Intermediate Capital Group H2 2025 Earnings Report

Intermediate Capital Group EPS Results

• Actual EPS: GBX 157.10
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Intermediate Capital Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Intermediate Capital Group Announcement Details

• Quarter: H2 2025
• Date: 5/21/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 21, 2025
• Conference Call Time: 4:00AM ET

ICG provides flexible capital solutions to help companies develop and grow. We are a leading global alternative asset manager with over 35 years' history, managing $107bn of assets* and investing across the capital structure. We operate across four asset classes: Structured and Private Equity, Private Debt, Real Assets, and Credit. We develop long-term relationships with our business partners to deliver value for shareholders, clients and employees, and use our position of influence to benefit the environment and society. We are committed to being a net zero asset manager across our operations and relevant investments** by 2040. ICG is a member of the FTSE 100 and listed on the London Stock Exchange (ticker symbol: ICG). Further details are available at www.icgam.com. You can follow ICG on LinkedIn and Instagram. *Past performance is not a reliable indicator of future results; as at 31 December 2024. **Relevant Investments include all direct investments within ICG’s Structured and Private Equity asset class and Infrastructure Equity strategy, where ICG has sufficient influence. Sufficient influence is currently defined by Science-Based Targets initiative (SBTi) as follows: at least 25% of fully diluted shares and at least a board seat.

Intermediate Capital Group H2 2025 Earnings Call Transcript

Key Takeaways

• ICG achieved a record fundraising year of $24 billion and generated £600 million of management fees, up 19% year-on-year, effectively anchoring its four-year fundraising cycle.
• Fee-earning AUM rose 8% to $75 billion (total AUM $112 billion), while $32 billion of “dry powder” provides significant firepower to capitalise on market volatility.
• The firm reinforced its global leadership in GP-led secondaries, European direct lending and structured capital, and successfully launched three new scaling strategies.
• Financial performance was strong, with fund management company PBT up 23% to £461 million, operating cash flow up 44% to over £500 million, and a 5% dividend increase to 83 pence per share.
• ICG continued its “breadth at scale” expansion, opening three new offices (now 20+ locations) and growing to 686 employees to support diversified, uncorrelated growth and enhanced client solutions.

Presentation

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

Good morning. Thank you for joining ICG's results for the twelve months ending 03/31/2025. The slides are available on our website along with the accompanying results announcement. And as a reminder, unless otherwise stated, all financial information discussed today is based on alternative performance measures, which exclude the consolidation of some of our fund structures required under IFRS. This morning, I'm joined by our CEO and CIO, Bernard Orcheste, and our CFO, David Biccareggi.

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

They will give an overview of our performance during the period, and we will then take questions. You can submit these through the webcast messaging function or by telephone. More details are on the online portal. And with that, I will hand over to Benoit. Benoit.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Thank you, Chris, and, good morning, everyone. This has been a milestone year for ICG. The financial results speak for themselves, including 24,000,000,000 of fundraising and a new high of £600,000,000 of management fees, up 19% on the year. But more important is what this means for ICG's positioning as a business. This was a critical year for us, and I'm very pleased to report that we have surpassed even our most ambitious targets and have, as a result, already anchored fundraising for this four year cycle.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

We have $32,000,000,000 of dry powder available today, and we have underpinned our management fees in the medium term. In terms of client offering, we have reinforced our market leading positions in GP led secondaries globally, in European direct lending, and in structured capital. We have also successfully raised three scaling strategies, including North America Credit Partners and European Infrastructure Equity that are now established and are positioned for further growth. Our funds have continued to perform well, and our deployment and realization activity has been strong despite a generally slow market, giving our clients exposure to attractive investments and anchoring fund returns, continuing our track record of consistently returning capital to our LPs as measured by strong DPI metrics. We have been saying for some time that we want to have breadth at scale, which I believe is increasingly important as our industry evolves.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

As clients and the broader industry face a challenging environment for the fourth consecutive year, our performance has reinforced ICG as one of the few global alternative asset managers who are seeing their competitive position strengthened through this period. This year has seen ICG successfully continue to deliver on our strategy of scaling up and scaling out, building our franchise on excellent investment performance across strategies and geographies. We now manage a $112,000,000,000 of capital and have fee earning AUM of $75,000,000,000 up 8% year on year. Our $32,000,000,000 of dry powder, billion of which is not yet earning fees, gives us significant firepower to capitalize on the opportunities which inevitably arise in a more volatile market environment. From a corporate perspective, we opened three offices and now operate from over 20 locations globally, and we continue to invest in our platform, including with a number of senior hires during the year in our client solutions team, that's marketing, as well as our investment teams.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

The financial outcomes of this are clear. Management fees up 19% year on year, increasing performance fees, a robust performance from our balance sheet and at the profit level, fund management company PBT up 23% year on year. This is enabling us to pay a total dividend per share of GBP $0.08 3, up 5% on the year while continuing to have an appropriately capitalized balance sheet, and David will discuss this in more detail shortly. Breath at scale is hugely important for our business, our clients, and for shareholders. It has become a strategic necessity in our industry.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

On the back of our cycle defining fundraising campaign, I believe we have now reached a high level of market relevance across several uncorrelated strategies. Over the last decade, ICG has focused on moving to the top right quadrant of the graph you see on this slide where I believe we now firmly sit. Of course, this does not spell the end of our growth ambitions. It does mean that we have the earnings power and the balance sheet to support and grow a now established and complex operating platform and marketing team, and we have attained a global relevance with investors that we can further build on. This should see us continue to benefit from structural market trends of LPs concentrating their capital allocations on a narrowing set of managers.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

On the right hand side of the slide, there are some figures to illustrate that. Our AUM is now a hundred and $12,000,000,000 from 20,000,000,000 10 years ago. And during the same period, our client base grew four times and our management fees almost nine times. ICG today is very different from what it was just a few years ago. We are now a relevant global player in several verticals or families of strategies with significant organic growth potential for at least the next ten years.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

We enjoy a recognized leading position in structured capital in Europe where we have an unrivaled track record and the largest fund of this type globally. We are now a major player in private equity secondaries, notably with a number one position worldwide in the GP led segment. And we are of course a significant actor in private credit, notably as one of the largest providers of direct lending in Europe. Our real assets platform to the more recent area of focus is performing well and a source of significant growth potential as we look to build the same relevance and presence in this segment as in the others. The charts underline how broad based our growth has been over the last five years.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Secondary is clearly the standout, having grown over six times in the period, admittedly from a lower base. And structured capital, private debt, and real assets have all grown at high teens CAGRs. Having more scaled and scalable strategies, largely uncorrelated as we now do, diversifies our growth and fee streams, reinforces our market relevance, and gives us more organic growth drivers in the future. The result of this is that we are able to raise more capital from more clients into larger funds. And you see this in the last twelve months during which time we held final closes for four different strategies.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

To put this performance in perspective, 2024 was the third consecutive year of decline for global private markets fundraising with 2024 numbers more than 50% down from the 2021 peak. I won't go through every statistic on this chart, but it's worth noting that Europe mid market too was ICG's largest ever vintage to vintage upsize, three times larger than the predecessor vintage. Strategic equity five is, by some margin, the world's largest GP led secondaries program focused on single asset continuation vehicles. And SDP five was the largest ever direct lending fundraise in Europe at time of closing. In addition, infrastructure two is already larger than its predecessor fund, and it is still in the market, and we expect to hold a final close during the calendar 2025.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

This is really quite an achievement for a second vintage that has been raising through a very challenging period for fundraising generally and for real assets, especially. Of course, each individual fundraise is a success in its own right, contributing to our scale and earnings capacity. But more broadly, and in particular, the success of our scaling strategies, this shows that ICG is benefiting from LPs looking to do more with fewer managers. Turning to fundraising in the year. As I mentioned earlier, this was a critical year for us given the number of strategies we were marketing concurrently.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

It's fair to say that we made a few strategic calls which help explain the positive outcome for the year. Since we could see that our efforts were successful and our positioning and strategies resonated with investors, we decided to keep Strategic Equity Five open longer to maximize demand, which in turn put us in a position to increase the hard cap with LP consent, of course. We also brought forward the first close of Europe 9 to lock in client capital. Clients from The Americas, and that's mostly The US, we're the largest contributors of capital in the year. This is not surprising as this is by far the largest source of capital, but it does highlight our growing presence and recognition in North America.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Overall, we attracted a 22 new LPs, which is quite an achievement in this environment. And we saw good cross selling, in particular, into, European market too. As a result, and as I said before, we have materially underpinned fundraising for this cycle. Looking ahead in full year '26 and likely full year '27, the only major strategy we are raising for is the ninth vintage of European corporate. So in the context of our four year fundraising guidance, we're off to an extremely strong start, but it's likely to be barbelled with a low couple of years in the middle.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

On Europe 9 specifically, early indications for that fundraise are very good, and we have already had a first close at 4 and a half billion euros. This is the largest first close in ICG's history. The strategy's focus on structured transactions, its track record, and its focus on Europe are all likely to be appealing to investors globally in this environment. Moving to our transaction activity, which was impressively strong, somewhat bucking the the market trend. On the deployment side, we saw good levels of activity in European corporate and in secondaries.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Strategic equity five is already roughly 40% deployed and LPS one, that's LP secondaries, which only closed in March, is 90% deployed. Real assets had a record year for deployment in absolute terms, reasonably equally spread between real estate equity, real estate debt, and infrastructure equity. It is more challenging in direct lending, which is dependent on the level of buyout transaction activity, which has been depressed and remains so. The bid ask spread on valuations remaining the main issue there. In this segment, direct lending, we do, however, benefit from the additional financing requirements of our existing portfolio.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

And so we've been able to maintain deployment even year on year. The contributions were slightly different within realizations, which were largely driven by direct lending and structured capital. We closed some very successful exit for infra equity as well and for structured capital, both mid market fund and European corporate. And this anchored top decile DPI performance for all three funds, which no doubt played a significant part in our fundraising success. Importantly, as we look forward, our portfolios are still performing very well with still meaningful average EBITDA growth across the board and relatively modest by historical standards, certainly levels of leverage.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So a very good year strategically and financially across all metrics, which positions ICG well for the future. Looking ahead, we want to continue to offer our clients an attractive waterfront of private markets investment strategies with a differentiated and attractive risk return profile. As such, investment performance is our top focus always. We are known and recognized for this in the market. We are convinced that across cycles, that will remain and enhance our brand and reputation amongst our growing client base of institutional investors and high net worth individuals.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

We will continue to add new strategies that fit with that ethos and to develop new products to enable our clients to invest their capital with us efficiently. And finally, while our client base is now large, it still has significant room to grow, which we will do, as well as ensuring our operating platform delivers excellent experience to those clients. The last few years certainly have not been easy in private markets, and I believe this will remain the case for some time. This is making ICG stronger. In future years, when we look back on today's environment, I'm confident we will be able to say that ICG emerged with its reputation enhanced, its client franchise strengthened, and its competitive positioning reinforced.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

And with that, I will pass to David to talk in more detail about our financial results.

[David Bicarregui, CFO at Intermediate Capital Group]

Thank you, Benoit, and thank you all for joining us today. I'm pleased to report that we have published strong results this morning with growth across key financial metrics. Fee earning AUM up 8% in the period at $75,000,000,000. Fee income of £690,000,000, up 19%. Group operating cash flow of over half a billion pounds, and FMC profit before tax of £461,000,000, up 23% year on year.

[David Bicarregui, CFO at Intermediate Capital Group]

Despite the ongoing macro uncertainty and wide range of potential outcomes, as Benoit said, our performance over the last twelve months anchors our fundraising for this cycle and underpins our medium term financial outcomes. As a result, we are confident in reiterating our medium term financial guidance. On fundraising specifically, I'd reiterate Benoit's point about it likely being very barbelled with f y twenty six and likely f y twenty seven quite low irrespective of the market conditions given our fundraising cycle. In a sense, our fundraising cycle has insulated us from being too buffeted by the current levels of volatility. So we remain confident in the short, medium, and long term outlook for ICG.

[David Bicarregui, CFO at Intermediate Capital Group]

Now turning to the outcomes of the year in more detail and starting with fee earning AUM. This grew 8% during the period to end at $75,000,000,000, and over the last five years has grown at an annualized rate of 14%. In the past twelve months, we have raised $11,000,000,000 for strategies that charge fees on committed capital and deployed $9,000,000,000 in strategies that charge fees on invested capital. In addition, we have $20,000,000,000 of AUM not yet earning fees, largely in private debt, which has management fee generation potential of approximately a hundred and £40,000,000. I mentioned fee income of £690,000,000 at the beginning.

[David Bicarregui, CFO at Intermediate Capital Group]

And as you can see from this chart, our revenue is clearly management fee centric. Management fees reached a record £604,000,000 this year, up 19% year on year or 8% excluding catch up fees. As you know, this revenue stream is long duration, visible, and recurring. Our effective management fees increased by five basis points in the last twelve months and now stands at point 97%, driven by mix effects and in line with our expectations. Performance fees were £86,000,000, largely due to additional revenue for Europe seven as we get more confidence on that fund's hurdle date.

[David Bicarregui, CFO at Intermediate Capital Group]

This represents 12% of total fee income in line with the five year average and our medium term guidance. As a reminder, these are almost all European waterfalls, so this is a durable and valuable income stream that turns to cash as you can see with the black dots on the chart that show realized performance during the year. And the final component, our total balance sheet return, which is defined as NIR plus CLO dividends, was £241,000,000, all of which comes together as a solid year for revenue as a whole with continued management fee growth very much the highlight. Now turning to group wide operating expenses, which were up 4% year on year with the low growth primarily due to lower incentive costs compared with f y twenty four. Over the last five years, group OpEx has grown as an annualized rate of 12%, materially lower than the management fee growth of 19% during the same period.

[David Bicarregui, CFO at Intermediate Capital Group]

Over 75% of our cost base is people, and we now have 686 permanent employees. I've spoken before about operating leverage. And as you can see on the right hand side, how the rate of growth in our headcount is shallowing. We've continued to invest in our investment teams and our client solutions group and in our firm wide operating platform, CBS. These investments position ICG for continued efficient growth.

[David Bicarregui, CFO at Intermediate Capital Group]

So strong revenue and limited cost growth have translated directly into higher profits and operating margin. We are reporting fund management company profit before tax of £461,000,000, up 23% year on year and growing at an annualized rate of 20% over the last five years, along with fund management company operating margin of 60%. At a group level, our profits are increasingly driven by the fund management company, reflecting the fee centric nature of our growth. As well as higher earnings, our growing fee income is generating increased amounts of cash, and our balance sheet is structurally cash flow positive. As a result of this, we are reporting operating cash flow of just over half a billion pounds for the year, up 44% on f y twenty four.

[David Bicarregui, CFO at Intermediate Capital Group]

We repaid £241,000,000 of debt over the year. And if we look back five years, that number sums up to £1,000,000,000. We ended this year with total available liquidity of £1,100,000,000, net debt of £629,000,000, and net gearing of point two five x. During the period, S and P upgraded our credit outlook to triple b plus stable, which sits alongside our triple b positive rating from Fitch. Our balance sheet remains a strategic asset for us and a powerful resource to grow fee income.

[David Bicarregui, CFO at Intermediate Capital Group]

In that context, I'm pleased to be able to say that it is stronger than it ever has been. Now we're very focused on being efficient in the use of our balance sheet. We have recently seeded new strategies such as LP secondaries and Asia infrastructure, as well as new products such as core private equity. Our ability to ramp new products and seed new strategies is very powerful as we continue to innovate and allow our clients to access our investment strategies in different ways. And once strategies or products are launched, we seek to reduce our co investments through vintages.

[David Bicarregui, CFO at Intermediate Capital Group]

As you can see on the right hand side of this page, we have successfully done this for a number of funds during the year, lowering our absolute pound million commitment despite raising more blank capital. As a result of this deliberate approach, our balance sheet now represents less than 3% of our total AUM. To conclude, the financial consequences of our growing breadth of scale is that we have significantly more liquidity and capital today than we did even five years ago. Since March 2020, ICG has generated over £2,200,000,000 of cumulative earnings, almost half of which has been returned to shareholders through dividends, which have increased by 48% over the period to 83p per share for f y twenty five. Looking ahead, I believe this trajectory will continue, and we have a clear toolkit for how we think about allocating that with the aim of generating recurring and durable growth for shareholders.

[David Bicarregui, CFO at Intermediate Capital Group]

The starting points are the need to maintain a robust, appropriately capitalized balance sheet and our progressive dividend policy. Beyond that, we're in a fortunate position of having a number of options available, including seeding new strategies and accelerating the growth of current seeding and scaling strategies by putting more capital behind them. Delivering on our ambition of breadth at scale has meaningful and positive strategic consequences for ICG. It gives us increasing confidence in the future trajectory of the company. It also has very positive financial outcomes, which are clearly visible today and which I look forward to discussing with many of you in the coming weeks.

[David Bicarregui, CFO at Intermediate Capital Group]

So with that, I'll turn back to Chris for any questions.

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

Thank you, Benoit, David. To keep things moving and ensure that everyone gets an opportunity to speak, I would ask if possible, that you limit your questions to a maximum of two each, and we will be finishing promptly on the hour. As a reminder, you can ask questions in writing through the portal by clicking the messaging icon in the navigation bar or, if connected by telephone, by pressing star one to join the question queue. To start with, Benoit, we'll take a question that's been submitted online. You mentioned briefly European corporate and the fundraising there as to what might be attractive for LPs, but could you talk a little bit more about LP sentiment more broadly at the moment?

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Sure.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Well, I think, you know, the the broad undercurrent is that LPDs are still most LPs, are still struggling with a relative lack of capital because not enough capital is being returned to them, which is mostly from private equity, which takes us back to the the low level of deal flow and the, you know, the the the issue that the market has been dealing with of a bid ask spread on valuation now for, what, three years and ongoing. So that that's that's the general, you know, that's the general sentiment. There are exceptions. It's not exactly the same in in The Middle East and so forth. But as a whole, that's the that's the general picture, which means that LPs are you know, they're not stopping allocation to the space, but they're clearly being more selective, and they're focusing their efforts and their allocations on fewer managers.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So if you're in that in that group, you are benefiting. If you're not, it's a very, very difficult environment out there. We're fortunate to be we're fortunate to be in in the right group. The other, the the other two elements that I would mention is one, which is more recent and post the, call it, the tariff noise. You know, there there's been a rethink about allocations, and a greater appetite for diversification and for allocations to Europe and potentially Asia as well.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

And we're seeing that across the board, including from US Investors. And that's very meaningful because historically, The US was attracting I mean, almost more than two thirds, almost three quarters of the flows were concentrated on US Managers or US Managers investing globally. But as far as we're concerned, you know, that that's that's, you know, capital that was moving away from us. So that can be incredibly helpful in as long as, you know, as this last, and there's all reason to think that it will. The other the other aspect that I wanna mention is a number of LPs are they're taking a step back and they're looking at the overall performance of private equity.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

And they're noticing two things. Is one in many instances, the performance over a long period of time may not have been as high as they had hoped. And certainly, you know, the what what the recent past has shown is the the level of liquidity is low. You know, those DPI numbers distributed to paid in ratio are incredibly low for private equity. So they're reconsidering how they're viewing the asset class, and this could benefit some of our strategies, particularly structured capital, so Europe nine, because of, you know, the significant debt portion of of this this investment strategy, there's a much more constant and consistent return of capital and and certainly much stronger DPI levels.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

We're top decile DPI compared to, the the the private equity industry with that strategy.

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

Thank you very much. We'll now turn to the phones. And the first question, Oliver Caruthers at Goldman Sachs. Ollie, your line should be open.

[Oliver Carruthers, Executive Director at Goldman Sachs]

Thanks for the results. On two questions, I guess, I'll go with, firstly, number of clients, I think, stepped up again this year. I think you added 100 new institutional investors to your LP roster. I'm guessing the strategic XC5 was a big driver of this, but any color on where you're winning new clients would be helpful. And then second question, if we could zoom in on the FMC OpEx, I think it grew only 10% this year despite it being a busy year of fundraising and a new flagship launch.

[Oliver Carruthers, Executive Director at Goldman Sachs]

So how should we be thinking about that growth rate in FMC OpEx for this year? Thank you.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Yes, I'll take the first question on clients. Thanks for question. I mean, the first comment I would make is, this is unusual. So kudos to our marketing team because in the current market environment, what you find is most market participants are are focusing on farming much more than hunting because it's so much more difficult. So I think being able to increase the client base by a 22 is quite an achievement, and it's actually broad based.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So you're right. You know, SC five did contribute meaningfully, but actually, it's it's it's across the board. I mean, we had a number of new clients in infrastructure equity, for instance. We had some new clients in in the in the mid market fund. So the mid market fund, the the investor base for the mid market fund, it is not just a mirror of the of European corporate and actually attracted new investors.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Hopefully, we're we're gonna try to cross them over into into the larger vintage as well. But, no, it's it's it's very broad based, and I think this goes to the point I was making about, investors generally, you know, focusing on fewer managers, which is why it's so important to have a broad platform because they're looking for GPs who obviously have the track record, but who could deploy across a number of strategies. And I think that's that's what we're seeing now, and we're seeing the we're seeing the the the benefit of that. The other element, which is why and as I was going through my presentation, I realized I was using the terminology, you know, relevant a lot. Uh-huh.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

But that's because we fought for so long to be relevant globally. I remember mentioning years ago that you needed a few strategies that were $10,000,000,000 or more, you know, per per vintage in order to be meaningful to a number of our clients. We're now there, and I think that's also that's also a reason for this for the success in in in broadening the the investor base even in this environment.

[David Bicarregui, CFO at Intermediate Capital Group]

Yeah. And, Ollie, on your question about FMC OpEx, you're right. It was 10 year on year. Remember, the year before, it was above 20%. So we've clearly put a significant amount of focus on the platform.

[David Bicarregui, CFO at Intermediate Capital Group]

It links very much to the growth in client numbers and the record fundraising environment that we've had. So those things will come together in terms of increased cost. I think from here, and the reason we put the slide up is we have a further opportunity to shallow the rate of that growth. So you have less than 10% effectively. I think we'll do that because this will be a different kind of year for us.

[David Bicarregui, CFO at Intermediate Capital Group]

We'll have less funds in market. We will still be focused on selective ads around the client experience and other places in the on the platform, but it won't be a broad based growth year in terms of cost.

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

Thank you. Marina from Morgan Stanley. Marina, I think your line should now be open.

[Marina Massuti, Equity Research at Morgan Stanley]

Hi. Good morning. Thank you for taking my questions. So the first one is on the portfolio performance. Can you perhaps talk about the underlying portfolio trends?

[Marina Massuti, Equity Research at Morgan Stanley]

And then should we expect any potential negative markdowns following the volatility in April on the balance sheet or elsewhere? And then a second question on the recent launch of The U. S. Evergreen product. Can you perhaps discuss the demand and traction you've been getting there with clients?

[Marina Massuti, Equity Research at Morgan Stanley]

Thank you.

[David Bicarregui, CFO at Intermediate Capital Group]

Sure.

[David Bicarregui, CFO at Intermediate Capital Group]

Do you

[David Bicarregui, CFO at Intermediate Capital Group]

want to

[David Bicarregui, CFO at Intermediate Capital Group]

take the balance sheet? Yes. So on balance sheet, Marina, we're still seeing very robust outcomes. You can see that in terms of the the total balance sheet return, and we've published sort of what the five year average has been at 12%. So now we feel good about the robust of the balance sheet.

[David Bicarregui, CFO at Intermediate Capital Group]

I mentioned deliberately, you know, it's never been as resilient as it is now in terms of sort of concentration of positions, diversification, lack of leverage. So there's lots of things to like about the balance sheet in its current form. And, obviously, we look at the fundamentals of the portfolio companies, and we're not seeing any particular concerns in in that regard at this point.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Yeah. And and and the the the comment I would make about portfolio performance, and this this applies to the whole market. And we have we have, you know, through our our direct investment strategies, but also our secondaries and CLOs, and we we have, you know, quite a good view on on the overall markets across geographies. By and large, company performance across the board remains quite strong. But again, as we've mentioned, I think, in in prior years, you know, this is largely because in the buyout world, the focus is on services companies.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

It's on companies that that tend to continue to do well even in an environment like this. Having said that, I mean, I'm always very cautious because it pays to be cautious. You know, I I I do expect that it's going to become more difficult for management teams going forward to to maintain growth rates, finally, because the economic environment across the board is is, you know, is not showing significant growth. And this, you know, that, you know, shouldn't really be a problem for all of the debt strategies because, you know, they'll they'll be doing fine and leverage levels by and large are relatively modest. There are exceptions.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

They'll be higher in The US than Europe. But overall, they're relatively modest and companies are very well capitalized generally because valuations are high. And and that's where I think the that's where I think the the biggest question is is if you're seeing an economic environment with lower GDP growth across the board. I think the, you know, the question mark that's been there around equity valuations is is I mean, I think should be even more pronounced, which we'll see we'll see how that how that, you know, evolves. But I think that's raising a significant question on some of the, you know, historical vintages in for for private equity funds.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

And at what point does that market unlock? So that's the main comment I I would make there on on portfolio performance. On The US Evergreen, which is essentially a secondary product, I mean, it's early days and these things take a long time to to grow. And but once they grow, then it becomes a constant flow of of capital. So this is this is a slow burn.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Interestingly, we are in the process of replicating this in Europe because there is significant appetite in Europe. So we're replicating exactly well, not exactly, but almost exactly the same structure in Europe, which is an evergreen which is an evergreen structure for secondaries, which I think is is very well suited because, you know, secondaries naturally generate liquidity. Even in a downturn, you can look, you know, historically, several decades back, there's greater rotation of assets. So these these structures generate natural liquidity. So they lend themselves quite well to to evergreen structures.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So we'll continue with that. But in my mind, this is just you know, it's it's just a it's just a different structure, just a different way of of accessing capital. And we may very well have, institutional investors who opt for one, version versus another so they could go into LP secondaries in the closed end fund and or opt for the evergreen depending on how, how they are what what their strategy is. I mean, you know, some of them essentially want to invest for a very, very long period of time. We've seen that in, for instance, in strategic equity, we have a client with a twenty five year mandate.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So they don't wanna see any money back for a long time. Evergreen vehicles are are very useful for that. So we, you know, we I I think we're we should see growth, but I don't want to overstate it. These things take a long time to to take hold and start generating meaningful numbers.

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

Thank you.

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

Angeliki from JPMorgan. I think your line should be open. Please go ahead.

[Angeliki Bairaktari, Senior Equity Research Analyst - Executive Director at JP Morgan]

Good morning and thank you for taking my questions. Just two for me as well, please. First of all, I heard your comment with regards to the fundraising in fiscal year twenty twenty six and 2027 being naturally lower than the big number that you produced this year in fiscal year twenty

[Angeliki Bairaktari, Senior Equity Research Analyst - Executive Director at JP Morgan]

twenty

[Angeliki Bairaktari, Senior Equity Research Analyst - Executive Director at JP Morgan]

five. Can I please just get an update with regards to your expectation for sort of start of fundraising for SDP-six and Strategic Equity six? What is the timeline based on the deployment that we're seeing at the moment, which is I think around 40% for Strategic Equity 550% for SDP five? And second question, with regards to private debt, the fee paying AUM declined by 15% year on year for the reasons that you described. In terms of the direct lending deployment from this quarter onwards, have you seen any retrenchment from the broadly syndicated loan market?

[Angeliki Bairaktari, Senior Equity Research Analyst - Executive Director at JP Morgan]

And sort of what is your outlook with regards to the net deployment in private debt for fiscal year twenty twenty six, please?

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Yes. Thank you. Thanks, Angeliki. So, I mean, your your two questions partially dovetail. So let let let me let me address direct lending deployment, which will partially answer your question about when we expect s d p six to be to be in market.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Listen, I mean, the the direct lending deployment is a function of two things. It's primary deal flow, which comes I mean, it's directly correlated to the private equity buyout activity. And that is low. It remains low. I, you know, I was not in the camp of those who believe that, you know, in q one, we'd see a a sudden resurgence, and we didn't.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

And this was pre the tariff news. And we didn't because the fundamental issue has nothing to do with tariffs or even with with GDP growth prospects. It has everything to do with the bid ask spread on valuations. And I think as long as this, you know, as as this you know, there's no consensus there, either by private equity sponsor deciding that they can keep on paying high valuations or by accepting that, you know, they need to drop their valuation expectations on exit, you're not going to see a material uplift in in deal flow activity. Having said that, there is an enormous backlog which is increasing.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

And so at some point, that will need to unlock because some private equity funds are coming to the end of their investment period and or they're under intense pressure from their LPs to return capital. So something will need to happen, but I I I don't think it's going to be a sudden or a cliff edge, you know, move. I think it's going to be I think it's going to be a slower evolution, probably a slower ramp up over the next over the next couple of years. So that's one aspect of deployment for direct lending. The second one, which benefits, you know, only those players who've been in the market for a long time, but that's fortunately our case, is benefiting from your own portfolio generating financing opportunities.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

And essentially, that's what we've been doing for the past two years. I mean, there is some primary deal flow, but we're clearly benefiting from the additional financing requirements from our existing portfolio and that is likely to continue. So that's providing, if you want, that's providing a base, which is why, you know, we've seen the deployment being stable year on year despite despite the the environment. You pointed to the fact that, you know, last year was net negative for us, but in a sense that that's just a reflection of, you know, there were a number of realizations, but they were fewer the the year before. So that's more of a timing that's more of a timing thing than anything else.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

It's it's the deployment number that I think is the is the key. And then in terms of in terms of fundraising, I mean, it's it's it's, you know, it's hard to say, but, I mean, certainly not this year. You know, possibly possibly, we could start next year on on the fundraising for for the next s SDP vintage. We don't wanna rush this. I I did make an important comment is that, you know, our priority is always to preserve investment performance.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Not you know, we're not a volume player. And so, you know, we, you know, we're going to remain selective. There might be a time where if the market does reopen because, you know, there is consensus around valuation between private equity players, there could be a time when there is, you know, accelerated deal flow, but I I don't see it yet. Right? So it's it's hard to say.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

On strategic equity on strategic equity, we are we're actually we are managing deployment because this is one area where there is, you you know, enormous demand because that's one way to create liquidity for private equity sponsors. So there's huge demand there, but that means we can be we can be incredibly selective. I mean, the performance for this strategy has been exceptional. You know, that's that explains why we are the global leader in this space. We wanna preserve that position.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So we are being we're being incredibly selective, so we're not going to rush into this. So, likewise, this is certainly not for this year, you know, at best. I but but this is a bit of, you know, crystal ball gazing. So, you know, maybe back end of back end of next year, we start fundraising, you know, something like that. But, this one, we're we're more managing it to to slow it down to make sure that we don't invest too quickly.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

That's always a bad idea. And also that we just raise the bar. We we we can be incredibly selective and just pick the, you know, the best managers and best assets out there.

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

Thank you. Before we move to the next phone question, there's a question online about the 97 bps weighted average management fee rates. Just to clarify, that does not include catch up fees. That is calculated as the fee earning AUM at the March 31 and the effective management fee we charge on each fund and each compartment there. So put another way, if we did what that implies is if we did nothing for twelve months, the fee earning AUM just stayed completely the same, we would earn 97 bps on that $75,000,000,000, which translates to 560, 5 hundred and 70 million pounds of management fees as a sort of an exit rate management fee.

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

So that that's how the 97 bps, bps is calculated. With that, let's turn to the phone again and Arnaud from BNP. Go ahead, please, Arnaud.

[Arnaud Giblat, Managing Director, Research Analyst at BNP Paribas]

Yes. Good morning. Have two questions, please. On the outlook slide, you talked also about The U. S.

[Arnaud Giblat, Managing Director, Research Analyst at BNP Paribas]

Insurance channel. I was just wondering if you could develop there a bit more. Could you be eventually looking at doing some asset back offering? I think some of your credit peers are doing it particularly well there. Is this a channel you could explore?

[Arnaud Giblat, Managing Director, Research Analyst at BNP Paribas]

And secondly, if I could follow-up on the wealth. You mentioned the evergreen efforts in secondaries. I'm just wondering, given the traction that some of your peers are seeing as well in terms of credit Evergreen, if this is an area you'd be looking at doing too. Thank you.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Yes. Thank you. So on the you know, US or there are two different things. I mean, US insurance channel, I mean, a number of our US peers have actually bought insurance companies, which is giving them access to capital. But it's typically capital, you know, looking for lower yielding strategies, some of some of it investment grade.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So that's not really where where we operate. I mean, we do raise quite a bit of capital from insurance as you have seen, but but not at not at the at the lower yielding product end of it. And you're also right. You know, asset base has been very popular and quite successful in The US, not so much in Europe because there isn't much depth of market there. This is not an area that we are planning to get into because if you look at these strategies, they are very, very broad.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So by asset backed, I mean, they include a lot of things in there, you know, from music rights to containers to just about everything, which is it's interesting, but as a result, it it requires a very, very large origination platform. Again, that's in The US. So you need hundreds of people in The US originating these deals. That would be too expensive for us to to deploy, and we're not well positioned for that. So that's that's on the that's on the the asset back.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

I mean, there are subsets of that, obviously. We have a very successful sale and leaseback strategy in in Europe, but I think you were you were you were more more thinking about the former. On Evergreen, so Evergreen, again, outside of The US, there is a lot of appetite typically coming from the wealth space for evergreen credit solutions. We actually have, you know, some evergreen vehicles within the, you know, within the SDP family. So, yes, this is something that that could grow.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

It's fair to say that there are more regulatory constraints unsurprisingly, regulatory constraints in Europe than there are in The US, which is, you know, raising some hurdles. So, you know, for instance, you cannot put the same level of leverage as you can in The US, which means you cannot reach the same level of return. It's a low risk profile as well. But so essentially, it's a different product that you can deliver in Europe versus what can be done, what can be done in The US. But, yeah, I listen.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

I agree. I think it's still early days, by the way. So I mean, no one's raising huge amounts, in this space in Europe yet. But I do think it's likely to be an area of growth, again, provided that market participants are lucid about realistic rates of return. Right?

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

I mean, you you putting it differently, today, you can now generate double digit return with senior debt assets. It just doesn't exist. So you need to put leverage on it, but even then, once you factor in the fees and the cost, even then, you're gonna struggle to generate double digits. So if there's appetite from the wealth space for something that's generating 8%, you know, maybe a bit more if you're adding some sub debt in it, then, yes, that's an area that will grow. Otherwise, it won't.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

But we are positioned, we already do we are already doing some of it. And, yes, there's a lot of appetite from insurers, banks, a number of players in that space.

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

Thank you. Consent of time, let's keep going through David McCann at Deutsche. David, your line should be open, please.

[David McCann, Director and Equity Research Analyst at Deutsche Numis]

Morning, everyone. Two for me as well. So firstly, just on the cost point. So you obviously lowered cost growth, particularly in the second half compared compared to what you've seen in recent years and what you've been talking about. You obviously commented, David, about shuttling the rate of growth below 10 in future.

[David McCann, Director and Equity Research Analyst at Deutsche Numis]

I just wondered if you could put some more specific numerical guidance on that for the market, just so we kind of get understanding of what below 10% actually means? That's question one. And then, yes, secondly, broader question. You reiterated your cautious comments and say on the deployment, particularly in credit. Is that more a reflection of the competitive environment you're seeing there and so valuations?

[David McCann, Director and Equity Research Analyst at Deutsche Numis]

Or is it more a reflection about your desire or caution, if you like, to actually just want to add risk more generally in what you're seeing from a macro perspective? Thank you.

[David Bicarregui, CFO at Intermediate Capital Group]

Good morning, David. So, yeah, my my comment on cost was really, you know, below below 10%. We don't give in year guidance on cost, but the the point is that the direction of travel, I think, is pretty clear in terms of what we're trying to achieve and our ability to do it, given what the investments we've already made and sort of the year ahead of us. So I'd I'd for now, I'd say, you know, think about it as less than 10%, and we'll continue to respect the margin guidance at the same time.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

And and on on your deployment question, so, you know, just to clarify, I know you're you're specifically, you're specifically thinking about, direct lending, but, you know, just just to make sure it's clear for everyone, you know, deployment numbers and and prospects are very different by asset class. So in secondaries, there's a lot of deal flow, whether it's traditional LP secondaries or GP led secondaries. In our structured capital products because, you know, this is largely self originated. It's not correlated to the buyout market. That that's actually deploying quite well.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Last year was actually a record year. So it's really for direct lending senior debt that is dependent on buyout activity. And there, it's not really the competitive intensity because the competitive there is competitive intensity today, but but that is the result of very low deal flow. The the what's really going to drive the the overall level of of deployment is by productivity. And so, yes, it does link to valuations, but not in the sense that those valuation present a risk to the debt.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

You know, the the debt what what's important is your level of leverage. You know, whether the private equity sponsor buys a company at 18 times or 15 or 12, I mean, if you're just putting four or five times the levered on it, it doesn't really change anything for you as as a as a lender. So it's not a question of risk, but it's a question of deal flow is as long as there is no consensus within the private equity industry on where valuation should land, you're not going to see a significant uptick in in deal flow. As I've said earlier, because there's so much pressure on many of the private equity sponsors to return capital to LPs, you're bound to see an uptick in activity. But you could see that right now, you know, it's it's it's very hard.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

And and to be fair, it's very hard for market participants to form a view as to where valuation should be. You know, after the the, you know, the the tariffs announcement, you know, I I heard some market participants saying, well, we're not gonna, you know, we're not gonna wait for the for the midterms to to have a real view on valuation. And in private equity, you can sit on assets for a very long time. So until that is resolved, you're not going to see a significant uplift in in in in deal flow. But I pointed out, answered in the previous question, we we we have a bit of a floor or safety net, whichever way you wanna look at it, because of our existing portfolio.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

That alone is is creating quite a bit of financing of financing opportunities. And so, you know, we right now, we're we're clearly taking advantage of that. As for the rest, you know, we're not driving the the, you know, the the buyout activity.

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

Thank you very much. Moving swiftly on to Hubert Lam at BofA. Hubert, please go ahead.

[Hubert Lam, Equity Research Analyst at Bank of America Merrill Lynch]

Hi, good morning. Just a couple of questions. Firstly, for Europe nine, obviously, you had a great start. Just wondering how big could this fund be? How long will it take to fundraise it?

[Hubert Lam, Equity Research Analyst at Bank of America Merrill Lynch]

And when do you expect it to close? And the second question is on catch up fees. You've had helped in fiscal twenty twenty five. Just wondering any thoughts of it into for catch up fees in 2026? Thank you.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

I'm sure you'll take catch up fees. Listen. On on the European fund, I'm afraid I don't know. The the the only thing I can observe is, yes, we've had a very strong first start, particularly since we brought forward the timing of the of the first close because we we, you know, we finished investing Europe 8 bit faster than we'd anticipated. So we accelerated the the first close.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

It it was the largest first close in our history. Maybe it's also worth mentioning because there was a there was a question on fees that we we gave zero first close discount, which is rare. I'm not sure that many funds out there give zero first close discount. So we gave no first close discount, and we still achieved that. So that's that's a very good result.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Having said that, you know, we we can't ignore the fact that the overall fundraising environment remains incredibly incredibly tight. You know, all fundraising take much longer than they used to. So, you know, that's why it's hard to say. And and in a sense, it doesn't matter all that much because for these strategies that have fees uncommitted, what really matters is it's the final number, because you do have catch up fees, which will segue into your question as you do have catch up fees. So in a sense, it doesn't really matter what the timing of of the fund as long as you have got capital to deploy, but now we do.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So we're in a relatively comfortable position, but it's very, very difficult to know, you know, how fast or how long it's gonna take to raise. You know, typically, what happens in a in a fundraise is your first close, you you get a lot of the re ups, a lot of your existing LPs will come back. And then there's a bit of a lull, as you bring in new LPs or maybe some of some of the some of your existing LPs that didn't make it into the first count starts thinking about it. But they know that the pressure is off after the first close, so, you know, it you know, they they they can take their time a little bit and see how the portfolio develops. And we've seen that.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

We saw we saw it for strategic equity. We saw it for the mid market. We certainly saw it for infra. I mean, that's a common theme in for for for the for the the market.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So

[David Bicarregui, CFO at Intermediate Capital Group]

Yeah. Maybe maybe the dovetail, Hubert, then into catch up fees specifically. As you say, we've had a a year when we've had funds straddling multiple years generating the catch up fees. For the year ahead, there's really only one to call out. That will be infrastructure two, which is still in market, but in the final weeks now.

[David Bicarregui, CFO at Intermediate Capital Group]

So we're really into the final throes. There'll be a bit there, but nothing highly material.

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

Let's see if we can get through the remainder nice and quickly. Mike Sanderson from Barclays, your line should be open, please.

[Michael Sanderson, Director in Equity Research at Barclays Investment Bank]

Morning, all. A couple, please. I guess just reversing back to Europe 9, you say good demand, etcetera. I mean, open are you to co invest in this? Because there did seem to be some level of sort of non fee earning co invest that seem to be disclosed unless I'm incorrect?

[Michael Sanderson, Director in Equity Research at Barclays Investment Bank]

And also how much balance sheet are you planning to commit there as you were talking about lower allocations? And then sort of the follow on, I suppose second question is, as you how are you thinking about any potential incremental capital returns to shareholders? Or is it a great opportunity such that that doesn't seem likely in the near term? Thank you.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Yeah. On on Europe 9, I mean I mean, nine generates co invest, as as it goes along. So, you know, for instance, we closed a very large deal at the end of last year, which was much larger than what we could do, for, you know, within the fund. And so in order to get the deal done, we raised, just under €2,000,000,000 of co invest. But that is something that we we you know, we're we're doing as we invest the fund and as we need it.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

We don't we don't have for Europe 9, we don't have any committed free co investment, if that's if that's

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

the question.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So we don't have that, but we do have the ability to go to our LPs and and offer co investment if we have deals that, you know, are are too large for the too large for the vintage. So that's co investment. There was another

[David Bicarregui, CFO at Intermediate Capital Group]

Yes. So a couple of other things you mentioned, Mike. One was just on the the capital from the from the PLC that's yet to be determined in terms of final form, but it'll be in line with the strategy of reducing the percentage of of PLC to fund size. So we'll be in line with that with that strategy, I'm sure. We haven't disclosed that yet.

[David Bicarregui, CFO at Intermediate Capital Group]

And then you mentioned sort of capital options. You know, I put the menu up as usual in terms of what we could do. At the moment, the priority is paying down the debt, deleveraging. We actually have some staggered maturities, but we have some coming due in the next couple of years. So we're clearly not there yet in terms of paying down the debt and deleveraging, and that's one of our priorities alongside the progressive dividend policy where we've increased the dividend 5% this year.

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

Thank you. We had a question online, which is in a quote of Vaitham. We have very clearly your performance track record is a key focus for you and that you remain disciplined on deployment to achieve this. There have been some very significant European private debt fundraisers in the last year as well as lots of interest in secondaries. Are you seeing any evidence of less rational deployment, in better commerce by competitors?

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

And interested, how long can you maintain your discipline before LPs push you to deploy if they will?

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So, yes, listen. Whenever there is an increase in competitive intensity, which is the case now, not so much because there's that much capital raised. Because actually, you look at capital raising in direct lending, it's come down in the past few years. But it's because of the lack of deal flow. So it's supply demand.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So whenever that is the case, you always see, not all, but some actors focusing on putting the priority on deployment, more so than on on being selective. So that's not unusual. That's always the case. We're always gonna be in the camp of preserving preserving performance. There isn't really I mean, you know, LPs are quite sophisticated.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

I mean, they understand. And, you know, their their direct lending senior debt is not an area where you wanna take excessive risk because you can't afford to have too many default and certainly not losses. You know, it's not like private equity where you can hope to compensate one poor deal with, you know, with with with an extremely good transaction. And so, you know, LPs understand that, you know, the key is consistency, is low default, you know, that's been our case for a long time. You know, we have decades of track record, and so that's that's going to be that's gonna stay that's gonna stay our focus.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

And it's not they're we we're not under any significant pressure. But also, you know, as I said, we're actually deploying pretty well just by taking advantage of our existing portfolio and additional needs in our existing portfolio. That alone gives us, you know, pretty good deployment. Now we may not deploy in two years. You know, we may end up deploying in three or four, but, you know, so what?

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

You know?

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

We are at 10. So I think there's one there's one questioner left. Let's be just quick on that. But, Nick at Citi, do you want to, your line should be open.

[Nicholas Herman, Director - Equity Research at Citigroup]

Thanks, Chris. Good morning, guys. Just two quick questions from me, please. One on valuations, performance in NIR. If I look at Moex and your RNS, the fund valuation has been pretty stable versus the first half.

[Nicholas Herman, Director - Equity Research at Citigroup]

Just kind of understand a bit better, please, what drove the strong NIR and performance fees in H2? I guess, performance fees, I kind of actually make sense on Fund VII, but particularly NIR. And to avoid us a doubt, can I clarify that fund valuations did not incorporate any impact from the lower market valuations that we saw in early April? I'll stop there, actually.

[David Bicarregui, CFO at Intermediate Capital Group]

Okay. So, Nick, let start to answer your your question there. So you're right on performance fees. Europe seven, we called out specifically because that was a a driver as we get more confidence in the in the hurdle date. So that's that's in line with the with that with that model.

[David Bicarregui, CFO at Intermediate Capital Group]

NIR, think I characterized it. Yes. We've had sort of flat to up valuations by and large. There is accrued interest in the NIR as well as pure valuations, so that comes together into the total balance sheet return that we published and the NIR we published. So we we feel that's that's robust enough.

[David Bicarregui, CFO at Intermediate Capital Group]

And then you mentioned what's your third your third question? Sorry.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Whether we had reflected, I guess, the public market. Yeah.

[David Bicarregui, CFO at Intermediate Capital Group]

Oh, yeah.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

I mean, that's that's not really how it works. I mean, in in in you know, when we have an equity exposure, because obviously that's not the case for for debt, when we have an equity exposure, in most instances, valuation well, they're a combination, but they they're mostly gone on discounted cash flows. If only because in the mid market, it's incredibly hard to find to find comps that really make any sense. So, no, Neil, this is not something that would be reflected in any event on the way down or on the way up for that that matter. And also just I'm sorry.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

Generally, we tend to be reasonably conservative because we can, because we don't have pure play private equity strategies. So, in structured capital where we have some equity exposure, we also have a lot of contractual elements. So we can afford to be conservative on the equity portion because in the end, it doesn't move the dial for overall portfolio that much. And there's a bit of a psychological thing as well, which is LPs always like when you have a bit of an uplift at the end on on an exit. It's a bit of a thing in our market.

[Benoît Durteste, CIO & CEO at Intermediate Capital Group]

So, you know, you strive to achieve that, and there's always a little positive surprise at the end.

[Chris Hunt, Head of Corporate Development and Shareholder Relations at Intermediate Capital Group]

Marvelous. And with that, we are just over the hour. So thank you all very much for your time, and we look forward to speaking in the coming days. Thank you.

Participants

Executives

• Chris Hunt, Head of Corporate Development and Shareholder Relations
• Benoît Durteste, CIO & CEO
• David Bicarregui, CFO

Analysts

• Oliver Carruthers, Executive Director at Goldman Sachs
• Marina Massuti, Equity Research at Morgan Stanley
• Angeliki Bairaktari, Senior Equity Research Analyst - Executive Director at JP Morgan
• Arnaud Giblat, Managing Director, Research Analyst at BNP Paribas
• David McCann, Director and Equity Research Analyst at Deutsche Numis
• Hubert Lam, Equity Research Analyst at Bank of America Merrill Lynch
• Michael Sanderson, Director in Equity Research at Barclays Investment Bank
• Nicholas Herman, Director - Equity Research at Citigroup