Icg Plc · LSE:ICG
Icg — Intermediate Capital Group — Investor Day (February 2018)
85 slides from Icg's investor day presentation, Feb 1, 2018
Slide 1: Capital Markets Update
Capital Markets Update 1 February 2018
Slide 2: Agenda
2 Agenda Business strategy – update Benoit Durteste Fundraising – raising the bar Andreas Mondovits Senior Debt Partners – in depth Max Mitchell Balance Sheet – a competitive advantage Philip Keller Andrew Hawkins Private Equity Solutions – in depth Emma Osborne Capital Markets Update February 2018
Slide 3: Business strategy – update
3 Business strategy – update Benoit Durteste, CEO Capital Markets Update February 2018
Slide 4: Our strategy
4 Our strategy To grow our specialist asset management activities Invest selectively Grow assets Manage under portfolios to management maximise value Generate strong shareholder returns to invest in growth and pay sustainable dividends Capital Markets Update February 2018
Slide 5: Delivering on strategic priorities ahead of plan
5 Our strategy Delivering on strategic priorities ahead of plan FY16 – FY19 Achievements Strategic priorities • Deliver gross fundraising target Target exceeded every year • Enhance brand and client franchise Client base up 475% since 2012 • Selective acquisitions and team hires to expand 63% of AUM
Slide 6: Accelerated growth across asset classes
6 Our strategy Accelerated growth across asset classes AUM (€bn) Corporate Investments 30 €13.8bn AUM 25.3 25 14 funds Capital Markets Investments 20 19.3 €6.6bn AUM 23 funds 15 10.7 Real Asset Investments 10 8.7 8.0 €3.4bn AUM 7 funds 5 Secondary Investments - €1.5bn AUM FY10 FY12 FY14 FY16 H1 FY18
Slide 7: Well positioned in favourable markets
7 Well positioned in favourable markets
Slide 8: Global context
8 Global context A positive macroeconomic investment environment • Global economy forecast to grow 3.9% in both 2018 and 2019, up from 3.7% in 20171 • Positive growth environment reflected in the performance of our portfolio companies • ICG strategies well positioned to benefit from possible higher
Slide 9: Fundraising market
9 Fundraising market Long term, structural trend towards alternatives Available capital for investment by asset class $bn 1,800 1,600 1,400 1,200 1,000 800 600 400 200 - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Private equity Real Estate Infrastructur
Slide 10: Fundraising market: investor appetite for alternatives
10 Fundraising market Continuing to capitalise on investor appetite for alternatives Institutional investors’ long term allocation plans 80% 60% Increase in allocation 40% 62% 50% 20% 39% 36% 29% 22% 17% 0% (5%) (5%) (4%) (9%) (13%) (15%) -20% Decrease in allocation (44%) -40% -60% Private debt Priv
Slide 11: Market bifurcation
11 Market bifurcation Market trends accelerate growth of diversified managers Diversified asset manager Market trends • Full range of strategies • Robust, centralised risk management • Scale in client service delivery Complexity Client demands Single strategy boutique • Focus on single asset class •
Slide 12: What makes us different: track record
12 What makes us different Through the cycle track record is a competitive advantage Europe Fund III Asia Pacific Fund I SDP I Investing 2003-2007 Investing 2005-2009 Investing 2013-2015 realised 1.9x MM realised 1.9x MM realised 1.2x MM Europe Fund II Europe Fund IV Longbow Fund II Investing 2000-2
Slide 13: What makes us different: investment approach
13 What makes us different Differentiated investment approach gives access to deals Nordics US/ Canada UK Benelux France Germany Spain Japan Hong Kong Singapore Key: Corporate Investments Australia Capital Market Investments Real Asset Investments Secondary Investments Single investment framework Pr
Slide 14: What makes us different: adding complementary strategies
14 What makes us different Proven ability to add complementary strategies 1989 – 1999 2000 – 2009 2010 – to date 2 strategies 4 strategies 16 strategies European European Asia Pacific ICG Mezzanine Mezzanine Mezzanine Enterprise Trust European CLOs European CLOs European Real Estate Mezzanine Senior
Slide 15: ‘Locked in’ value in business model
15 ‘Locked in’ value in business model
Slide 16: Durability of investment strategy
16 Durability of investment strategy Once established foreseeable fundraising pipeline and fees Growth of European Mezzanine strategy AUM 1998 2000 2003 2006 2012 2016 Fund Note: The timing and size of future fundraising is indicative only Capital Markets Update February 2018
Slide 17: Strength of closed end funds
17 Strength of closed end funds Long term value creation and market downside protection Visibility of Long term predictable fundraising fee streams Increased Protection multi-year in a market fundraising downturn target Increasing operating Capital available for leverage deployment Increased Protect
Slide 18: Maturity of strategies
18 Maturity of strategies Significant, foreseeable growth from existing strategies Mature investment strategy Europe CLOs Europe Mezzanine ICG Enterprise Trust European Senior Debt UK Real Estate Mezzanine US CLOs Asia Pacific Mezzanine Real Estate Senior Debt Strategic Equity North America Private
Slide 19: New strategies: opportunity in private markets
19 New strategies Substantial opportunity to expand in private markets Real Asset Sale & Leaseback Real Estate Euro Mezzanine Global Senior Europe Fund of Funds Small Cap Debt Real Estate Infrastructure Private Equity Secondaries Solutions Asia Private Rented Sector Real Estate Asia Real Estate Nort
Slide 20: New strategies: selective approach
20 New strategies Selective approach to ensure scalability and ‘cultural fit’ Does investor demand imply that the strategy is scalable? Market demand What angle can the strategy offer to differentiate it from the competition? Does the team have the same investment philosophy as ICG? Investment
Slide 21: Shareholder targets
Shareholder targets iCG
Slide 22: Fundraising target raised
22 Fundraising target raised New three year rolling average target of €6.0bn per annum €bn 8.0 6.4 €6.0bn 6.0 5.7 5.2 3.8 4.0 4.0 €4.0bn 2.0 0.0 FY14 FY15 FY16 FY17 H1 FY18 Other European Mezzanine Senior Debt Partners Capital Markets Update February 2018
Slide 23: Fundraising outlook
23 Fundraising outlook Rolling average target given closed end fundraising cycle FY19 FY20 FY21 European Mezz Fund VII SDP IV North America II Corporate Investments Asia Pacific IV Japan Mezzanine Fund II Australia Senior Loans European Loans, High Yield & Multi-Asset Credit Capital Market Global Lo
Slide 24: Operating margin
24 Operating margin Balancing maturing strategies with investment in new ideas £m Operating m argin 300 60% 250 50% 43% 200 40% 150 30% 100 20% 50 10% 0 0% FY14 FY15 FY16 FY17 H1 FY18 Costs (lhs) Income (lhs) Operating margin (rhs) Capital Markets Update February 2018
Slide 25: Durability of investment strategy
25 Durability of investment strategy Once established foreseeable fundraising pipeline and fees Growth of European Mezzanine strategy AUM 1998 2000 2003 2006 2012 2016 Fund Note: The timing and size of future fundraising is indicative only Capital Markets Update February 2018
Slide 26: Strategic priorities
26 Strategic priorities Strategy unchanged, updated for new shareholder targets FY10 – FY18 FY19 – FY23 Strategic transition Recognised as the leading European specialist asset manager Enhanced brand and client base Increased fundraising target of three year rolling average €6.0bn per annum De
Slide 27: Fundraising – raising the bar
27 Fundraising – raising the bar Andreas Mondovits, Head of Marketing and Client Relations Capital Markets Update February 2018
Slide 28: Competitive fundraising market
28 Fundraising market Competitive fundraising market Average fundraising duration Private equity fundraising 2017 18 17 17 17 17 600 16 Average Time Taken to Reach Final Close (months) 16 15 15 15 15 500 483 14 14 12 12 11 400 10 300 274 284 8 197 6 200 4 110 100 77 2 0 0 2006 2007 2008 2009 2010 20
Slide 29: SDP fundraising: existing relationships accelerate process
29 SDP fundraising Existing relationships accelerate the fundraising process ICG Senior Debt ICG Senior Debt ICG Senior Debt Partners I Partners II Partners III (€1.7bn) (€3.0bn) (€5.7bn) 24 Month 8 Month 5 Month Fundraise Fundraise Fundraise Capital Markets Update February 2018
Slide 30: SDP fundraising: successor funds
30 SDP fundraising Existing relationships support raising of successor funds ICG Senior Debt Partners II ICG Senior Debt Partners III 156 investors targeted1 103 investors targeted1 77 initial 103 initial meetings meetings (49%) (100%) 7 7 42 investors conducted DD 64 investors conducted DD (27%) (6
Slide 31: Client franchise
31 Client franchise Targeting further expansion of client relationships Investors by Geography 2012 Investors by Geography 2017* 13% 51% 38% 22% EMEA (excl. UK & EMEA Ireland) 16% (excl.UK & Ireland) Americas 328 Americas 69 investors investors UK & Ireland UK & Ireland Asia Pacific Asia Pacific
Slide 32: Cross selling relationships
32 Cross selling relationships Existing investors support fundraising achievements 97 clients are invested in more than one ICG fund 4% 2% 5% 22% 4% 6% 41% 45% 9% 18% 21% 8% 15% Pension Fund of Funds (FoF) EMEA (excl. UK & Ireland) Americas UK & Ireland Asia Pacific Insurance Company Asset Manager B
Slide 33: Fundraising success
33 Fundraising success Largest European independent private debt fundraiser Total Funds Raised Total Funds Raised Rank Firm in Last 5 years Headquarters Rank Firm in Last 5 years Headquarters ($bn) ($bn) 1 Lone Star Funds 37.8 US 16 TPG Sixth Street Partners 13.0 US 2 M&G Investments 36.5 UK 17 Cres
Slide 34: Summary
34 Summary Investor base key to growth of fund management franchise Diversified client based creates a strong base for future growth Growing client Client relationships supporting the efficiency and speed of fundraising activities franchise New relationships focused on those with commitment to
Slide 35: Senior Debt Partners – in depth
35 Senior Debt Partners – in depth Max Mitchell, Head of Direct Lending Capital Markets Update February 2018
Slide 36: Evolution of SDP strategy
36 Evolution of SDP strategy Successful fundraise takes total strategy AUM to €7.9bn SDP AUM progression SDP III Investors €bn 9.0 16% Existing SDP clients 8.0 New clients 7.0 56% 28% Existing ICG clients, 6.0 new to SDP €5.2bn available 5.0 to deploy 4.0 SDP Investors by Sector 3.0 10% 2.0 Pension
Slide 37: Market development: direct lending
37 Market development Direct lending funds have become a critical source of capital Since 2012, 1,082 direct lending mid-market deals have been recorded across Europe ICG origination volumes up 40%1 in the two years to December 2017 Currently only 4-5 direct lending funds have the scale, brand
Slide 38: Market development: one of the largest direct lending strategies
38 Market development One of the largest direct lending strategies in Europe European Senior Direct Lending fundraising Number and size of funds raised €bn €bn 25 4.5 80 71 4. 3,838 70 20 3.5 60 3. 15 50 2.5 40 2. 10 30 1.5 20 5 1. 610 .5 10 4 . 0 2012 2013 2014 2015 2016 2017 YTD Funds > €3 billion
Slide 39: Competitive environment
39 Competitive environment Bank lending remains the largest single competitor Only three managers Bank lending with €3bn+ funds (market share reducing) (market is consolidating) Competition New entrants Niche players (do not have the scale to (geography or industry compete) specific) Capital Markets
Slide 40: Investment market
40 Investment market 90% of investments made where ICG has a local presence SDP deals (by number) (2012-2017) by geography 30 25 20 15 10 5 0 Country with ICG local presence Country without ICG local presence Capital Markets Update February 2018
Slide 41: Fund performance
41 Fund performance Performance of SDP I supported the fundraising of SDP III SDP 1 performance by portfolio company IRR 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Expected 3-year Gross return Excess Return Underperformance Source: ICG, 30 September 2017, realised and unrealised investments Capital Mark
Slide 42: Evolution of strategy
42 Evolution of strategy ‘Locked in’ value enables the strategy to scale and broaden SDP I SDP II SDP III 2012 2015 2017 €1.7bn AUM €3.0bn AUM €5.7bn AUM European focused European focused European focused Fundraising exceeded Balance sheet 30% non European initial target of €1bn commitme
Slide 43: Market opportunities
43 Market opportunities Dynamics strong for raising larger successor funds European Existing US Market Platform Leader High Global investor addressable demand Regional market Funds Global Fund Note: Future expanded and complementary strategies are indicative of potential growth opportunities Capital
Slide 44: Summary
44 Summary Competitive advantage as a European market leader One of the largest direct lending strategies in Europe Market leader Scale is important to be able to fully exploit the market opportunity Investment Direct lending has established itself as a critical source of capital in Europe sou
Slide 45: Q&A
45 Q&A Andreas Mondovits and Max Mitchell Capital Markets Update February 2018
Slide 46: Coffee break
iCG Coffee break
Slide 47: Agenda
47 Agenda Business strategy – update Benoit Durteste Fundraising – raising the bar Andreas Mondovits Senior Debt Partners – in depth Max Mitchell Balance Sheet – a competitive advantage Philip Keller Andrew Hawkins Private Equity Solutions – in depth Emma Osborne Capital Markets Update February 2018
Slide 48: Balance Sheet – a competitive advantage
48 Balance Sheet – a competitive advantage Philip Keller, Chief Financial and Operating Officer Capital Markets Update February 2018
Slide 49: Loan book evolution
49 Loan book evolution Balance sheet is an accelerator and enabler of growth Loan book balance : 2010 vs 2017 £m 3.0 Invests in funds 2.5 Diversified portfolio reducing single name exposure 2.0 0.3 Investment in new strategies 1.5 2.7 1.0 0.5 1.7 x Principal investor - March 2010 September 201
Slide 50: Capital efficiency
50 Capital efficiency Loan book reducing as a percentage of total AUM Loan book and AUM progression €bn 30.0 25.0 20.0 15.0 10.0 Co-investment ratio 7% Co-investment ratio 37% 5.0 - FY10 H1 11 FY11 H1 12 FY12 H1 13 FY13 H1 14 FY14 H1 15 FY15 H1 16 FY16 H1 17 FY17 H1 18 Loan book Third party AUM Capi
Slide 51: Returns from Investment Company
51 Returns from Investment Company Loan book a reflection of historic co-investment decisions Loan book as at 30 September 2017 by year investment made £m 500 450 400 68 350 17 300 145 51 250 7 22 23 41 200 23 35 21 150 27 58 100 22 199 186 196 23 168 128 50 102 66 36 - Pre-2011 2011 2012 2013 2014
Slide 52: Investment Company reporting
52 Investment Company reporting Net investment returns mirrors perspective taken by clients 12 months to £m 31 March 2017 Interest income 144.7 Capital gains 201.4 Other income 14.7 Asset impairments (48.0) Net investment return 312.8 £m Average NAV Total return Net investment return Corporate Inves
Slide 53: Investment Company reporting
53 Investment Company reporting Net investment returns mirrors perspective taken by clients £m Average NAV Total return Net investment return Mirrors how fund investors Corporate Investments Mezzanine 1,150.6 224.5 19.5% view the portfolio Senior Debt 59.7 6.9 11.6% Capital Market Investments 300.
Slide 54: Loan book KPIs
54 Loan book KPIs Net investment returns should facilitate modelling Net investment return trend £m 2,000 1,800 1,755 1,800 1,744 1,690 1,600 1,400 1,200 13.4% 13.6% 14.7%* 13.7% 1,000 800 600 400 258 240 237 200 116 - FY15 FY16 FY17 H1 18 Average Loan Book Net Investment Return Reporting on a net
Slide 55: IFRS 9: Financial instruments
55 IFRS 9: Financial instruments No significant impact expected from new accounting rules No impact on management reporting or information provided to shareholders Debt and equity instruments with the same counterparty will be presented in the same line item – presentational impact only Impact
Slide 56: Competitive advantage
56 Competitive advantage Supporter of fundraising and development of new strategies Mature investment strategy Supports Accelerates Develops Time New investment strategy Enabler and accelerator of growth = competitive advantage Capital Markets Update February 2018
Slide 57: Competitive advantage: supports new strategies
57 Competitive advantage Supports development of new strategies Develops + Accelerates + Supports Example 1 Example 2 Strategic Equity Australian loans • Balance sheet underwrote • Provides capital for initial transaction prior to investment team to source syndication deals during fundraising • Bala
Slide 58: Competitive advantage: accelerates growth
58 Competitive advantage Capital is used to accelerate growth in new strategies Develops + Accelerates + Supports Example 3 Example 4 US Private Debt Liquid strategies • Facilitated team hire • Investment of balance sheet to accelerate growth of capital builds a track record US business • Supports f
Slide 59: Competitive advantage: maximise existing strategies
59 Competitive advantage Capital support to maximise existing strategies Develops + Accelerates + Supports Example 5 Example 6 Example 7 Domus UK real estate CLOs • Enables deal teams to • Balance sheet can provide • CLOs require 5% ‘skin in compete for deals in excess bridge financing to fund the g
Slide 60: Summary
60 Summary Enabler and accelerator of fund management growth Efficient use of Invests alongside third party funds only balance sheet capital Loan book is a reflection of historic co-investment decisions Reporting to be updated in line with how clients view the portfolio Updated reporting No
Slide 61: Private Equity Solutions – in depth
61 Private Equity Solutions – in depth Andrew Hawkins, Head of Private Equity Solutions Emma Osborne, Head of PEFI Capital Markets Update February 2018
Slide 62: ICG platform
62 ICG platform Benefits of a multi asset manager with a scalable platform Investment Skills + Market Access ICG Platform Marketing Capital Infrastructure Capital Markets Update February 2018
Slide 63: Private Equity Solutions
63 Private Equity Solutions Two strategies with different risk/reward characteristics Private Equity Fund Investments Strategic Equity Approach High volume, small ticket size Low volume, high transaction value Typical primary fund commitment €10-20m, Deal size Typical equity is $75-250m secondary €5
Slide 64: Strategic Equity
64 Strategic Equity A differentiated approach to investing in private equity Value Direct Favourable Market Buying Approach Dynamics Value Creation Pillars Address Proactive Team Fund Structural Involvement Specialisation Challenges Post Close Attractive Risk Adjusted Returns Capital Markets Update
Slide 65: Investment activity
65 Investment activity Attractive opportunities results strong deployment pace Above Target 40% Uncommitted Total Fund II Commitments $637m / 60% 15% Quadriga 6% Monitor Clipper 15% Metro 14% VSS 7% EdgeStone Below Target 2% Diamond Castle 1 Feb-16 Feb-17 Feb-18 Feb-19 Feb-20 Year 1 Year 2 Year 3 Ye
Slide 66: Investment market: early mover advantage
66 Investment market Early mover advantage in a developing market GP-led transaction volumes $bn ICG launches 18 Private Equity Solutions 16 14 12 10 8 6 4 2 0 2012 2013 2014 2015 2016 2017F Source: Greenhill Secondary Market Update & Outlook, July 2017 Capital Markets Update February 2018
Slide 67: Investment market: target market $200bn
67 Investment market Growth opportunities with target market $200bn Addressable market in mature private equity funds Target market $42bn $42bn No Successor 129 Funds $176bn $102bn Underperforming $384bn $102bn Vintage 122 Funds $64bn Mature & Performing $64bn <$1bn of NAV 274 Funds Source: Preqin a
Slide 68: Performance
68 Performance Market opportunity supports high returns at lower risk 2 ICG Strategic Equity Target Returns Buyout Money Secondaries Multiple Distressed PE 1.5 Fund of Funds Direct Lending Infrastructure 1 0 5 10 15 20 25 IRR Source: Preqin. Average IRR of median investment strategy from 1990 to 201
Slide 69: Prospects
69 Prospects Dynamics strong for raising larger successor funds Scale will widen investment Investor demand opportunities Large addressable Larger Cement position as market leader market successor Funds Strong Operating leverage performance Supportive Increased shareholder value balance sheet Capita
Slide 70: Private equity fund investments (PEFI)
70 Private equity fund investments (PEFI) Growth through complementary acquisition Acquired Graphite Capital’s private equity fund of funds investment business in February 2016 The business manages ICG Enterprise Trust plc, an investment trust listed on the London Stock Exchange The Trust inve
Slide 71: PEFI strategy
71 PEFI strategy Balanced portfolio across private equity investments Direct Primary funds Secondary funds co-investments Commit at inception of a Invest alongside a fund, Acquire an additional new fund directly in an underlying interest in a fund part way company through its life Typical 10-12 year
Slide 72: ICG impact
72 ICG impact PEFI investors benefiting from ICG’s global platform In-house investment opportunities arising from ICG managed funds Access Third party manager introductions Delivering on objectives to increase investment rate and geographical diversity ICG’s knowledge of the private equity l
Slide 73: Performance
73 Performance Continuing to outperform the benchmark and peer group NAV Total Return¹ 120.0% 112.0% 100.0% 80.0% 73.4% 60.0% 46.9% 40.0% 20.0% 16.8% 0.0% 1 year 3 years 5 years 10 years Listed PE sector FTSE All-Share ICG Enterprise Trust ¹For the period ending 31 October 2017 Capital Markets Updat
Slide 74: Benefits to ICG
74 Benefits to ICG Addition of a strong, profitable and complementary platform Immediate positive profit contribution Growing, profitable Evergreen structure supports future growth in revenues business A range of adjacent growth opportunities are available and under review Established team c
Slide 75: Market opportunities
75 Market opportunities Dynamics strong for broadening scope of asset class Existing Market Leader Platform Global High investor addressable demand Asia market expansion Fund of Funds Note: Future expanded and complementary strategies are indicative of potential growth opportunities Capital Markets
Slide 76: Summary
76 Summary Competitive advantage as a market leader One of the largest dedicated strategic equity strategies Market leader Scale is important to be able to fully exploit the market opportunity Strategic Equity has established itself as a critical part of fund restructuring Investment sourcing
Slide 77: Q&A
77 Q&A Andrew Hawkins and Emma Osborne Capital Markets Update February 2018
Slide 78: Summary
78 Summary Benoit Durteste Capital Markets Update February 2018
Slide 79: Well positioned for growth and increased shareholder value
79 Summary Well positioned for growth and increased shareholder value • Fundraising supported by long term trend towards alternatives • AUM and fee streams replenished with recent fundraising activity Excellent fundamentals • Plentiful third party capital, supported by a strong balance sheet, availa
Slide 80: Q&A
80 Q&A Benoit Durteste and Philip Keller Capital Markets Update February 2018
Slide 81: Capital Markets Update
Capital Markets Update 1 February 2018
Slide 82: Appendix
82 Appendix Capital Markets Update February 2018
Slide 83: Operating model
83 Operating model Updated to reflect revised shareholder targets INVESTING FUNDRAISING • Fund deployment • Gross fundraising to average €6.0bn on a 3 year rolling basis • Fund performance and track record • Maintain fee level • Selective product expansion INVESTMENT IN NEW FUNDS IC PROFITABILITY FM
Slide 84: Net investment return bridge
84 Net investment return Net investment return bridge Net Investment Return FY17 Interest Capital Total Net Investment £m Opening NAV Closing NAV Average NAV Income Gains Other Income Impairments Return Return Corporate Investments Mezzanine 1,213.8 1,087.3 1,150.6 82.8 180.9 8.6 (48.0) 224.5 19.5%
Slide 85: Disclaimer
85 Disclaimer THE MATERIALS BEING PROVIDED TO YOU ARE INTENDED ONLY FOR INFORMATIONAL PURPOSES AND CONVENIENT REFERENCE AND MAY NOT BE RELIED UPON FOR ANY PURPOSE. THIS INFORMATION IS NOT INTENDED TO PROVIDE, AND SHOULD NOT BE RELIED UPON, FOR ACCOUNTING, LEGAL, TAX ADVICE OR INVESTMENT RECOMMENDATI
Intermediate Capital Group — Investor Day (February 2018) on 6ix