Partners Group Holding AG

Good morning everyone. Welcome to this 2019 Annual Results Conference Call, and let me first say, thank you for your flexibility and honoring our social distancing measures that we have put in place given the current COVID-19 and the situation.

I'm here with a few of my colleagues with our CEOs André Frei here in Zug, Dave Layton based in Denver. Thanks Dave for late stay today.

We have also our COO with us Andréas Knecht, who is also steering our business continuity efforts and our firms. So, we felt if maybe questions arise in that direction, good to have him with us; and ultimately, Philip Sauer, our COO, Head of Finance and Corporate Development.

The topics we want to cover today are severalfold. We will talk certainly about 2019 results.

It was a strong year. The results are very representative for a normal year and 2019 wasn't normal years.

So, we'll talk about that today. Today, the situation has changed as everybody's clear about, and 2020 will be different to year.

We don't know yet how different it will be, but we'll give you some idea how we see the current situation as of today. We will then also talk about a major new strategic initiative, which is around stakeholder impact and it's actually notwithstanding the current situation, I would rather say, its especially in the current situation that this is actually a very attractive topic, something which will be very relevant for us in the next years ahead of us.

And so, it's something we want to start sharing with you today. We'll allow for some Q&A as Sarah introduced, and we'll do this actually in a couple of chapters with different dimensions.

We'll start first with the investment side of things. So, talk about 2019, but also look at the current situation, the same on a client side financials before we move to this new strategic initiatives and conclude with Q&A session.

So, with that, its pleasure for me to hand over to Dave to cover the investment side of things first.

Thank you, Steffen. To kick things off today, I'll spend some time discussing the investment side of our business starting on Page 3.

Investment in divestment volumes within many areas of private markets were lower in 2019 than in 2018 and some of the prior years. The first quarter of 2019 in particular was soft.

However, we had a reasonably solid market backdrop during the back half of 2019, and overall we were able to execute on our investment in divestment activities at acceptable levels relative to our plans. Our origination strategies have been working and we've been able to win our fair share of transactions in the market.

We invested $14.8 billion in calendar year 2019 and we were able to generate $11 billion in gross underlying portfolio realizations during the year. On Page 4, we provide some incremental examples from last year's deployment.

The majority of these investments, 68% by volume were direct investments and we had a reasonably-balanced deployment year across asset types. Private equity continues to be the largest of our investment asset classes.

We invested $6.4 billion into private equity opportunities last year, each of the examples highlighted here Confluent, Blue River and Schleich were opportunities that we worked to develop over very long periods of time, months and years in some cases. We have thematic research projects ongoing to identify and to pursue target assets and areas that we believe are structurally attractive.

We also invested $1.6 billion in private infrastructure last year, $3.8 billion in private debt and $3 billion in private real estate opportunities. On Page 5, looking at liquidity events, we had a number of successful divestments from the portfolio last year, particularly in the second half of the year.

Despite the challenges presented in the first few months of 2019, when, as previously discussed, we elected to postpone a number of liquidity events. For the full year, we were able to meet our clients’ expectations in terms of return on invested capital and we created substantial value through our client portfolios over the last decade, and we're proud of this contributed to solid realizations and a strong increase in performance fees in 2019.

Now, in private markets, we have the luxury of not being forced to sell assets, if market conditions are not right. We held off on sales in the first part of 2019 and we're obviously holding off on asset sales right now as well.

We've worked hard to create value in these assets and we don't feel pressure to sell into a bad market. On the next slide, given the volatility that we're all observing today, we wanted to provide you all with some additional transparency into the average debt levels of our underlying portfolio companies.

I think this is important. There are different strategies for generating returns in private markets.

Our strategy has been focused on rolling up our sleeves in middle market companies identifying driving and realizing meaningful value creation initiatives. Debt is a part of the equation, and we have used debt to finance most all of our acquisitions.

However, we've generally elected not to take the maximum quantum of debt available to us in the marketplace. Our investment teams, our investment committee, our capital markets team looks at the resiliency of acquisition targets and designs a capital structure that appropriately balances upside enhancement, with downside protection.

The result of this approach is that we have a portfolio that is more conservative and less leverage than what I would have Imagine to be the case in similar portfolios in the market. We don't have a perfect transparency into the current debt levels within the private markets community overall.

However, we provide here a comparison of new debt issuance of the U.S. buyout market, not a perfect proxy, but a directional indicator for the types of leverage levels that are out there and we show how that contrasts with our portfolio.

The lion's shares of our portfolio companies 72% have debt levels that are less than six times earnings. And on the next slide, because we're not just going long leveraged equity, we've had to work extremely hard to transform assets in order to generate the types of returns to which our clients have become accustomed.

We govern assets with what we call an entrepreneurial governance approach. What we mean by that as we want to lead the boards of our portfolio companies like a founder, like an entrepreneur, focused on strategy and vision and winning in the marketplace.

We've added meaningful resources to help drive our portfolio initiatives and today we have one of the largest teams of in house operators focused on middle market companies anywhere. About half of our value creation initiatives are focused on growth and the other half of our initiatives are focused on margins financing and strategic positioning.

In 2019, we saw meaningful measurable results from these activities. On average, our companies grew top line and bottom line by double digit percentages, and we saw an increase in over 20,000 new jobs in the portfolio over the course of last year.

At a time like this, we also feel fortunate to have such a large team of operators to help us manage our assets during these times. Now we've all watched the coronavirus situation unfold since the start of the year and on the next slide, we really started feeling the impacts on the portfolio in Asia in late January, when travel restrictions started.

We hit bottom in our China portfolio, the week of February 17th in terms of revenue and traffic and production capacity. The indicators in our China portfolio have been climbing up since then.

One of our China assets has fully recovered back to pre-coronavirus levels and others are still building back to where they were before the crisis started. And while this started as a China and an Asia topic today, it's obviously a global concern.

In an industry which is judged by relative performance, I think we've been fortunate to have only a very modest exposure to some of the areas hardest to hit. During the early phases of this pandemic, we have under 4% of NAV exposure to China, 1% exposure to Italy.

We're meaningfully underweight sectors like tourism, aviation, hospitality, commodity oil. However, in the last two weeks we started to feel the impacts in wider segments of the portfolio.

We have school assets for example, that are partially closed. We have restaurant assets that have seen footfall fall and we've had to move many of our locations to delivery or take out only models.

We have industrial assets that have had to close or partially closed production facilities for a season, and we've communicated the same messages to our investment leaders, responsible for our portfolio investments as we've been using with our leadership team within partners group, and that is first and foremost ensure the health and safety of the employees that we have within our stewardship. We have a meaningful presence in Singapore and we've leveraged and borrow some of the observations and insight gained from how that situation was managed there from a very early phase, as we've rolled out social distancing initiatives across partners, groups, other offices.

Next, we've been ensuring our continuity plans are regularly refreshed. To make sure that we're constantly looking at how we safeguard the interests of our clients for new information that emerges.

Later today, we'll again have members of our global team on a conference call going acid-by-acid through our plans. We've been laser-focused on liquidity management as well, with this sudden slowdown in economic activity that we're either feeling or anticipating.

We will see revenue shortfalls in many portfolio assets and we need to manage the liquidity very, very closely. I've been on with many of our investment leaders discussing liquidity plans.

This is perhaps our most frequent conversation at the moment. We have revolving credit facilities in place in most assets and delay draw loans in place in a few.

We've drawn many of those lines down at the asset level out of caution, and we have over $15 billion of dry powder available at the fund level. We've also tried to anticipate and to get out ahead of factors that could disrupt value chains.

We haven't encountered any supply chain issues yet that our assets haven't been able to navigate, but we're still in the early innings. As you may be able to tell, much of our direction and our leadership time right now is focused on our existing portfolio, as it should be.

We'll likely have some Rocky terrain to navigate in the future, but we believe that we've been reasonably on top of things today. The economic impact of this disruption will depend on the duration and the severity of the pandemic.

It's also probably a reality that once consumer patterns change overtime, in the next few weeks and months, consumers will find new, more home-based routines. It will likely take time to reengage them into what was previously observed as regular economic activity.

And so, it's completely premature to project with any accuracy, the broad economic implications this event could have on our portfolio at this time. We're underweight some of the problem areas as mentioned like leisure and oil.

We've never big been big investors in those areas. We've targeted investments into solid companies that we believe have fundamental reason to exist and will bring the resources of partners group as a large, responsible capable owner to help her management teams face whatever lies ahead.

At the same time, we still have our eyes open for investment opportunities. Periods of economic turbulence has historically been attractive times for private market firms to make new investments, even though we often observe relatively low levels of transaction volume during periods like this.

On the next slide, we outlined some of the advantages of operating in the private markets at a time like this. First of all, our funds have a long duration.

We can be focused and see past some of the near-term volatility and buy businesses that we believe are fundamentally solid businesses that will be more relevant 20 years from now than they are today. In addition to long-term money, we also have dry powder, which as you all know is capital that's been sitting on the sidelines waiting for attractive opportunities to emerge.

At the entrepreneurial way we run boards helps us to maintain focus on long-term objectives and strategies even if we have short-term events that impact numbers. We're responsible owners, we celebrate the jobs that we've been able to add to the portfolios over the past number of years and we're focused on being good responsible partners to our stakeholders and that matters, even I would say, and especially in a time like we're experiencing today.

We continue to emphasize long-term convictions around ESG and stakeholder inclusion. We'll speak more about that in a little bit.

It's important to us as strategic, that doesn't go away just because of fear in the public markets. We also have capital markets, expertise, resources and relationships to help our assets with their financing needs.

Our private markets firms we believe are particularly well suited to meet today's challenges. We've seen crises in the past and following each one of those prior events, we found ourselves more relevant to our clients than before.

We'll have some tough sledding in the portfolio, I'm sure, but we also have seen some bright spots. One of our portfolio companies, PCI serves as a bridge between life changing therapies and patients are people that partners group and PCI have had our sense of purpose and meaning intensified over the past few weeks, as we've been able to play a critical role in bringing necessary treatments to those suffering from acute respiratory conditions and septic shock triggered by this virus.

And in some even harder hit situations like our casual dining restaurant chain in China called Green tea, where we've had meaningful temporary store closures. Our team in China while working remotely out of their homes and apartments have been negotiating down rent payments pushing supplier terms out, extending terms obtaining incrementally financing to support the Company and our management team volunteered to forego a number of overhead expenditures and even over this turbulent time, we've been able to stabilize liquidity for the past few weeks, and we've really seen our team rally around situations like them.

On Page 10, we highlight the fact that private equity returns has historically developed in a cyclical pattern. It's not a coincidence that the cyclical highs for private equity returns for new pools of capital occurred during periods of marked economic turbulence like we're experiencing today.

Many sale processes will be shelved right now for sure as you can expect relatively low private market transaction volumes in a market like this. But we are widening our origination efforts into areas that were closed up until now.

We've had a list of public targets for example, which were previously interesting to us in areas consistent with our thematic research, but prohibitively expensive. Those may look more attractive today, if valuations remain at these levels.

We've lost competitive processes in the past to other private investment firms that may not have a capital base sufficient to support those companies through difficult times. It's a little bit early.

But, I wouldn't be surprised if you see us approaching owners of over-leveraged solid assets with capital solutions. We're not looking for B and C quality assets right now.

We're not looking for fire sale assets, but we are open for business for A quality assets if the current environment forces them to raise equity capital for some reason, or if we can provide liquidity solutions. We're looking for category winners, consolidators companies positioned to benefit from long-term structural trends.

Priority one right now is the existing portfolio, but we have a large investment engine and we've on-boarded a number of new professionals over the past few years and we'll do our best to take advantage of having long-term capital in a year like this. And with that I'll hand things over to my partner and Co-CEO André, who will speak about the client side of things.

Thank you, Dave. Good morning and welcome all from my side.

I would like to give you an update about client activity 2019 and 2020. And actually we have a tradition to start these updates with a summary of our client AGM, which was scheduled to last week in Denver.

You'll not be surprised to hear that we have decided to postpone this event to later in summer. In my update today, I will talk about, how coronavirus could impact our 2020 fundraising, but that would like to start with a very, very solid update about 2019.

Actually 2019 fundraising was strong. We attracted $16.5 billion of gross client commitments through a number of programs in mandate.

Private equity was largest contributor as the asset representing 43% of all new commitments are about $7 billion private dates. Private debt was strong and grown as well, representing 30% or about $5 billion, and real assets contributed 27% as well asset raising, last year.

On Slide 13, you see that our client base is really broadly diversified across regions and types of clients. We count around 900 institutional clients all around the world and the two charts here to show the split of our asset under management as off the end of 2019.

So, let me give you some color on the drivers of demand by country and type of clients. North America, accounted for 19% share of growth plan demand.

UK at 17%, Switzerland at 17%, Australia was notable and represented about 10% of total inflows. In this part of the world, we had loans to private debt focused listed investment trusts, which is strongly oversubscribed and kept at the size of AUD550 million.

The chart on the right hand side illustrates the split in terms of types of clients. You see that 80% of our assets stand from institutional investors such as pension funds, insurance companies, sovereign bonds and about 10% was contributed by distribution partners, which provide access to our products to private individuals and for smaller institutional lead source.

Slide 14 illustrates somehow our portfolio is diversified across the number of programs in size and just being spoken about this in the past, a key strength and differentiate Partners Group is to manage complex private markets portfolios. For example, in tailored mandates and rather than evergreen structures.

We currently manage around 300 diverse private market portfolios at different stages of the life cycle and across all private market asset classes. The two largest programs accounted for 12% of our rates on the management.

That is the U.S. evergreen and European evergreen section.

The pie chart on the right hand side reminds us of flying diversification, you see in the past without a largest client only account for about 3% of assets under management. Partners Group does offer traditional end tailored private market program.

Traditional programs such as limited partnership structures, it's a classical or historical way how investors exit private markets, all the partner groups don't offer traditional private market programs which accounted for about 34% effects on the management. Our non-traditional programs accounted for 66% of assets under management and these range from evergreen program for individuals and smaller institutions, to bespoke mandate for large institutional clients.

Let me quickly zoom in on the 26% of our as on the management contributed by evergreen. We call these programs evergreen because they have no contractual end that means they typically reinvest distributions from the portfolio.

Now if the 26% of our assets on the management in the evergreen programs about 22 billion are subject to potential redemptions. For example, the two large evergreen sources that I just described before, you don't have the option for limited inflows and limited outflows.

Both of them are more than 10 years old and we have seen strong traction over the past decade with various distribution partners. We expect inflow to slow down a bit in this market iteration and redemptions, as we'll pick up from levels he has seen in the past not in Q1 actually but potentially are likely in the quarters to come.

Net redemptions in these programs are often limited to around 20% per annum. Now, it's currently too early to tell how much liquidity will be used or the courses will come.

Many investors actually use these in these offerings to invest like the strategic long term investors, and they expect them to remain invested. So, some will be redeemed, but many will actually go through this crisis by remaining investors in private markets with Parkinson's.

But this team is here to illustrate what we do on the mandate side. As I mentioned before, Partners Group has a key strength to create bespoke mandates for clients and to manage complex private market portfolios.

And this slide illustrates three examples one each in the Americas, Europe and Asia, all three seats more than one asset class as you can see with private equity, often the largest allocation even that they have in loans and invested at different times, their portfolios will only partially overlap. They can pay them really happy about our capability to customize this mandate to meet our client specific objectives.

For example, we have achieved the net return of 12, 14 24% in 2020 which I think is a solid result and clients are really happy about that performance. Of course in the 2019, poor market for example public technologies offered an important driver of integration.

Private markets will not fully keep up with returns of public markets. Our portfolios are often composed of more defensive assets the safe to say and that is why I would expect our draw downs to be more and most central public markets in difficult markets and like you're in today.

I'd like to move on to Slide 16, regarding our guidance for 2020. Actually, for the full year 2020, we had previously guided that the expected growth plan demand for about $15 to $19 billion.

So, that we're trying to take on effects and redemptions of about $7.5 billion to $9 billion. What I can say is that, we had a strong start in 2020 and they expect to receive around $5 trillion in growth client demands for our private market solutions in the first quarter of 2020.

And with COVID-19 of course, there's additional uncertainty in the markets. We do know if knows the duration of these crisis and the corrections in public markets.

These past days have been almost unprecedented. We anticipate that future clients commitments may be somewhat delayed by the current market volatility, and the general disruption caused by COVID-19.

We have chosen to withhold from confirming out of guidance as is today. In fact, we will provide an update on the expected growth client demand and potential slowdown and since the redemptions in our next asset management announcements on July 14th.

Please allow me however to underline, the client feedback in the last days and weeks has been really encouraging. There are so many convinced that private market is a strategic asset allocation for many investors.

We do an authentic material and lasting impact on the growth trajectory of Partners Group's assets under management. With this, I'd like to end by talking about ESG's impact on sustainability.

That's a topic that is on the minds of investors and shareholders alike. The Partners Group has been consistently recognized as a leader in that field.

We do receive very positive feedback and how we translate responsible investment concept into practical and approaches to create lasting impact in a very handful manner. As the deep in private markets, we take a unique, often operational approach to ESG.

We looked at our investments and ourselves, which environmental, social governance topics are most materials to the businesses and then by operational improvement in those areas, with a real focus on results. And, we will provide a lot of examples actually in our corporate sustainability report, that will be probably soon.

I invite you to read it. It's a very comprehensive report.

It provides a lot of insight. And, you will see how senior leaders take these topics including climate change by the way, and you don't give him the importance this topic, we have decided to have a separate call on our ESG and CSR initiatives on April 2nd and you'll be invited there to participate.

With this, I'd like to hand over to Philip.

Thank you, André, and good morning from my side. On behalf of the whole firm, I'm looking forward to present you our full year results.

I would like to also provide you some sensitivities and potential outcomes and our P&L and the balance sheet, in particular to the current year. So, let us start with a quick overview on Page number 20.

In general, we had a very strong year in 2019. Our average AuM increased by 14%, management fee followed and that confirmed the continued strong fundamental growth of AuM in private markets.

Overall revenues increased by even 21%, mainly due to a strong increase in performance fees in the second hop. Our accelerated build out of our platform and successful on-boarding over 260 employees led to an increase in EBIT of 17% for the first time in the firm's history to CHF$1 billion.

Based on these strong financial numbers, the board proposes a dividend of CHF25.50 for the financial year 2019. It's an increase of 16% and in line with the profit development.

With that, I would like to provide you some more color on the 2019 numbers and give you a bit of an outlook for 2020. With that, we will move to Page number 21, where I would like to talk about the revenue composition.

I would like to talk about management fee first. Management fees are contractually recurring.

They are based on long-term client contracts 74% of our AuM and therefore, our management fees in long term close and the structures, often with an initial term of 10 to 12 years for equity and 5 to 7 years for debt offerings. There are no redemption possibilities.

Management fees are paid on a quarterly basis in advance. So, the visibility on those fees, are very high.

26% of our AuM and therefore our management fees are coming from evergreen programs. They allow as André elaborated for quarterly subscriptions and redemptions and then management fee basis is the NAV development, which is significantly less volatile than traditional public market funds.

Based on the contractually recurring nature of these management fees, we would like to remind our shareholders again that we do not expect management fees to deviate much from the AuM development which is in itself very sticky. Now, let us move to performance fee.

Performance fee amounted to 473 million in 2019, and amounted to 2.5 times the amount in the second half than in the first half. This was mainly due to a combination of strong underlying portfolio performance and successful divestment activity in the second half.

With that, I would like to provide you more color on Page number 22. It shows that out of our 300 vehicles we currently manage more than 85 investment programs and mandate we're contributing to performance fee.

They were driven by dozens of underlying assets. Each asset is part of many private market programs and mandates, and the largest contributing investment program contributed 16% of the overall performance fees in 2019.

With that, I would like to move to Page number 23, and take a mid-to-long-term view and zoom in a bit on 2020. Now, if we look at some years out, we can say that management fee will be continuing to drive our revenues for the long-term.

They are expected to make up around 70% to 80% of our total revenues in collinear. As such performance fee as a proportion of total revenues should be 20% to 30%, but that assumes a market which is favorable for exits and this assumption is all with our base case, and it excludes dislocations like we see at this point in time.

Now, if we zoom in into 2020, I would like to highlight that for the same reason, as we have chosen to withhold from confirming our guidance on the full year. We also expect most exit activities in our portfolio to be the current.

If anything, this leads performance fee in 2020, to be significantly skewed to the second half of the year. Depending on how the current situation develops performance fee will likely fall below our long term guidance of 20% to 30%, and potentially shift some of the performances in 2021.

Despite the very solid investment performance of our programs, we are dependent on liquidity events for all assets. If they are pushed out, our performance fees are pushed out.

But this is important to note they are not cancelled. With that, I would like to Page number 24 and talk about performance fees potential.

Now, this slide basically shows that our historic investment activities translated into performance fees offset time lag of 6 to 9 years. Between 2007 and '12, we invested 25 billion in private markets, which generated the majority of the performance fees we have shown you between 2016 and '19.

In sum, they were around 1.5 billion. Now, let me give you an example how this works.

One of the largest single exits contributing to performance fees in 2019 was the sale of our stake in action, a leading European non-suit discount retailer. It started as a relatively modest investment in 2011, but significantly compounded value over eight years.

Today Action operates over 1,300 stores in seven countries and across 46,000 employees and that was a fraction in 2011. In November, we signed agreement to sell Action for a transaction value of €10 billion.

We will close the transaction in May this year. This exit accounted for 24% of our performance fee and this performance and was part of many different programs.

So, irrespective of the current situation, I would like to switch to the next page and talk about future potential. Although performance fee cannot be estimated reliably, we expect significant potential ahead.

As you can see, since 2012, we invested 84 billion in high-quality private market assets, where the majority of the embedded performance has not yet been recognized. So, when markets will become favorable to exit again, this value creation within our portfolio will translate into significant mid to long-term performance fee potential.

On Page number 27, I talk about the management fee margin. The management fee margin has dominated our overall margin since the IPO.

Historically it ranged between 118 to 133 basis points and we don't expect a material change to this range going forward. On Page number 28, 27 -- sorry, let us have a look at the costs.

I talked a lot about revenues, but now let's switch to costs. Personnel costs represent about 80% of our costs and that's why they are the main cost driver.

They increased by 30% in 2019 and we're increasing at a higher rate than revenues, and that's why we need to look a bit deeper into these costs. So, we actually separate personnel expenses into two categories.

One is regular and the other one is personnel fee related. So, irregular personnel expenses increased like 24% and slightly more than our average number of employees, which grow by 20%, and that was mainly due to our accelerated hiring activities in 2019 in particular on the investment side.

So, we talked about that several times that 2019 was a catch-up year of hiring. For 2020, we expect our hiring activities to slow from our targeted level, but this is mainly due to hurdle on our execution side or from our execution side.

Our interview processes are quite extensive and require us to spend a substantial amount of time with our candidates. Now we need typically invite them into our hops and conduct detailed case studies, and without these prerequisites we cannot hire effectively as it is right now in the market.

The performance fee related personnel expenses increased in line with performance fee. So, we typically allocate around 40% of the performance fee of the firm to our professionals through our compensation programs.

So personnel expenses, which are performance fee related, highly dependent on actual performance fee regeneration. So, that makes these personnel costs highly flexible.

Now on this chart, you also observed a change in our accounting policy, which resulted in a reclassification, mainly rent related from operating expenses to depreciation and amortization. This change deflated, OpEx and inflated depreciation and amortization.

Going forward, please assume that our operating expenses as well as depreciation and amortization grow broadly in line with AuM. Overall, this resulted in an EBIT increase of 17% to 1 billion.

Now I'm moving on to Slide number 29. We continue to target an EBIT margin of around 60% for newly generated management fees as well as performance fees.

It's stand at 63% in 2019, and use to our hiring and some shifts in FX. It was a bit lower than 2018.

Our target and target margin assumes a constant FX rate. And with that, I would like to give you some sensitivities on FX on the next page.

On Page number 29, you see our currency exposure of our AuM as of yearend. Our management fee to like our AuM predominantly derived from euro and U.S.

dollar denominated programs. 38% of our cost base is Swiss francs, but we expect the Swiss franc cost base to slightly decrease overtime in relative terms, due to the further internationalization of the firm.

In 2019 the FX movements of the U.S. dollar and the Euro against the Swiss franc lead to a negative impact of the EBITDA margin of 1 percentage point.

So, if we look into 2020 and see what the FX impact could be, then everyone of you can actually make the calculation themselves. So, if all non-Swiss franc denominated currencies depreciate or appreciate against the Swiss franc by 1%, we expect the EBIT margin to decrease or increase by 50 basis points.

That said, if you look at the current situation of the FX rates right now, we could expect if they stay as long as yearend like that, and that we see another drop of 2 to 2.5 percentage points in EBIT margin. With that, I would like to go to Page number 30, and talk about items below our EBIT and some balance sheet items.

The financial results and contributions to roughly CHF60 million in 2019 and was the largest contributor to below the EBIT. Now, we and partners group invests typically 1% alongside our clients.

Now, depending on these amounts currently for these investments amongst the client amount currently to CHF700 million, CHF600 million of that they are subject to performance measures for instance, last year and they had a great performance of 10%. Now, that was an up market, if you assume for instance, a down market whatever the percentage point which is 10% minus, then this would have a negative contribution of 60 million.

Overall, we ignore these fluctuations in as they are all non-cash relevant. Our focus remains on realizations.

Now our tax rate is 13% and we expect no material changes. The profits increase 17% in line with EBIT.

As you can see, our balance sheets remain strong with a net liquidity position of 1 billion. With that, I would like to move on to the dividends on Page number 31.

So, that's why we show that dividend development over the last 14 years and allow me to say some words in our dividend policy, it is based on first, the overall development of the business in all asset classes. It is second based on the operating results of the firm.

And third, and most importantly, on the confidence in the sustainability of the firm's growth in the future, and this is why the Board has proposed a dividend increase of 16% to 25.50 per share, which represents a 76% payout ratio. And with that, I would like to conclude my presentation and hand over to our Chairman, Steffen Meister.

Thank you, Philip. Thank you, André and Dave.

Let me maybe as this is the third crisis in our last 25 years on full, make a few comments about the preparation of the thermal power industry for that crisis. The first comment, I would probably make as maybe a difference this time around compared to last time in 2008, '09 or 2001 is the level of understanding of our clients, how private market can actually outperform in just kind of situation.

I think it's fair to say that, especially in Europe, our clients in 2001 or even in 2008 or '09 was somewhat uncertain around the measures that can be taken, the resources that can be invested, the capitalist that available to actually help portfolio companies and actually strengthen portfolio companies in this kind of situation. I think many clients in hindsight after global financial crises were surprised to see relatively decent IRS, not at the level of regular IRS, but decent IRS, even out of worse was cleared by 2007, 2008.

We today see that clients clearly have understood the potential off private markets in that situation, that's why I think André talked a little bit about that confidence that we actually encounter now daily interaction with clients that our client team actually pursuits on a regular basis and see relatively positive feedback even when it comes to new commitments this year or during that crisis. I would probably mention a couple of other areas here.

One is that, we have over the last 25 years as a leadership team and many actually of the senior leaders are still the same as over the last two crises. We learned a lot about how to actually maneuver through that crisis.

We have certainty the best understanding today when it comes not only to our own operations and dealings with clients and investment programs, and to some of the structural features that André had talked about. But maybe even more importantly I think we have very clear idea how we actually spend our time, our involved total resources, and our external resources and our capital to make the best out of the potential of our portfolio companies.

And let's not forget, this becomes sometimes a bit of a relative exercise relative to other companies and private markets and public markets. And as such, you probably see us quite confidently talking about long-term potential not only of our portfolio, but also the strategic initiative that I want to now talk about that we is about precisely that stakeholder impact that we want to better build actually in the next few years.

So, that brings me to a Slide number 33, which is around the context of his new initiative. And you have seen similar slides before we have seen our markets systemically outperforming public markets, and you see that for the long-term, you see it for the bull market of last five years and maybe interestingly, you don't see that on the slide, but especially also in the down periods like today.

And with that and turning to 34, I mean, we have seen this tremendous success of the industry growing very substantially at a time actually when a number of listed companies have come down and sometimes people ask the question, why would businesses below a certain size, like 5, 6, 7 billion enterprise value still be in the public market. But there is a but, and the but is on Page 35, we clearly see that all that investor excitement that we have seen and we see actually in some of these quotes or that slide does need some more mixed public perception in that meantime.

And this is really what brings us to that question on 36. I mean, what will it take to sustain that growth also in the future?

So to bring the industry from 7.5 trillion to 15, or to 20 trillion to truly viable the property markets and I think the answer is twofold. The first one will not surprise you.

It's continuing with our outperformance to preserve our performance in the environment that we have. But the second one might be a newer answer and the more relevant answer going forward is around creating more impact for stakeholders creating also returns for employees, for instance, an output 40 companies.

So, this is what we talked about when we talk about being better owners in problem market. It's really in both dimensions.

It's around the beneficiaries, but it's also about the employees on the firm's. So, let me just very briefly talk about the first part because that's something we have extensively covered in last few years.

Actually, about a year ago in our annual result presentation. We talked about what we believe are key developments for the next decade that we should be aware of is around economy challenges around disruption that comes with risks, but also opportunities that comes with property market dynamics that can help us actually.

But also our chosen in private markets, but we have presented to you in the past, that's Page 38 is showing to you our answer to this. Diversity investment formula, which is a very extensive process that starts with research around transformational themes and sectors, the thematic sourcing many years it has sometimes of buying assets.

It's the actual value creation that is at the core of a lean assets and it's, of course, leveraging the platform like the best conglomerates have done in the past two or three decades, when it comes to being very effective in working with our assets. And the second pillar that Dave talked about is the ownership access to governance, the internal governance of these assets.

And let's just recall here, this unfair advantage that we have this pool of operating directors and the management team members that we can actually assign to these companies with a value of 1, 2, 3, 4 billion enterprise value that is unusual for these kind of businesses and gives us a very, very big differentiation to many of the other assets in family businesses or in public markets. Now let's move to the second question which might be more relevant as a differentiation going forward the stakeholder impact.

And so it's on Page 40, I try to allocate these quotes in a more systematic way between the beneficiaries and the stakeholders. So, to the wider public.

I mean, you see some pretty controversial questions around our industry these days and of course, we have possibly, I mean that we've taken the most controversial ones we could find, and do delve into that question on Page 41. I mean, it's the equity, as bad as some people feel or fear and I have to be confidently told you, no that's not the case.

There have been a vast amount of stats around growth of businesses sales and EBITs a job growth actually we have on this Page 41 presented our own numbers for the first time in our performance of job growth of our own portfolio companies compared to the market using the standard toward sectors as a proxy here, this involves our performance. And that will be very surprised if that looks very different for many other players in the private market industry.

But also, as if you move on Page 42, on the soft segment there is more social considerations. Our industry is maybe not as vocal, as for instance probably markets.

But I think very, very focused actually on these activities. At each point in time, we have dozens of ESG initiatives that we pursue on engagement side of things developed and financial access.

Diversity is a big topic for many years now for 40 companies health and safety, also families support. The one question that we started to ask ourselves, though and I'm moving to Page 43 years, if we compare our activities, what we believe is the benchmark companies in the public markets, both with our own activities, actually as partners within these different dimensions, can we still claim that we actually outperform and I think this is where we probably have to take a step back and agree, no, we cannot.

I don't think we can claim today that we do outperform actually, if we take the best benchmarks that we find these categories. So what is the difference?

It's certainly of willingness. I don't think it's the lack of intention.

It's actually quite straight forward. It's cost.

Ultimately, many of these initiatives in these dimensions, they will come with cost that today I think that the private market industry is often not spent for the benefit of stakeholders, and that brought up over the last year of the lot of concentrations internally and discussions with other stakeholders, the operating directors, the CFOs of portfolio companies, management teams to a new consideration. It's a paradigm shift that we suggesting here.

So, what we'd like to do is discussing with our LPs to systematically allocate going forward a portion of value that is created between the firm the management teams. But importantly the employees of the portfolio companies and actually allocate that value or percentage of that for such stakeholder initiatives that go beyond what we always do on an ordinary basis in terms of ESG initiatives.

So, these benefits that could range from educational initiatives, they could have an environmental component. They could be in a broader social universe of initiatives.

They can just mean financial support or sharing actually at the exit, a part of the value creation with employees of the firm. All of that means that, what we suggest is systematically using some of that value that has been created for the benefit of those, the employees who have been at the core of actually creating that value.

Now we're talking about percentages of the value creation, which means that, it will not change massively the EBITDA numbers or growth numbers for the portfolio companies, but it could actually come with a lower EBITDA growth. Hopefully in some cases we will also see some higher valuation for these kinds of assets, given that we build the apps convinced of that better firms with these measures.

You see on the right hand side, I mean, in a systematic way, how this would overtime unfold in a typical ownership situation. So, if we buy a new investment, we will typically start with the broad building and value creation definition measures before the value creation projects start.

The ESG initiative starts quite early on, and as we gain visibility over the EBITDA growth, the crystallization of that value creation, we would make these funds available. This is second concentration that was developed over the last 12 to 18 months and this is around the financial protection and downside case.

We have asked ourselves a number of times, how are we going react in a real bad situation, if we ever had a real bankruptcy situation. So far, we didn't have that, but if you think about situations like Toys "R" Us and others that have been somewhat widely publicized in the press, that is a legitimate question as to what is the right reaction in terms of severance payments and so forth.

And we came to the conclusion that, we should consider carefully to provide hardship funds that are sponsored by a kind of an insurance peer out of our portfolio of assets with some participation of our own term, hardship funds that can be used if there should ever be a case where these payments are needed to make severance payments to make hardship payments to employees, which we believe would be the right answer to make sure that also in this aspect, we really can't claim that we can be better owners than what you would find elsewhere in the industry. Now, as I said, this is a consideration which will be discussed with LPs and we have a pretty strict conviction that we want to there.

But there needs to be detail to be discussed with LPs in the future. So, if you move on Page 45, you see somewhat of a journey that we will go through intermediate steps to the long-term in this project.

We will broaden the discussion that we already started with investors with offering directors management teams and we will have that structured dialogue certainly with a goal to have a very clear understanding by invite our next big investor meeting that is scheduled for June. We'll develop intelligent concrete initiatives require progress in depth, and very importantly, a reporting framework because our investors we want to understand what kind of impact they actually create and what the actual cost if there was a cost on a net basis was actually incurred.

And will then formalize implement initiatives and as important as always in private market is about accountability. So, we will hold ourselves, our board accountable for these initiatives.

That's new thinking as a new approach, exchanging some upside for the benefit of employees. We're convinced this is the way the industry should go.

We're convinced that our investors, then very largely strive for that proposition and we clearly hope that our industry also largely follows that new concept of how we should think about the stakeholder impact. As Dave said before, it is actually the time to think about stakeholders and because it's a long term initiatives that are the actual art, we will pursue that independent of the or notwithstanding the environment, or maybe even more so because of the environment as it feels very opportune and timely to talk about these things.

So, with that, we conclude on the formal part of the presentation, and I would suggest we open up for Q&A for some time.

It's Arnaud Giblat from Exane. I've got three quick questions, please.

Firstly, could you talk maybe a bit about the investor appetite in the context of a potential denominator effect? If I remember well, during the financial crisis, the mark-to-markets taken by the private equity players were generally quite low when equity markets came down 50% and the consequence was a lot of appetite dried up because mechanically, the allocation to private equity rose.

So how -- what was the feedback from investors on that point? Secondly, on your guidance in terms of on fund or your withdraw guidance -- with regards to AuM development and growth this year.

I'm wondering how should we think about a slowdown in realizations? I mean, clearly, if you have low realizations.

You probably have a higher invested capital and therefore, lower levels of tailwind then in your funds. So could you maybe go through that dynamic?

What proportion of AuM is now based on -- has passed its investment phase and is now on invested capital at cost? And my third question is with regards to how well your portfolio companies might be doing.

Could you maybe give us a bit of an indication in terms of what proportion of your portfolio might be coming a bit close to covenants? Maybe could you give us a bit of an indication what proportion of your deals have been done on a covenant-light basis?

Thank you for your three questions. Maybe I take the first one, Philip second and Dave third.

So the denominator effect is really a phenomenon that we have observed and probably also will observe in this correction. And you accurately described how this works, right?

So some clients will potentially postpone like some of these investment decisions because they want to see how this crisis works. That's a certain portion of the clients.

But I believe many, many large institutional clients like sovereign wealth fund, for example, they don't really do that math. They will continue in my expectation.

They will not really kind of like have the denominator effect as a steering variable to guide the private market allocation. The third answer is that I believe many clients are still building up.

If they have the confidence that Steffen described that they will start to allocate potentially more sizable amounts going forward. But the denominator effect does not affect those clients that are building up their portfolio.

And that's a fourth answer, which is maybe my personal lesson learned from the -- when TMT bubble burst and I had joined Partners Group back then, like back then, there was quite a bit of stop and go. A number of institutional investors have decided to stop committing, wait for a few years and then reenter the asset class.

I believe over the past two crisis, many institutional investors have learned that a stop and go policy is just not an ideal way to build up, diversify exposure to private market across calendar and vintages. So if institutional investors remind themselves of the disadvantages of a stop and go policy then I believe the impact of this denominator effect is going to be much less substantial than you might worry about.

That's question one. Philip, you want to say the answer?

Maybe. Arnaud here Philip speaking, absolutely, yes, in this market environment, and this is what, as Dave said, our realization is slow.

Now that has -- or can have several impacts. But for one, and this is what I would like to stress again.

The majority of our AuM is based on so-called close-ended long-term structures, and they have no -- they don't react based on realizations but on tail-downs. And we give you guidance on tail-downs and they come irrespective of years where we have high realizations or low realizations.

The tail-downs is our mathematical formula, which will come every year. Now realizations have an impact on some of our evergreen structures, right, if there are lower realizations, right, then you keep on and hold on longer to these assets.

But I'm maybe not getting your point right here. On performance fees, it has a direct impact because we need realizations in order to show performance fees.

And if -- that's why we also give the guidance that performance fees are shifted towards the second half of the year. And the third question may be, Dave.

Yes. And to answer your specific question around how many assets do we have that are close to covenant issues.

We have two portfolio companies, in particular, that we're working very closely with and have been working with them actually for some time to help them mitigate some performance issues that they've been having. It's very normal percentage of a portfolio, relatively small percent of AuM, less than 1% of our companies are in that situation.

And fortunately, we have the vast majority of transactions, particularly vast majority of transactions completed in the last three years that have covenant-light packages.

Maybe on the performance fee potential, which you showed on the slide. The question of postponing versus canceling the realization, and maybe you could give us some feel on how long this situation, this downtrend need to be once the potential might start to be impaired?

Second one on distribution partners, i.e., private individuals, so the semiliquid part of the AuM. This part has again gone up from 16% in the first half to 18% at the end of the year.

Obviously, this is the part where redemptions might go up. Have you seen any signs there already?

And can you maybe discuss how these redemption procedures actually work for such semiliquid offerings?

Yes. Andréas, maybe, unfortunately, I don't have a real answer for you.

It is simply too early to tell. I'm very sorry about that.

We are two weeks into kind of a severe uncertainty now what we have seen in the stock market. And it really depends on how the markets react and how we solve this whole COVID-19 situation and how fast we can get over it, sorry.

In semiliquids, it is of products and programs that are really focused on the portfolio construction. So they have cash position, they have like syndicated loans, for example, they have listed equities.

And generally, these products do offer for liquidity over time. Now for many of them, like the first quarter or even the first half is passed.

So like the redemptions in 2020 might be more moderate than what you might hear. But this portfolio has been constructed in a way to really accommodate this liquidity over the quarters to come.

Now the feedback so far is really very quiet. I believe this correction is new to everyone, we have not seen like a pickup yet in terms of redemption by clients.

I have two questions, please. First of all, on the private debt side of plans, can you share your views on the current situation in the private debt markets?

Where do you see risks to your portfolio as this CLO strategies perhaps syndicated deals or rather in direct lending? And on the flip side, where could the current situation create some opportunities use?

Could this actually lead for a bit more rational behavior in some pockets of the market? That's question one.

And second question is just a follow-up on allocations and perhaps the denominator effect. Could you be a bit more specific and maybe highlight the client types or segments where you see, let's say, elevated risk of perhaps somewhat higher redemptions or lower allocations, that would be helpful.

This is Dave. I'll cover the private debt side of things.

So obviously, over the last couple of weeks, we have seen spreads increase by 200, 300 basis points within the debt markets. And we have, I think, actually on the CLO side of things, been a big beneficiary of that.

We've been one of the only CLO managers to have priced CLO in both Europe and U.S. this year, one of very handful.

We're, I think, in good company there. And we priced those CLOs very tight in the market, and we've been deploying that capital into -- over the last couple of weeks.

And I think those strategies are going to perform very well for us. Now we do have to watch for liquidity issues within the debt portfolio, the same way that I described we're watching it in the equity portfolio.

And where we have our debt -- largest positions in the debt business that we're going to be running through later this week, 45 assets where we're going line by line, talking about where each one of those stands from a liquidity perspective. And really managing that asset by asset, I think what you really have to watch out for on the debt side of things are defaults and events of loss.

We're long-term investors. We're not traders, by and large.

We do have a broadly syndicated loan portfolio. But for the most part, we're holding those loans through to maturity.

And so we really have to watch the liquidity side of things. And I do think that there are opportunities that continue to exist, obviously, spreads have increased.

We have some capital that is available to be invested into those situations. I don't see any new issuance activity happening at the moment.

And I wouldn't expect for any new issuance activity to happen until things calm down.

In terms of response to the denominator effect, on Slide 13, we had visualized like our split of assets under management in terms of types of clients. If I just go through the slide, I believe sovereign wealth funds, as I already mentioned, they are very strategic long-term allocation to private markets.

I believe they will almost respond slowest or latest to potential denominator effect. If I look at insurance companies, they really count on, for example, infrastructure to generate yield.

So I believe here, the argument might actually be the opposite, and I expect continued demand in private markets, for example, by insurance companies. If I look at family offices, these are often -- risk, they have a risk-taking mindset.

I believe they will naturally just observe opportunities and might move very nimbly in terms of private market allocations and by no means, this is certain that it will go down. Then we have 50% of allocations to public and corporate pension funds.

And what I can tell you from the last crisis is that in these times, especially to pension funds, you need to really intensify communication and reporting. Partners Group is very transparent in terms of like position or portfolio reporting, risk metrics, the risk precisely just communication and the transparency that has helped institutional investors like pension and corporate funds, public pensions to keep up their exposure to private markets.

I just got a couple of questions. Firstly, on your liquid and semiliquid funds, can you give us an update in terms of performance year-to-date, given that you're charging the fee, management fees on NAV?

I assume that there is a NAV that you've updated. Also, another question is on the breakdown in terms of your investment portfolio.

I think Dave alluded to the relative exposures by sector, but I was just wondering if you have the exact breakdown by industry and sector.

So the first question is about the performance. I will leave this question again, it's just too early.

We have updating valuations. I cannot provide an answer how this will look like in March, but certainly, we're going to run our valuation procedures in a very professional manner, and things will then be released in April.

Dave?

And we do indeed have a detailed breakdown of our portfolio. Maybe I'll just highlight the largest two exposures.

And then happy to follow up with any follow-up questions. But software is the largest exposure outside of real estate, which we have as a separate classification, which is 14.7% of our exposure.

Software is 11.3% and health care, health care services is 8.9%. Those are the largest exposures.

And oil and gas, do you have a percentage there?

Yes. So oil and gas is 1.4%.

Oil and gas services is 2.2%.

Just a couple of questions. So just in terms of the market, I guess there's quite a lot of opportunities there, given where valuations have fallen.

Partners clearly has, I guess, a significant amount of dry powder. I think you have roughly about a year of dry powder.

Just what's the sort of strategy at Partners? How quickly do you think to move?

Or do you see how this progresses over the next few months? Just sort of understanding how Partners sort of behaves perhaps in the global financial crisis.

That's the first question. And then secondly, just in terms of the impact investing, that's clearly a focus for Partners Group.

I get the implication of that one potentially could lead to perhaps slightly lower net IRRs. So you've got to invest a little bit more into that business.

But is this something you're seeing from your investors? Are the LPs saying that we want to see more ESG approaches and impact investing from their asset managers?

Great. I'll cover the opportunities in the market because we are a long-term, long-duration investor, and I do think that with the amount of short-term thinking that exists in the market today, we will see opportunities.

As mentioned, there's a couple of areas where we're focused at the moment. The first is for public to private situations in sectors that we've previously identified as being structurally attractive through some of our research.

And we do have a list that we've been working off of historically but never found quite the right window to invest, and we are dusting that off and starting to spend some time on those opportunities. The second is around opportunities that we have pursued in the past, businesses that we know really well.

Businesses we've been through due diligence on, but been beaten by competitors in the marketplace. But maybe those competitors don't have enough capital to support those businesses during periods of -- period of market dislocation like this.

And we're currently preparing to approach several of those owners with proposals for capital if they should need it during this period of time. But we are focused on really high-quality businesses, so A assets.

We're not looking for -- we're not bottom-fishing. We're not looking for distressed or trouble businesses.

We're really looking for high, high-quality businesses where we can make a long-term investment. Steffen, you take the second...

And maybe I can take the second -- yes, sure. So let me quickly talk about the clients' perspective on this.

I think what's fair to say is actually two things. First of all, I mean, ESG sustainability impact has become a very, very significant topic, I would say, across the investment universe.

And that's certainly also true for our investors. At the same time, it is also fair to say that people invest in private markets, first and foremost, because of the returns, okay?

So unless we can create still that outperformance and very significant returns compared to public markets, it will not be good enough to just demonstrate good actions with respect to employees. So what we're suggesting here is clearly that we absolutely do not compromise on our, I think, ability we have shown over the last years to actually provide these outperforming returns compared to public markets.

The amounts we talk about for these stakeholder benefit programs are percentages of EBITDA growth. So it might, in some instances, for instance, to give you a little bit of directionally sense, to, for instance, bring a net multiple on investment from, let's say, 2.6 to something like 2.4, 2.45.

So that's the kind of dimension. That will be in a situation where the valuation would not be adjusted for the fact that we have built actually better business.

So we're not talking about very substantial changes. But the discussion with the investors is still important because we have fiducial responsibility towards these investors.

And so it's only in a dialogue with LPs that we can ultimately ratify, I mean, the precise performance of these programs. I'm absolutely convinced.

I mean what's happening in today's society in the world, especially to the younger people, I mean, I would be very surprised if our investors would not clearly support any such program as long as we can actually keep up the outperformance at a very good margin compared to public markets.

I had a question on accrued income, which has increased quite substantially above 600 million I calculate. I just wondered why that balance has increased to such an extent and if that implies that a lot of the performance fees are coming from unrealized as opposed to realized.

But I wonder if you could comment on that, please.

Yes. In private markets, you typically have two events, right?

You sign a transaction where you want to exit and then you close typically 3, 6, 9 months later. And that is the case also for Partners Group.

So we had a lot of realization, especially in the second half of 2019. And that brings forward a lot of closings into today's market.

With whether or not our transactions, we have a net clause embedded or not, unfortunately, they are part of the negotiations, and we cannot disclose these facts. But we feel very confident that we will close these transactions.

And I presume Action is a large part of that, given that it is due to close in May, I think you said?

Exactly. Yes, look, there's more than Action because especially when you have the six months delay between closing and signing and closing, there you have a bit more assets which are about to close than in Q1 and Q2.

But we are pretty sure that they will happen.

The first question comes from [Daniel Albrecht], and he was asking if we could please comment on the risk profile of various international, in particular, Asian investments in connection with the new virus development and how this will be influenced?

Dave?

Yes. So I'll -- I'd be happy to cover that.

So we have watched the current portfolio that we have in place. And again, it's not huge exposures in China, for example.

It's 3.8% of our portfolio. But we have watched very carefully over the last number of weeks since end of January.

As the virus has had an impact on the portfolio and then the recovery that we have since seen, as mentioned, one of our holdings there has fully recovered to pre-crisis levels. And we have a few other assets that are still building back to those pre-crisis levels.

And so we have not been actively looking at new investments in some of those particularly hard-hit geographies. I think we're still waiting to see how the environment develops over the next coming weeks and months.

The next question came from Shamoli Ravishanker from Morgan Stanley. She asked if there are any -- is there currently any clawback risk?

And if not yet, how far down the line does it become a concern assuming current environment extends?

Yes. Shamoli, it's me Philip here.

We apply very conservative tests on our portfolio, which need to go or the portfolio needs to develop far, far, far more worse in order to trigger any clawback right now. So there is right now, even though you have seen this drawdown in the public market, we don't expect any clawback risk.

So the next question comes from [Rob James] from [PI Media]. He's asking if there are any contingency plans in place to delay live fundraising processes, if necessary?

And how do we think that coronavirus will impact your secondaries investment program?

Well, in relation to fundraising, like what we've learned like from the global financial crisis is that, of course, like as a GP, you want to be mindful of the constraints on the LP side. For example, at this point in time, you don't want to issue too many capital calls or too substantial capital calls because maybe actually also staff of clients is working from home.

So at Partners Group, we are very mindful of like these lessons we have learned from the past. I believe that our business continuity is in place to make sure that we can process all the client interest and also the investment deals that are on the horizon, but we are confident that also on the client side, it will be smooth weeks to come.

And with regards to opportunities in the secondary market, I think our secondary team is ecstatic about these market developments. As many of you are aware, volatility very much plays into the favor, the opportunity set for secondary buyers as liquidity needs increase, the relevance of that asset class and investment type increases.

And our secondary team is anticipating a large spike in opportunities at attractive levels coming their way. And so we're preparing for that.

We haven't seen a huge increase yet. I think it's a little too new, but there's certainly that potential embedded in this market environment.

Good. I think that actually closes our call.

I think this was the last question. And as always, of course, I mean, Philip and his team, they are ready to answer any further questions that come up, and surely also Dave and André in some of their bilateral meetings and calls.

Thank you for your time. Thank you for your interest, and we hope to have some discussions, maybe not physically, but over the telephone in the next few days and hope to give you as good of a sense as we can to tell you about our feeling of the current situation, how we are ready for this situation.

But just to mention this is, again, its confidence, I think, that we go into the next few weeks and months, and we are obviously convinced that we will actually get out of this crisis in a strengthened way as we have done so in the last two ones. And with that, I guess, we wish you all good days, and talk to you soon.

Bye-bye.