very pleasing to see.

Now on the derived investment side, the Derived Debt investments have also done very well. The Derived Debt delivered a total return of 11.8% during the year. There's a bit of currency tailwind in this return, but even excluding this, the investments performed well and delivered an attractive return for the funds that are currently not invested in Private Equity. Now the Derived Equity investments ended the year with a 9.1% total return. I'd characterize this as an okay-ish outcome in light of where portfolio started off from early in the year but also how markets have performed over the period. But it's good to see that the active management of a smaller but more focused Derived Equity portfolio has led to a turnaround in performance and, frankly, quite a nice catch-up in returns during the last quarter of 2019.

Now if we go on to the next page, 4, you will find a breakdown how the performance has actually driven value for AGA during the year. Let me start with the top chart on the page here. Adjusted NAV, as I just mentioned, increased to almost EUR 1.1 billion. Or if you want exact number, it's EUR 1,092.1 million -- sorry, EUR 1.0921 billion during the year. Now essentially all of this uplift is from investment performance which is due to the strong performance of the investment portfolio that I've just talked about.

If you look at the bridge at the top of the page, you can see that EUR 206.2 million in value was generated from investment income, unrealized gains and realized gains during the year. Now Private Equity is the biggest contributor to this performance. Again, it's not a surprise given the relative size of the Private Equity portfolio in the funds but also a strong return. But also Derived Debt produced a nice contribution of EUR 20.7 million, with most of this contribution coming out of interest income. Derived Equity was also positive, contributing EUR 6.3 million to value over the year. The biggest negative movement in terms of adjusted NAV is the dividend paid to shareholders of EUR 49.6 million. Now this is obviously not a negative but a cash distribution out of the fund to its shareholders. If you look at the bottom of the page, the contribution of these drivers are shown again in percentage terms, breaking down the total NAV return of 22.7% into its components.

Now that we've covered the value movement in the portfolio, let me give you a snapshot of the entire portfolio and how it's structured at the moment on the next page of the presentation. So this is a pie chart of AGA's investment portfolio at year-end. And as you can see from the pie chart, the investment portfolio was slightly over 100% of total NAV at year-end. Now the reason for this is -- of being over 100% is not because AGA's revolver was drawn. The reason is an accounting effect, AGA bought one debt investment near year-end which subsequently funded post year-end, and the accounting for this transaction moved the portfolio value slightly above 100%.

But let's look at the portfolio overall. The Private Equity remains the most important exposure for AGA, represents 69% of the investment portfolio. This is about 4% more than what the exposure was at the end of last year, and the key reason for this increase were the strong value upticks across the portfolio which I've talked about. As you will see later on, calls and distributions from Private Equity pretty much balance themselves out. It's really value increase which is causing the percentage move here.

Now within the Private Equity portfolio, the biggest exposure is now from the Apax IX fund. Apax IX is now fully invested, and AGA has exposure to 25 portfolio companies through that fund. The second largest exposure is to Apax VIII, which is a predecessor fund to Apax IX. Now the Apax VIII fund is in harvesting mode, and we've already seen some very good exit activity from that fund.

Now quickly turning to the smaller fund exposures in Private Equity to cover those off, there are only 11 portfolio companies remaining in the Apax Europe VII and Apax Europe VI funds, and they have a total value of EUR 59.9 million. This includes the value of the carried interest stake that AGA acquired in these 2 funds during 2015 and 2018. Now on these carried interest stakes, both Apax Europe VI and Apax Europe VII are paying carried interest, so these stakes are in the process of being monetized to AGA.

AMI and ADF are AGA's investments in the Apax mid-market Israel fund and the Apax Digital Fund. Both funds are in their investment periods and together represent about 3% of AGA's investment portfolio at present.

But coming back to the global funds, you will see Apax X showing up in this chart for the first time. It's the global buyer fund currently being raised and to which AGA has made a $450 million commitment during 2019. The fund has already started investing and has signed its first 3 investments, 2 of them in 2019 and 1 in 2020. Neither of these investments closed in 2019, and therefore, you don't see a value for them in this pie chart yet.

So in total, you have a portfolio of 61 companies in Private Equity. It's a portfolio which is nicely diversified across vintages, performing strongly and delivered a 33.9% total return during the year.

Now if I turn to the derived side, where the majority of derived investments are now in debt, exposure to Derived Equity has reduced to just 8% at year-end. And as a reminder, the portfolio of Derived Investments is in essence a highly bespoke portfolio of investments with a high due diligence hurdle that leverages off the Private Equity activities of Apax. AGA uses these investments to absorb cash which is not invested in Private Equity whilst at the same time generating an attractive level of return.

Now if you look at this portfolio, the portfolio consists of 32 positions across Derived Debt and equity at present. The Derived Debt portfolio has performed well during 2019. Its total return was 11.8%. And the gross IRR realized and positions fully exited out of the portfolio was 15.1%, so very pleasing result here.

So that's the portfolio of current investments. Now what about unfunded commitments that the fund has, and you can see the details in an overview here on the following page, 7 (sic) [6]. If you look at the chart on the left-hand side of the slide, it's a comparison between the unfunded commitments that AGA has and its current balance sheet and funding sources. Let's start with the unfunded commitments first. The biggest unfunded commitment is the $450 million commitment into Apax X, which in euro terms is about EUR 400 million. Now next to that Apax X commitment, there is also still a smaller number of unfunded commitments or recordable distributions outstanding for the other funds, but Apax X is the lion's share for obvious reasons in terms of unfunded commitments. We expect Apax X to draw down on these commitments over the next 5 years or so. And as a reminder, Apax X also operates capital call facility on a short-term basis to bridge capital calls from investors. And we summarized further details on this capital call facility on the bottom right-hand side of the page.

Now these unfunded commitments contrast a total balance sheet of almost EUR 1.1 billion, of which EUR 342 million is sitting in derived investments. In addition to that, AGA continues to have access to a revolving credit facility which was undrawn at year-end. So bottom line, looking at this chart, a very healthy balance sheet, a reasonably sized commitment to Apax X, which continues to -- which allows AGA to have continued access to attractive new Private Equity deals going forward.

So that covers the portfolio composition and the unfunded commitments. Now I'd also like to take the opportunity to update you on how portfolio allocations in AGA has evolved and where shareholders should expect them to be going forward. In that context, I'd also like to touch upon fee changes that the Board of AGA has agreed with the investment manager. And let's turn to Page 6 (sic) [Page 7] for that. Now taking a step back here first, following feedback from shareholders but also ongoing discussions with the Board of AGA, the investment manager continued to refine its investment process throughout 2019. And this was part of an ongoing process to review investment opportunities for the fund and quite similar to the review of the portfolio approach in 2016 where the investment manager has concluded to reduce AGA's participation in the primary syndication of riskier debt instruments in Apax Funds portfolio companies, for those of you who remember that discussion.

Now from the 2019 process, there were a couple of takeaways from the process but the first one being I believe that the most attractive investment opportunity for AGA is in Private Equity. And this is also reflected by the increased commitment that AGA made into Apax X during 2019. And as a result of this, shareholders should expect Private Equity to remain the majority of AGA's portfolio for the foreseeable future. Now second, a reduced and more focused approach towards Derived Equity, an approach which has already been discussed over the last 12 months. So if you take those 2 elements together, this essentially translates into more volatile Derived Equity investments in the portfolio being replaced with Private Equity investments which have historically delivered both higher and steadier returns. So those are the first 2 elements.

The third is, to [comp guide] this evolution, the investment manager will also aim to follow a more diversified risk approach for Derived Debt. There are again 2 main things driving this consideration. And the first of all, given we are likely in a late-stage cycle environment for credit, being more diversified across risk is a good idea in itself. But second, and this is more a portfolio management reason, there is an increased liquidity requirement for Derived Debt in the portfolio as the Derived Equity exposure is being reduced. And as more liquid instruments can more often be found in senior debt instruments, this implies that AGA will invest more actively across the risk spectrum rather than solely focusing on the junior debt end of the capital structure.

Therefore, taking this together, the key aspects to how shareholders should think about portfolio allocation is an increased exposure to Private Equity, a reduced exposure to Derived Equity and a more diversified risk approach to Derived Debt. Now I need to caveat all of this, of course, as all of this is subject to market developments, valuations, timing of calls and distributions and other factors which can have a significant impact on portfolio exposures, but it's important to understand how the investment manager thinks about the structural direction of the portfolio.

Now onto a related point that was discussed in the context of this portfolio evolution, which is fees. In the context of the discussion around portfolio structure, the Board has negotiated a series of changes to the management and performance fee arrangement of AGA. You can see a summary of these changes on the right-hand side of the page. Let me summarize them for you. The annual management fee of 1.25% is reduced to 1% for Derived Debt and 0.5% for Derived Equity and eligible Private Equity. The performance fee rate has been reduced from 20% to 15% for Derived Debt with a revised hurdle rate of 6% net of fees, and this was previously 8% gross of fees. For Derived Equity and eligible Private Equity, the performance fee rate remains at 20%, but the hurdle rate has been increased to 8% net of fees. Again, this was previously an 8% gross hurdle. And additionally, it was agreed that the performance fee will now be paid on the net annual performance of each portfolio rather than the historic cash-on-cash approach for realized investments. AGA has also entered into a new agreement with Apax in respect of the provision of certain corporate investor relations services at a fee rate of 0.04% of the value of the investment portfolio. And last, overall fees payable to the investment manager and the investment adviser for AGA will be capped at 3% per annum of net asset value, and this was previously uncapped. These changes all take effect from the 1st of January 2020 and are expected to lead to a material overall reduction in fees in a substantial majority of cases.

Now to illustrate, there's a chart showing the model output of expected performance fee payment has been included on this page. Whilst this is a model output from what we call a simulation and is therefore only for illustrative purposes, it shows that under the new performance fee structure and with the revised portfolio approach, the performance fee payment is expected to be significantly lower AND the likelihood of outsized performance fee payment is significantly reduced.

Now this was a lot of detail now. If you want to find further information on this, please see Page 90 of the annual report document. And obviously, I'm also happy to answer any further questions at the end of this call as well.

In summary though, both through the evolution of the portfolio as well as the changes to the fee structure, AGA is expected to provide an even better value-creation potential and risk profile for investors, while the cost of funds are expected to reduce.

So back to business now. Let me cover the Private Equity portfolio in the next section before I turn to the derived investments. Page 9 is a summary of the key highlights for the Private Equity part of the portfolio. I've already spoken about the excellent performance the Private Equity portfolio delivered during 2019. The total return was 33.9% or 31.7% if you exclude currency movements. The operational performance of the portfolio companies overall remains strong. The EBITDA growth has been at 15.9% and revenue growth at 20.9%.

But 2019 has also been quite a busy year in terms of new investments. A total of 13 investments were added to the portfolio, all of them exciting deals, and I'd like to cover those briefly that we haven't talked about in prior calls.

The first one is Inmarsat, which is a global mobile satellite communications company. Their clients include governments, commercial enterprises and humanitarian organizations. What Inmarsat does is that it provides high-speed data communications on land, sea and in the air. In taking private buyout consortium including Apax IX and the Apax Funds had actually previously acquired in Marseille as part of a separate consortium back in 2003 and listed it in 2005. Now this time around, we see considerable potential for Inmarsat's in-flight connectivity business, commercial aviation and also maximizing the opportunities in the global Internet of Things world. The business' current growth comes from its core mobility markets in aviation, maritime and government transitioning from narrowband to broadband communications.

ADCO is another new business. It's a rental company providing portable toilets and sanitation equipment to construction sites and events worldwide. The investment thesis here is based on strengthening the portfolio and growing in existing and new markets and, in particular, taking advantage of Apax's significant experience in the route-based services subsector.

GamaLife is a new European life and wealth platform launched by Apax IX following the acquisition last October of a company called GNB Vida, which provided protection savings and retirement products. The strategy here is to grow through consolidation within the life insurance market.

Lexitas is a leading technology-enabled litigation and service provider. The growth strategy is geographic and sales force expansion, technology differentiation as well as M&A.

So moving on, Classpass is -- connects paying subscribers with boutique studios, gyms and wellness providers. The opportunity in Classpass is to back a rapidly growing business with a strong management team to accelerate growth.

And the last but not least, S.R. Accord is a provider of nonbank credit solutions for businesses in Israel. The investment thesis here is that the strong management team and a strong brand can foster further growth.

So these are the new investments from 2019 that we haven't talked about previously.

Now on to the exit side, it's also been a good year for the Apax Funds for exits. A total of 7 portfolio companies were exited during 2019. Of these 7 exits, all but Sophos has closed during 2019. The realized returns have been very good for AGA. The 2x money multiple and 14.2x spend return numbers you can see on the right-hand side of the chart here are actually a bit skewed from the realization of One Call. The One Call has been underperforming for a number of years, and it only had a negligible remaining value for AGA at the end of last year. If you exclude One Call from the exits, the average gross IRR and money multiple were 23.6% and 3x over the other 6 investments that were exited. So another very good year for Private Equity, strong returns, a lot of new and exciting investments and some very good exits during 2019.

So let's turn to the performance drivers in the Private Equity portfolio on the next page, where we have an interesting observation on comparison to public markets that I wanted to share. Now on the top of this page, you can see a bridge breaking down the 33.9%, the LTM total return in Private Equity into its various return drivers. Again, from this bridge, you can see the strong contributions that earnings growth has had in the portfolio. And as public comparables are used in many cases to value the Private Equity portfolio companies, it's also not surprising to see a positive contribution returns from multiples this year.

But this is where I would like to draw your attention to the bottom part of the page. It shows performance contribution of multiples and earnings for the S&P 500 and the Europe Stoxx 600 in comparison to AGA's Private Equity portfolio. Now if you double click on the public market indices, you will see that almost all of the valuation increases in public markets last year were driven by multiple increases rather than underlying earnings growth. But it's quite in contrast to AGA's Private Equity portfolio where growth in underlying earnings was more important as a valuation driver than was the increases. Now I believe this is an interesting observation, and that's why I wanted to share it with you. It just speaks to the quality of the value creation that AGA has seen in its Private Equity portfolio over the last 12 months.

Now there are 3 more aspects that I'd like to cover on Private Equity before we go into the derived investments: the first is NAV progression between 2018 and '19; the second being the operational state of the current portfolio; and last but not least, an overview on exits and valuations -- an overview on exit valuations and uplift.

Let's start with the NAV progression, which is on the next page, 11. So the key message on that progression is that value gains in the portfolio were the main driver of the increase in NAV. You can see this on the top of the page. The key numbers here are from the chart on the top of the page on calls of EUR 165.9 million, distributions of EUR 182.4 million and unrealized gains of EUR 179.2 million. So looking at these numbers, calls' broadly balanced with distributions, and therefore, the increase in NAV for Private Equity is largely due to the increase in valuations of the portfolio which, going back to the discussion we just had on the prior page, is supported by strong growth in underlying earnings.

On the bottom part of the page, we also included the performance breakdown in percent as well as a summary of portfolio companies with the largest value gains and the biggest markdowns. I won't go into detail on those. Let me rather turn to Page 12, where we have the usual chart that shows the operational performance of the top 30 portfolio companies in Private Equity.

So on Page 12, just as a reminder, what does this chart do? It shows in some very broad categories the overall operational performance of the top 30 Private Equity portfolio companies. The aim of the chart is to give you a sense of how we currently view the general performance from a more fundamental point of view. The logo positions within a bucket are not in comparison to each other and don't reflect performance between the companies within that category. And the 2019 deals aren't allocated to any performance buckets simply for the reason that they are still relatively new and the portfolio would be early -- too early to do so.

Without going through all the names, what are the key takeaways here? And first of all, the overall portfolio is performing strongly. There are a number of portfolio companies in the Apax Funds that are delivering very strong performance ahead of expectations. And importantly, you can also find this strong performance across investment vintages.

Now on the flip side, there are no companies amongst the top 30 which would have significant issues, so not surprisingly, in a diversified portfolio, there are always a handful of companies that are performing behind expectations. And if you look at the behind expectations category here, it's largely the ones that we already discussed during the interim call. The 2 new additions into this category are Shriram City and MATCHES, so I want to comment on those.

Shriram City is listed on the National Stock Exchange of India. Shriram has delivered solid operational performance over the last several years, also following in a significantly (inaudible) tightness in the Indian market due bankruptcies of a couple of large non-bank finance companies starting in late 2018. Growth has slowed for Shriram in recent quarters, while the asset side of the business has held up well. But as a result of this, the share price has been volatile over the last couple of years, which is also reflected in its valuation.

Now MATCHES has seen short-term margin pressure due to higher-than-expected discounting activity as well as the investments needed for growth. MATCHESFASHION also recently announced the appointment of Ajay Kavan as CEO, which is effective March 2020. And Ajay's extensive experience in e-commerce will be of great benefit to the business as it continues to innovate and expand into the luxury e-commerce space. But in summary, again, if you look at this page, the portfolio, overall, is doing well with a number of good breakout performance with very strong performance.

Now as a final point on Private Equity, I'd like to cover the uplift on Page 13. Now this is always a point of interest. We have updated the chart here that was disclosed previously. On the left-hand side, you can see a summary of the average valuation uplift achieved from the full exits in the Apax Europe VI and VII funds as well as the Apax VIII fund, which are the main buyout funds. In addition, the chart shows the uplift achieved from the 7 exits in 2019. Now as mentioned before, of those 7 exits, 6 already closed during 2019. And of those 6 exits, really the relevant ones for AGA were Assured, Exact, and Acelity. The total unaffected value of these 3 investments are shown here in comparison to the other 3 in order to illustrate that these 3, Assured, Exact and Acelity, make up 93% of the unaffected value, just to highlight it's really those 3 that make the difference for AGA.

Again, the key point to highlight from this page overall is that the Apax Funds continue to exit the portfolio companies with an attractive uplift. Now of course, there are ups and downs from one investment to the other, but on average, these uplifts has been around the 20% to 30% level over 3 fund generations now.

Now this concludes the discussion on Private Equity. Let me now turn to the Derived Investment portfolio. The main themes we will be discussing for derived investments is one of good returns coming out of Derived Debt, the reduced exposure to Derived Equity and the continuation of the Derived Debt track record that shows consistently strong returns with a decrease in volatility.

Let's start with a summary of the performance highlights, which is on Page 15. So on Page 15, let me first talk about Derived Debt which was 75 -- 74%, apologies, of the derived investment portfolio at year-end. The total return of the portfolio during 2019 was 11.8% with a small benefit from currency tailwinds here that I mentioned before. AGA invested EUR 115 million into Derived Debt during the year and realized across IRR of 15.1% from the positions that were fully exited during 2019. Now these are very strong results, and we will talk about them in the context of the longer-term performance track record of Derived Debt in a minute.

In line with the prior discussion of the portfolio evolution, the share of first lien secured instruments has increased in the portfolio. These instruments now represent 39% of the Derived Debt portfolio. And as a consequence, yield to maturity of the Derived Debt portfolio went down slightly, but it's still at a very attractive level of 9.3% overall.

Now on the right-hand side of the page, you can see the company logos of the firms on which AGA invested. I won't cover those in detail, but I wanted to highlight again that all of these were made by AGA leveraging the insights gained from our Private Equity activities.

Now on the bottom part of the page, you can see the summary of AGA's Derived Equity. Derived Equity represented 8% of AGA's portfolio at 31 December. The returns in Derived Equity were positive at 9.1% or 5.5% if you exclude currency movements. As I mentioned before, I consider this outcome sort of okay-ish with the knowledge that the performance of the portfolio was difficult in particular at the beginning of the year. It's therefore good to see that the active management of the portfolio has led to both an improvement in performance whilst at the same time that the exposure to Derived Equity and portfolio was reduced.

Now in terms of investment activity, AGA only made one new investment during the year, which is Airtel Africa. Airtel had a bit of a soft start in the public markets, something that didn't come fully unexpected as the investment was identified as being an attractive value proposition in the longer term whilst acknowledging that it can be more volatile along the way.

Now if you turn to Page 16, you will see a breakdown of each of the Derived Debt and Derived Equity performance. Again, let me start with the Derived Debt, which is shown on the top chart. The overall total return was 11.8% which we've already discussed. And of course, interest income remains the biggest contributor. The realized losses were negative at only 1 -- 0.2%. And on the flip side, unrealized gains in the portfolio were 1.3%. Now on the Derived Equity portfolio, the main driver of performance came from positions exited, where the good results were achieved during 2019.

Now before I conclude the presentation, I quickly wanted to touch upon the longer-term performance of Derived Debt again, so please turn to Page 17 for this. Now you will have seen similar data in different shapes and forms in prior presentations. What I've shown you on the left-hand side is return performance by when investments were made in Derived Debt by AGA and its predecessor vehicle; and on the right-hand side, constant currency returns again by investment year in the chart. And the message that I'd like to leave you with from this chart is, in particular, since the beginning of 2016, the constant currency IRRs from Derived Debt has been very strong. But in addition to that, and you can see this in the table on the left-hand side, the standard deviation of these returns went down consistently over the years. So not only has the Derived Debt portfolio, for a number of years now delivered investments that are performing strongly, but that performance was also achieved with a lower volatility over time, obviously a performance everybody aims to maintain going forward.

Now that concludes the presentation. But before going into questions, let me just summarize a couple of the takeaways. Will you -- Page 18. Summary is the adjusted NAV grew to over EUR 1 billion for the first time during 2019. The record performance in 2019, total NAV return of 22.7%. This was driven by the strong earnings growth in the underlying Private Equity portfolio, which is a testament to its quality and value creation ability, a diversified risk exposure and attractive return with decreasing volatility in debt and a reduced exposure to the historically more volatile sub-portfolio in Derived Equity. And additionally, as a final point here, final dividend of 4.68p has been declared, representing 2.5% of NAV at 31st December 2019, and this will be paid on the 3rd of April.

Now looking ahead into 2020 for Private Equity, pleased to see a Private Equity portfolio which is in good shape. It's performing well and delivering double-digit revenue and EBITDA growth. Our valuations in the Private Equity market remained at record high levels. This is obviously a supportive backdrop for exits, but we also believe that the Apax Funds' investment strategy is well suited to navigate this environment.

Now what is the strategy in terms of Private Equity? The strategy is to remain focused on transformational, good-to-great investment opportunities where Apax sub-sector insights the operating capabilities and the global platform can deliver operational value creation in the portfolio.

On the derived investment side, we continue to believe that we are in a late-stage cycle environment. In light of this and also for the other reasons discussed earlier, you should expect AGA to maintain its more diversified risk approach in Derived Debt; same time, however, the investment manager is quite focused on maintaining discipline in pricing, in particular, in junior debt instruments.

Now with regards to Derived Equity, you should expect the reduced exposure in the portfolio with more focused investments in Derived Equity going forward.

Now in light of very recent developments, I'd also like to talk briefly about implications from the coronavirus on AGA's portfolio and the outlook. The big picture to keep in mind here and it's important to remember that prior to the significant corrections that we've seen last week in equity markets, market performance has been very strong during 2019 and into the start of 2020. The S&P 500 was up 29% in 2019 and reached new all-time highs early in the year. The STOXX Europe 600 also gained north of 20% during 2019 and further increased until mid-February in 2020. And both of this happened despite news out of China since the beginning of January already that the coronavirus was spreading and the government taking action had quite a disruptive effect in China.

So we're coming off of a very high base, and with the news that the virus is spreading more globally, markets have obviously reacted quite forcefully last week with more volatility towards the end of the week and early this week. It's clearly a very dynamic situation and it's too early to call the real impact of it, but to share some preliminary observations from an Apax Funds portfolio perspective, the overall direct revenue exposure to China is limited across the current portfolio companies. In addition to 4 Chinese portfolio companies, only a small number of portfolio companies outside China has a really meaningful revenue exposure to China. There's also a smaller number of companies in the Private Equity portfolio that has meaningful direct supply chain dependencies, could be reduced by -- sorry, could be affected by reduced travel activity where we have other exposures. Now these companies are in the med tech, apparel space as well as a handful of companies across other sectors. And therefore, the overall immediate and direct exposure of the portfolio to the coronavirus outbreak in the short term appears limited. Now having said that, clearly, if the coronavirus ends up having a marked and prolonged impact on stock market valuations and economic growth, there would be an impact on the portfolio linked to a changed macroeconomic situation. But as I said at the beginning, it's a very dynamic situation for obvious reasons. It's too early to tell whether this will be the case but clearly a risk that needs to be closely monitored and taken into account as we go through 2020.

Now with this, I'm happy to answer any questions and would like to hand it back to the operator.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have a question from Matthew Hose from Jefferies.

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Matthew Lloyd Hose, Jefferies LLC, Research Division - Equity Analyst [2]

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Do you expect any calls from the capital call facilities beyond 12 months? You've got a figure of EUR 28.6 million expected calls on Slide 6. But if you look on Slide 26, there's a figure of EUR 71.1 million (sic) [EUR 77.1 million] for total capital call and other exposure.

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Ralf Gruss, Apax Partners LLP - Partner & COO [3]

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Sorry, Matt, can you just repeat those 2 numbers that you had? You said that it's EUR 25 million is what is currently sitting in the capital call facilities, and therefore, we expect this to be drawn over the next 12 months.

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Matthew Lloyd Hose, Jefferies LLC, Research Division - Equity Analyst [4]

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Yes, that's right. So you've got EUR 28.6 million on Slide 6. But on Slide 26, at the bottom, you've got capital call on the Private Equity side obviously. Capital call facilities and other, you've got EUR 77.1 million. So I just wonder what the difference between these 2 figures is.

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Ralf Gruss, Apax Partners LLP - Partner & COO [5]

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I'm just flipping to the page, Page 26.

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Matthew Lloyd Hose, Jefferies LLC, Research Division - Equity Analyst [6]

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Yes, that's right.

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Ralf Gruss, Apax Partners LLP - Partner & COO [7]

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That includes other, it's the EUR 77 million, Matt, on Page 26. That includes -- this includes other positions such as net current assets and these types of things.

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Operator [8]

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(Operator Instructions) It seems we currently have no further questions, so Ralf, if you'd like to continue.

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Ralf Gruss, Apax Partners LLP - Partner & COO [9]

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Well, if there are no further questions, thanks, everybody, for joining and participating in today's call. I wish you a good day. Thanks. And goodbye to everyone.

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Operator [10]

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Ladies and gentlemen, this concludes today's call. Thank you all for joining. you may now disconnect your lines.