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Edited Transcript of EQTAB.ST earnings conference call or presentation 5-Nov-19 7:30am GMT

Q3 2019 EQT AB Earnings Call

Jan 24, 2020 (Thomson StreetEvents) -- Edited Transcript of EQT AB earnings conference call or presentation Tuesday, November 5, 2019 at 7:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Åsa Hallert Riisberg

EQT AB (publ) - Partner & Head of Shareholder Relations

* Kim Henriksson

EQT AB (publ) - CFO

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Conference Call Participants

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* Arnaud Maurice Andre Giblat

Exane BNP Paribas, Research Division - MD & Research Analyst

* Bruce Allan Hamilton

Morgan Stanley, Research Division - Equity Analyst

* Gurjit Singh Kambo

JP Morgan Chase & Co, Research Division - Head of Diversified Financials Research

* Jakob Brink

Nordea Markets, Research Division - Senior Analyst & Sector Coordinator

* Magnus Andersson

ABG Sundal Collier Holding ASA, Research Division - Research Analyst

* Michael Joseph Werner

UBS Investment Bank, Research Division - Executive Director and Equity Research Analyst

* Peter Kessiakoff

SEB, Research Division - Research Analyst

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Presentation

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Kim Henriksson, EQT AB (publ) - CFO [1]

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Thank you so much, and good morning, everyone. My name's Kim Henriksson. I'm the CFO of EQT AB. I'm here with Åsa Riisberg, Head of our Shareholder Relations Operations, and Pawel Wyzsynski, Shareholder Relations Officer. It's my pleasure to present EQT's first quarterly announcement as a public company. And we'll start with a brief review of the presentation material, after which we will have then an opportunity for Q&A, as mentioned.

But before we dive into the material, just a brief recap of our reporting concept. So as you know, we have a very long-term business model that our fund investors entrust us with their capital for 10 to 12 years and a typical holding period for our portfolio company would be 4 to 5 years. So in any one quarter, there would typically not be significant changes. And the key factors impacting our financial performance and the way we also follow the business internally include that we manage to find and invest client funds in attractive opportunities, and as we create value in the portfolio companies by making them into better and more future-proof companies and that we subsequently exit these investments. And that such performance then, in turn, allows us to raise further funds to invest and of course, that we manage to recruit the right talent to continue to grow. And information on all of the above factors will be included in the quarterly announcement presented today.

Twice a year, following the year-end and after H1, we will also include a full financials in the reporting. So we believe that this strikes the right balance between focusing on the right things and on the long-term and ensuring sufficient transparency towards the shareholders and other stakeholders.

So given this is our first announcement and that our business model is not so familiar to all capital market stakeholders, the presentation material also includes some more educational slides. Bear with us, we will also cover the details of the announcement. So with that, let's start with some highlights from the third quarter.

There's, of course, one event in the quarter, which has been very visible to the outside world, and that's the listing on -- listing of EQT AB on NASDAQ OMX. And we are very humbled by the support and interest in EQT, both from the most respected institutional shareholders in the world and from around 40,000 retail shareholders. So we will be working hard to live up to that trust.

For the third quarter, the good investment activity continued roughly with the same pace as year-to-date. So year-to-date, the EQT funds have invested approximately EUR 10 billion. Also, the exit environment continues to be supportive with a total of close to EUR 6 billion for the first 9 months. Value creation in our key funds remain on plan, and let me revert to that later on in the presentation.

In terms of head count, we're continuing to grow according to plan with total number of employees at the end of the quarter reaching 675.

The fee-paying AUM, assets under management, has not changed much in the period. The ongoing fundraisings are focused on Ventures II and Real Estate II. But we are, of course, continuously in touch with our clients and such context will usually intensify the closer you get to launching a fundraising. We're now 65% to 70% invested in EQT VIII. So we expect to begin fundraising of EQT IX in 2020.

Turning to the next point and to give a little bit of background. Again, as mentioned in the connection with the listing, this is merely a watering station for us. It's business as usual, but now with a balance sheet. And what's business as usual then? Well, it's future-proofing companies into strong long-term and resilient companies across the globe.

And how do we do that? We recruit and train talent driven by a strong purpose. We have a thematic investment approach, we invest with the trends. And by making companies better, we both create returns, and we make a positive impact to investors and to society and the companies. So that's how we work towards our vision of becoming the most reputable investor and owner.

As you can see on Slide 4, growth is in our DNA, actually since our inception 25 years ago. And you can see that here with long-term growth in the fee-paying assets under management but also in our talent pool, our employees. And our business really is about people. Our employees and network, they are EQT's main assets. And they are people that find interesting investment opportunities. They have angles on how to develop, grow and transform them. And at the end of the day, creating strong companies that benefit society as a whole that creates returns and gives EQT its license to operate.

You can also, on this slide, see our geographical footprint. We are continuously expanding it, most recently with Milan in Italy. And currently, we have a new office opening underway in Paris, France.

So on the next slide, there's -- you can easily get lost in the details of private markets investing and the model may seem complex. So let me take a minute to go through our business model from a helicopter perspective. So our primary focus is on creating attractive returns for our clients. That's the starting point. And if we succeed with that, like we have done in the past, they will entrust us with further funds. So assets under management will grow. And from those funds, we have 2 integrated revenue streams. We have the contractually recurring management fees, and we have the carried interest, which is a function of the performance of the funds. So all of that on the top line. And on the cost side, our vast majority of costs are related to our employees.

And with that, I'll hand over to Åsa for some color on EQT's investment activity.

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Åsa Hallert Riisberg, EQT AB (publ) - Partner & Head of Shareholder Relations [2]

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Yes. Thank you, Kim. So good morning, everyone. We are seeing continued good investment activity in Q3 with a total amount of EUR 3.4 billion invested by the EQT funds in the quarter. And just to think of few deals, in private capital, notable deals include Aldevron, which is a U.S.-based manufacturer and supplier of plasmid DNA which is a mission-critical component in, for instance, gene therapy treatment. Another private capital transaction is Waystar, which is a U.S. revenue cycle management software business that helps hospitals and physician offices to manage claims and collect payments from payers and patients. And in real assets, a notable deal was, among others, Inexio, which is a fast-growing provider of high-speed Internet to retail customers and businesses in rural Germany.

These deals are all good examples of EQT's thematic investment approach to investments. EQT focus on attractive subsectors that we followed for a long time in key focus industries such as health care and TNT, and we combine this with the local execution or the local EQT deal teams. These are good examples of how we work at EQT with our investment activity.

It should be noted, though, that when it comes to EQT's investment activities, individual quarters can be lumpy from time to time, and we therefore prefer to look at the investment phase over a longer time period. And as you can see here, for the first 9 months of 2019, and which also Kim pointed out, total investments in EQT funds amounted to EUR 10.1 billion.

Turning now to the exit side, we note a supportive exit environment. We had total exits amounted to EUR 5.6 billion for EQT funds for the first 9 months of 2019. And a few examples here as well. For instance, in private capital, we've exited Press Ganey, which is a provider of patient experience and workforce engagement solutions. And this was the first exit by private capital in the U.S. We also exited AutoStore, a Norwegian warehouse automation systems business. And in real assets, some recent exits include, for instance, Charleston, which is a German senior care platform and GB RailFreight, a U.K. rail freight operator. So this is just to give you a flavor of the investment and exit activity of the first 9 months.

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Kim Henriksson, EQT AB (publ) - CFO [3]

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Thank you, Åsa. Let's move to the key funds and the value creation there. As mentioned, the expected value creation for our key funds is on plan. And let me take a moment to explain how some of the numbers here on this page hang together.

May I please turn your attention to the second column from the right, the gross MOIC as of September this year. So this is the valuation of the underlying portfolio companies, at that point in time, compared to the initially invested capital.

Now turning then to the column furthermost to the right, this refers to our current assessment of the future performance of the underlying assets i.e., given our expectations on exit timing and valuation and so on. And these are on plan with the exception of Infra III, which is above plan, there's no change from the prospectus on this. And what do we mean by on plan? Well, for private equity funds, the target gross MOIC is around 2.3x. And therefore, own plan is a range around that between 2.0 to 2.5. And for the infrastructure fund, the target gross MOIC amounts to around 2x, and therefore, our own plan would mean 1.7 to 2.2x gross MOIC. So that should give you a good sense for our value creation expectations.

Moving over to assets under management. They remain at similar levels as in the beginning of the quarter. Remember that when we talk about AUM, it's always about fee-paying AUM. We have no other definition and do not include any other assets here. And year-to-date, the fee-paying AUM has increased with some 11%. The gross inflows have mainly been driven by Infra IV, earlier in the year. And the Q3 development here illustrates, well, that not much necessarily happens in a single quarter, if there has not been any major fundraisings. So as mentioned, the fundraisings here are currently focused on Ventures II and Real Estate II.

What is then the status of our key funds, and let me go to this in some level of detail, although some of you have seen this before during the roadshow.

So normally, a successor fund would start -- you would start investing from a successor fund when you are 80% to 90% invested in the predecessor fund. And if there is such thing as a normal period, it would normally take 4 to 5 years. But more recently, the actual period has been more in the region of 2 to 3 years. So currently Infra IV has made some additional investments since the date of the prospectus, and that has taken the investment level to 50% to 55% in Infra IV.

In EQT VIII, it continues to be 65% to 70% invested. But given where we are there, we are intensifying the preparations for EQT IX, and we expect to formally launch the fundraising then in 2020. At that point, we will, of course, also communicate to the market.

So timing-wise there's still some room to invest from EQT VIII but we don't want to be in a situation where we are fully staffed and run out of capital to invest. But it's also important to remember that it's in the nature of our business that we have multiple business segments and active funds that we will always be buyers of assets, sellers of assets and always be in fundraising or pre-marketing mode.

To furthermost to the right here, in terms of size, we will also inform the market when we set a target size for the next fund. On the page here, we have indicated what the increases have been in our latest fundraises in the flagship funds. So the EQT -- the current -- the fund we are currently investing out of on the private equity side, EQT VIII, was approximately EUR 4 billion larger than its predecessor fund EQT VII.

Just moving to the next slide and the second part of our revenue lines, and that's a carried interest. This is a bit of an educational slide with a fair amount of text. But maybe firstly, we have a conservative way to account for carry, where we take discount on the unrealized valuations of the underlying assets. It's for an external party, not possible to exactly replicate without access to the underlying financials, but -- and we will obviously do the exact escalation, but we have given the markets here a rule of thumb, that the initial recognition would normally take place when you are at around 1.7 to 1.8x gross MOIC in a fund. And usually, you also need to have a few exits. Based on experience, this will normally occur 4 to 6 years after the first investment. So that's kind of the general guidance on when carry will be recognized.

On the right-hand side of this page, there's the status of the carried interest recognition for our key funds. So EQT VI and Infrastructure II, they are already in carry recognition mode. EQT VII and Infra III are illustrated here. So you can compare that to the rule of thumb that we are, on EQT VII, getting closed, but we are not yet in carry recognition mode. And as we have stated earlier, we do not expect to recognize carry from EQT VII during 2019. And EQT VIII and Infra IV, they are in the investment period, and thus, some years away from carry recognition.

We said that it's all about people, and we are continuing to grow our talent pool according to plan, I would say. As of September, we were 675 employees. And we have, and we will continue to grow that as well.

Moving on to the last page and the targets, our financial targets and dividend policy. There are no news here really but let me just reiterate them anyway.

Revenue growth is expected to -- or our target is that the revenue growth should exceed the private market's long-term growth rate. The latest available market expectations was about 10% compound annual growth rate between 20% and 25%. But our target is that our revenues will grow faster than the market. And not in every single point in time and every year, but over a fund cycle, let's say.

We have said that we have a profitability target that our EBITDA margin should be at least 55% to 65%. Our adjusted EBITDA in H1 was at 47%.

And in terms of dividend policy, we will have a steadily increasing annual dividend in absolute euro terms. And the Board of Directors is expected to propose that approximately EUR 200 million will be paid out as a dividend for the current fiscal year in equal installments there -- in over -- equal installments in next year.

So with that, the formal part of the presentation is concluded, and we open up for questions from the listeners.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Magnus Andersson from ABG.

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Magnus Andersson, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [2]

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My first question is around the preparations for the successor fund, EQT IX, where you said that fundraising is expected to begin in 2020. Can you give us some flavor of what we should expect in terms of when you would possibly launch it?

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Kim Henriksson, EQT AB (publ) - CFO [3]

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The way we see -- the way you should think about the fundraising is given the guidance of 80% to 90% invested, at that point in time, we want to be able to invest out of the successor fund. Well, when do we reach 80% to 90%? We don't know. It depends on when the transactions -- which transactions will happen and when they will happen. But based on historical pace, it -- we've said that 20% to 25% per year, it would be well within a year from now. So at that point, we'd like to be ready. Now, not ready with the fundraising, but be able to start investing out of the new fund.

How long does it take in between there? The whole fundraising may take anywhere from 6 months to a year or more. But we expect that we should be able to invest out of a new fund in a shorter period of time than that.

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Magnus Andersson, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [4]

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Okay. And my second question is just on the continued ramp-up in the number of employees from here. You're now at 675 as of September '19. What should we expect in the coming year?

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Kim Henriksson, EQT AB (publ) - CFO [5]

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We are continuing to ramp up, you're right. We are ramping up according to plan. What we have said is that the sort of percentage term change in number of employees is likely to go down, whereas the absolute number is probably in the same region as it has been in the recent past, 100 plus/minus some persons on an annual basis.

We've also said that in a normal year, you would expect the second half of the year to have a slightly higher increase of employees. That just has to do with how the bonus structures and other things work in the financial industry.

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Magnus Andersson, ABG Sundal Collier Holding ASA, Research Division - Research Analyst [6]

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Okay. And then finally, you were talking there on Slide 10 about normal commitment period versus the actual commitment period in the last fund generations. Why do you think the commitment periods have been shorter in the last fund generations? And going forward, is it still 4 to 5 that will be -- that you think is normal? Or is that more conservative?

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Kim Henriksson, EQT AB (publ) - CFO [7]

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We have -- if you look at it over an even longer time period, you could say that the 3 year or something around that is not abnormal in any way. Then, you will have time periods during recession, where that would be a longer period again. So on average, maybe the normal is 4 to 5. We feel that the 2 to 3 years is reasonable currently or in line with what we are currently doing.

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Operator [8]

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And the next question comes from the line of Peter Kessiakoff from SEB.

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Peter Kessiakoff, SEB, Research Division - Research Analyst [9]

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Just a question, follow-up question on the fundraising. Could you just tell us what kind of news flow or comments should we expect from you over the coming year in terms of the EQT IX fundraising, given that you're new on the market, what should we expect in terms of communication apart from what we've gotten today?

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Kim Henriksson, EQT AB (publ) - CFO [10]

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Well, I think the next step in terms of communication that you should expect is that when we launched the fundraising, we will come out and mention that. At that point, we will also set a target size for the fund, and we will announce that. Then after that, it depends a bit on how the fundraising then develops, what information we will come out with. But we will ensure that the market is always aware of the main aspects impacting that could impact our share price, of course, and that there's not any difference in information available to the various participants in the capital markets.

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Peter Kessiakoff, SEB, Research Division - Research Analyst [11]

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Okay. But then -- and will we get any information on how much has been committed of the fund size, so how that actually develops?

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Kim Henriksson, EQT AB (publ) - CFO [12]

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I will not commit to that. That depends on how the fundraising goes.

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Peter Kessiakoff, SEB, Research Division - Research Analyst [13]

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Okay. Okay. Then just a second question on the carried interest. And as you reiterated, we should not expect that EQT VII goes into carry during this year even though it's at 1.7x gross MOIC, so it could very well start to generate a carry. But I mean, the performance there improved another 0.1x in this quarter. And assuming that kind of continues into the end of the year, should there be any impact of that, perhaps, the carry that comes through is even more front-end loaded than perhaps we've seen in historical funds? Or is this just in line with ordinary developments?

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Kim Henriksson, EQT AB (publ) - CFO [14]

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No. We do not see that this differs in any meaningful way from ordinary, if there is such thing as ordinary. As we have mentioned, it does differ quite a lot as to when a particular fund enters carry mode with -- the range has been between 2.5 to 6 years or something like that. So it can differ quite a lot. But this should be kind of normal.

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Operator [15]

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And the next question comes from the line of Mike Werner from UBS.

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Michael Joseph Werner, UBS Investment Bank, Research Division - Executive Director and Equity Research Analyst [16]

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I guess going back to the fundraising and the expectations for EQT IX. I was just wondering if you could provide a little bit of color as to how long the fundraising process lasted for EQT VIII and Infra IV. I know these cycles will change depending upon external environments. But any color there would be quite helpful from when you announced the fundraising to the final close.

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Kim Henriksson, EQT AB (publ) - CFO [17]

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Well, I guess, first of all, I would say that the final close may not be the right timing to think of since we would start charging fees on the fund from when we start investing out of that fund and close the predecessor fund for new investments. So essentially, that would be the time when that is the key timing from a sort of financial model point of view. And even if we then add to the fundraising after that, also those funds would then pay from the first pay -- management fees from the first day of that fund opening up for investment.

So really, the key timing determinant is when will we close EQT VIII for investments and we -- that one, we do not know. It depends on which transactions will take place, which ones will happen here over the course of the next, say, 6 to 12 months.

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Michael Joseph Werner, UBS Investment Bank, Research Division - Executive Director and Equity Research Analyst [18]

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Okay. And then, I guess, in terms of the recently raised primary proceeds from the IPO, you've indicated that you plan to seed certain strategies. And I was just wondering if you had any indication as to when we might see those strategies being launched, whether we should think about that as a 2020 or potentially 2021 event, particularly when it comes to kind of the CLL product that manages the prime product, which you guys have indicated.

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Kim Henriksson, EQT AB (publ) - CFO [19]

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Yes. So I guess, the IPO was concluded about 6 weeks ago, and we had the plans in place at the sort of high level of what we would like to do. Some of them, like the CLLs, are fairly well advanced and could already commence here during the current year or at least next year. Real estate, managed to prime probably earlier next year. And then the other part, which we discussed during the IPO process is growth or venture growth or growth equity, which also we have sort of developed plans to initiate possibly already during the course of next year. So we do not have any specific launch dates on any of these, but we are advancing well in our plans.

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Operator [20]

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And the next question comes from the line of Gurjit Kambo from JPMorgan.

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Gurjit Singh Kambo, JP Morgan Chase & Co, Research Division - Head of Diversified Financials Research [21]

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Just a couple of questions. Firstly, just in terms of the investing, you mentioned a couple of deals you've done in the U.S. I'm just trying to get a sort of sense of where are you seeing most opportunities by geography for investing? So that's the first question.

And then just secondly, in terms of the gross exits, I know we shouldn't look at it on a quarterly by quarterly basis. But obviously, exits were slightly lower in Q3 versus what you saw in the first half. Is that just the lumpiness? Or is it -- should we read anything else into the gross exit during the quarter?

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Åsa Hallert Riisberg, EQT AB (publ) - Partner & Head of Shareholder Relations [22]

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Yes. If I -- maybe I comment on the investment activity. I think the way we think about the investment opportunity and the pipeline there. I mean we really apply a thematic investment approach, which means that we look at the interesting subsectors that are -- that has interesting fundamental growth drivers, noneconomic growth drivers like demographics or environmental trends or underlying growth that we like, and then we combine that with the local execution. So we have local people in the geographies where we are investing, and we have a very strong network of offices, as you know, in Europe, and we're building out our presence in North America.

So I think the way I would think about it is that the composition of deals is kind of -- it is currently, kind of what we expect it to be going forward. So we'll see a mix of North American and European deals. And I don't think there's any major difference in the deal flow. It's more that in the recent time period, we've seen a few very attractive opportunities in the North American market on the private capital side, that we were in a unique position to acquire and we're very comfortable and -- with those investments.

And equally, on the real asset side, the fiber difference that we talked about before, we've been doing fiber investments for 20 years. So we're quite well positioned to do fiber deals where it's in Europe or in the U.S. So I think that's kind of the composition that you've seen historically. It's kind of what you can expect going forward. But obviously, we are still under indexed in North American market compared to many of our competitors.

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Kim Henriksson, EQT AB (publ) - CFO [23]

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And on your second question with regards to gross exits, I wouldn't read too much into one quarter. We still find the exit environment supportive. Maybe it has grown a bit more selective during the course of the year, but I wouldn't say that the Q3 is materially different exit environment from the rest of the year. So I would put it more down to lumpiness for a time being.

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Operator [24]

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And the next question comes from the line of Jakob Brink from Nordea.

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Jakob Brink, Nordea Markets, Research Division - Senior Analyst & Sector Coordinator [25]

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And sorry for coming back to the question once again. But EQT IX, if I understood it correctly, just to get the data right, so you said you want to be ready to invest when the old fund, you could say it reaches 80% to 90%. Is that correct?

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Kim Henriksson, EQT AB (publ) - CFO [26]

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Yes, that's correct.

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Jakob Brink, Nordea Markets, Research Division - Senior Analyst & Sector Coordinator [27]

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And with the current speed of investment, isn't it also correct that you should be basically at 80% to 90% at sort of H1 2020?

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Kim Henriksson, EQT AB (publ) - CFO [28]

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Well, whether it's H1 or after H1, I don't know. We don't know that with the -- whether the deals will come true. We've had a fairly -- we have a number of fairly significant transactions happening during the course of this year. But if you just do a sort of mathematical exercise, you would end up in sort of the latter part of the period you mentioned.

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Jakob Brink, Nordea Markets, Research Division - Senior Analyst & Sector Coordinator [29]

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And if you don't know which, I guess, you cannot know, if it is actually going to be in last part of H1, wouldn't it be prudent to then start fundraising already sort of just after Christmas? Or how does that normally work?

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Kim Henriksson, EQT AB (publ) - CFO [30]

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Well, fundraising, it's a process not vastly dissimilar to an IPO, where you kind of -- well, first of all, we are in continuous dialogue with our fund investors during and between fundraisings. And then you start -- for you, lack of a better word, use pre-marketing, i.e., start warming them up, telling about how their predecessor fund is doing and how things are going. And then the formal launch is then a sort of more a second -- or a further step in that where you kind of accelerate those steps, that you haven't started the formal launch doesn't mean that you're not fundraising or marketing -- thinking about the fund together with your investor base. So it's a gradual process, I would say. I don't have the -- I don't dispute your comments though.

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Jakob Brink, Nordea Markets, Research Division - Senior Analyst & Sector Coordinator [31]

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Have you had those pre-marketing, what did you call it? Pre-marketing meetings?

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Kim Henriksson, EQT AB (publ) - CFO [32]

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We are meeting with our fund investors, yes.

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Jakob Brink, Nordea Markets, Research Division - Senior Analyst & Sector Coordinator [33]

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Okay. And then second question or whatever it is, I've seen some news recently that KKR and Carlyle has been outracing record lots of European funds in private capital recently. How -- in that light, how does that make you think about the target size for EQT IX?

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Kim Henriksson, EQT AB (publ) - CFO [34]

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Well, it's true that the fund -- the sort of fundraising market also continues to be supportive, and we have seen some very large fundraisings from some of our competitors.

What -- part of the pre-marketing that we are doing is also discussing with our investors about their appetite, of course. And the second element is that we are making sure that we have the pipeline of deals and the resources available internally to ensure that we can deploy then the fund size that we're after in attractive investments and in a reasonable time frame. So all of these taken together will then determine the fund size.

For the time being, I don't have any better guidance to give than that our predecessor -- the increase in our predecessor funds was about EUR 4 billion.

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Operator [35]

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And the next question comes from the line of Arnaud Giblat from Exane BNP.

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Arnaud Maurice Andre Giblat, Exane BNP Paribas, Research Division - MD & Research Analyst [36]

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I've got a couple of questions, please. Firstly, the investment environment has clearly been strong over the last 9 months. I'm wondering, looking forward, is that something you expect to continue to remain the case, assuming that equity markets remain flat, and nothing happens to the debt markets?

My second question is aside from fund IX, is there other areas where you might be looking at raising further funds, I'm thinking maybe in mid-markets or in credits in 2020?

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Kim Henriksson, EQT AB (publ) - CFO [37]

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Was the first one about listing and environment?

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Åsa Hallert Riisberg, EQT AB (publ) - Partner & Head of Shareholder Relations [38]

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No, in the investment activity, where you think it will continue to be strong.

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Kim Henriksson, EQT AB (publ) - CFO [39]

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Yes, we do -- we see no signs of it not continuing to be strong. The pace in the third quarter has been similar to the earlier part of the year, and we see -- we still see a good and attractive opportunities out there. So we continue to believe in that.

When it comes to other fundraisings, I mean, the ones that are in the market now, it's Ventures II and III -- I'm sorry, Real Estate II, we'll -- we are on plan, and we're making good progress on those. So let's get them done here in the short to medium term. And then see what the next. I'm not going to give out any specifics on that.

Obviously, we have some open-ended funds, such as public value, which is in continuous fundraising, you could say.

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Operator [40]

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(Operator Instructions) And the next question comes from the line of Bruce Hamilton from Morgan Stanley.

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Bruce Allan Hamilton, Morgan Stanley, Research Division - Equity Analyst [41]

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One on some investments and one on fundraising, if I may. Just on the -- I guess, we're now at sort of back to peak leverage levels in terms of sort of debt-to-EBITDA in deals, both in Europe and the U.S And I guess, some of your peers have mentioned certain sectors becoming more challenging to find value, including sort of tech, I think, in health care. So I mean I understand your thematic and sector-driven approach, but of those sectors seem to be amongst the hotter ones. So what's your level of confidence? Or how do you get comfortable that you can still drive the sort of more activities historically, if that's the case? Or do you think those -- that that's not the right way to read the investment environment? And

then secondly, on the fundraising, the sort of EUR 4 billion increase you saw between EQT VII and VIII, you mentioned that a couple of times, is that your sort of best guide to -- are you trying to give an implicit sort of guidance on what you think the increase might be in the following fund? That was the way I sort of read it, but I don't know if that was an overread.

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Kim Henriksson, EQT AB (publ) - CFO [42]

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Okay. On your first one, yes, we are thematic. And I would also say that historically, we have experienced that we are great investors in growth companies, in making good companies excellent. And that means that we are going to be paying full market price for those companies. We -- if you look at it over a slightly longer period of time, of course, we need to work harder and smarter to create those same returns. But that's also what we are doing. So we still think that we can find attractive investment opportunities also in the sectors you mentioned and reach the same MOIC target as before. That's one thing.

Secondly, I don't -- I'm not going to give any formal guidance on the size of EQT IX.

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Operator [43]

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As there are no further questions, I'll hand it back to the speaker.

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Kim Henriksson, EQT AB (publ) - CFO [44]

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Okay. Thank you so much. Great questions. I hope this was useful for you listeners. We had a good first quarter as a listed company. Obviously, there were no major surprises. We hope, in this, it was only 6 weeks since the listing. And we're looking very much forward to continuing the dialogue with all of you over the course of the next quarters and years. Thank you so much.