Pantheon International (LSE:PIN) — Interim Results

0:01 Good morning, ladies and gentlemen, and welcome to the PANTHEON INTERNATIONAL PLC Interim Results Investor Presentation. Questions are encouraged. They can be submitted at any time via the Q and A tab. This is situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish your responses where it's appropriate to do so on the Investor Meet company platform. Before we begin, we would decide to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful.

0:32 And I'd now like to hand you over to Charlotte Morris. Charlotte, good morning. Hi there, good morning, everyone that's that's joined us today. For any of you that haven't met me before, I'm Charlotte Morris. I'm lead manager of PANTHEON INTERNATIONAL and a partner at PANTHEON who are the the manager of PANTHEON INTERNATIONAL. I'm sure some of you have have joined these webinars before, but before getting into some of the detail about PIN specifically, wanted to just spend a minute on PANTHEON that is the the manager of PANTHEON INTERNATIONAL. We've been around for a very long time investing in private markets for more than forty years. In particular, private equity, that was the start of our business back in 1982, and PIN has been around since 1987. So it's really been part of PANTHEON's DNA for a very long time. We're a global manager, so you can see here offices around the world. We manage just under $85,000,000,000 of assets under management across our different asset classes.

1:31 But what we'll be talking about today is the private equity part of that and PIN in particular that, invests alongside PANTHEON in the underlying transactions. So maybe just to get straight into it and as a reminder for for some of you, but, for those that that aren't familiar, just to give you a flavor of what PIN's portfolio looks like. This doesn't tend to change dramatically from period to period. This is quite similar to what some of you may have seen at the end of, last year's annual reporting period. On the left hand side here, we invest in private equity in two ways, through funds and through what we call here directs, a combination of two different types of underlying, deal that we do. So those are directly into companies. The funds are positions that hold a portfolio of companies. But through these different wrappers, we're investing in a portfolio of high quality private companies.

2:28 It's diversified, and the the following three pie charts here will give you a sense of, the makeup of the portfolio. PANTHEON focuses on the smaller end of the private equity market. So you can see here about half the portfolio is in small mid market buyout and another quarter or so across growth and venture. They're important components of the the portfolio. About a quarter is in that larger end of of the market. And then moving on in terms of geography, this is a globally diversified portfolio. So more than half the portfolio in North America, solid component with a third of the assets in Europe and then other global and Asian exposures within the portfolio. And then finally on the right hand side in terms of sector diversification, we do have a diversified portfolio.

3:18 The top 500 companies make up around 80% of the the value of the portfolio. So there's some concentration there but not, you know, beyond a kind of diversified portfolio. What you can see here though is that half of the portfolio is split across technology and healthcare. We'll come back to this a bit later. There's clearly a lot going on within software specifically as a component of technology. That is about 26% of our portfolio that's actually in software businesses. And with both of these sectors, what we're looking for there is businesses that have quite a sort of resilient or bit more defensive profile to them. So in practice, that often means companies that have created some customer stickiness. They're providing something that's really essential for their, customers.

4:09 And businesses where you have a bit more of a kind of recurring revenue model that tends to be so impacted by cycles. And in some cases particularly in healthcare, you've got some secular trends and tailwinds that can support the growth of those businesses over time. So moving on to just kind of straight up front talk about the performance. What we've done here actually is roll forward the performance to the end of February. So you're seeing nine months rather than just the half year period. By the time we get to, the road show, often feels like the November point is pretty out of date. And there's there's been quite a bit that's been happening in the market since November. So we've rolled this forward to February. It's quite in line in some ways with what we saw at the half year. So the performance here over the nine months to to February, just under 5%, which is similar to what we saw in the half year to the end of November.

5:04 But what we've seen over that period since then is that the positive impact that we had from FX that was contributing over 2% of the five movement in NAV per share over that six month period has receded a bit. So the FX impact here you can see on the right hand side is about 1.3%. And the performance coming through from the underlying assets has increased. So about 4% coming from underlying valuation movements and bits of income coming back from the underlying portfolio. So that is an increase in performance from the last full year period, demonstrating that we're starting to see the operating performance in online companies starting to come through in valuation gains. But when you look on the left hand side here, you can see that over the one year, the three year period in terms of NAV performance, it has remained quite muted.

6:00 And it's in... Although it's in line with what we've seen in the market when you look at the Cambridge private equity benchmarks, it is lower than what we'd expect over the the long term. And you can see across the top there, the five year performance, ten year performance since inception, are more at that kind of 11, 12% type return, which is what we'd expect over the long term. There's been quite a challenging, period over the last few years, three, four years, both in private equity, but also clearly in the wider kind of macro picture. And if you're interested, there was a webinar that we held few weeks ago now at the end of of March and there's some slides. Some of those we've included in this presentation, but there's further detail looking back over the past few years and comparing that to what's happened in the market on on the website.

6:48 On the second row here though, you've got the share price performance. Now over this period, the the nine month rolled forward, we're looking at sort of 10 percentage type performance in the, going back over last year. If you just look at the half year period, that first six months to November, we saw just under a 27% increase in, share price performance over that period, reflecting the narrowing of the discount that was at 40% at the end of the last financial year at the end of May twenty twenty five. And then at the end of November had narrowed into 28%. That continued to narrow actually through the end of last year to about 26% discount at the end of the year. It's come out again a little bit, and we're sort of trading around 30 just inside 30, reflecting really the different macro and, wider geopolitical events that have have taken place over the course of the last few months.

7:47 So in particular, the the market noise in public markets around AI disruption and the impact that might have on software businesses and more widely the the ongoing conflict in The Middle East and, you know, the uncertainty that that brings to the market. One of these slides here is from the webinar that I just mentioned. So looking back over the history of our performance, what we've done here is set out in two time periods, the performance by the different investment types that that we are participating in. So the top half here is looking at the longer term performance, mature performance, and what we'd expect over the the long term and what is more normal for a vehicle like PIN. So when you look at primaries and co investments that make up about three quarters, a bit more than that, of the the portfolio, You can see there that it's been really good performance over that ten year period where you do see some maturity to the the performance there.

8:48 In the bottom half here, you're seeing the performance over the last four years, and that really is the period that has been more challenging. So there's been a bit of a slow start in terms of the primary commitments that we've made. That's both in terms of deployment being a little bit slower than you might expect, but also slower performance, particularly for funds that we're through 2021 and early twenty twenty two where the valuation environment was quite high. And we've seen a moderation in multiples coming through and being a bit of a headwind on valuations. The co investments have had a stronger start, but across the board here, you can see that IRRs are relatively weak. And that is reflecting what I'm sure many of you will heard of...

9:35 Have heard about in the market that there have been longer hold periods experienced across private equity reflecting a more challenging exit environment and certainly, you know, that that need to moderate valuations and align buyer and seller expectations in terms of, where a company should should trade. So if we dig in a little bit more into, kind of vintage timing. So I just touched on the 2021 and 2022, and that really has had a... An impact on on our performance. We spent a lot of time, and I think I've talked about this in in this format before. We spent a lot of time last year, PANTHEON alongside the board looking at strategy and performance, digging into what has worked, what hasn't worked.

10:28 And one of the things that we have identified was this sort of over investment in what has turned out to be peak vintages 2021 and 2022 and, less exposure in those subsequent vintages. Now part of that has come from in recent years investing a significant amount of capital into share buybacks, which is obviously accretive for investors and way of capturing the value that there is in the the level of discounts that the company is trading at. But it does divert capital away from new investments and you can see that coming out in the vintage diversification of the NAV of of our portfolio. These twenty one and twenty two vintage assets were invested in a period where, valuations were higher.

11:22 What we have seen, we'll we'll get to this in a couple of slides, is that over the last few years, the valuations have moderated. So these companies have been needing to grow out of those higher entry valuations, and you can see that reflected in the sort of more modest, returns that we're seeing across the different investment types on these deals that were done during this this period. That doesn't mean that the underlying assets are weak or flawed, and we'll we'll get into a little bit more of the performance of the underlying companies. But it does mean that there's been a valuation headwind to work through. We believe at this point though, that we've seen most of that valuation movement come through. And that we're at a point in the cycle where we should start to see returns driven more by the operating performance of the underlying companies.

12:12 You can see here also if we turn off take a step back and look at primaries as an indicator of some of the themes that we've seen over the past few years. In 2022, we saw a similar sort of, shock to the system as we've seen at the beginning of this year around technology and a rerating evaluations there. So that impacted in particular, venture and growth where we see a lot of the technology assets within our portfolio. Coming through 2023, that moderated. So you saw, muted returns across the board as you started to see the impact of things like rising interest rates, inflation that had started to take effect in 2022, but really started to, impact returns in 2023.

13:00 2024, and these are calendar years that we're looking at here rather than PINS financial years. 2024 saw a recovery across all different stages, and in particular, in venture, a bit of a bounce back there. And 2025, we've got first half data, that we're showing here. There was a bit of a pullback there again sort of valuation, but particularly for PIN, an FX headwind coming off the back of the tariffs that were, early on in 2025. So you can see here that there've been these different themes throughout the last few years that overall have been resulting in that more muted performance, that we're seeing across private equity, not just in PIN's portfolio, but across the market more generally.

13:47 So then the question is how do we think about where we go from from here? And what does this mean for how PIN is positioned and where we might expect performance to to go looking forward. And there are a number of things that we have been focused on over the last six, nine months, back through to the back half of of last year. So I talked a little bit there about the overweight that we have in '21, 22 vintages, the underweight in the subsequent vintages. And that kind of more cyclical timing of investment deployment is something that we spent a bit of time last year thinking about. And we announced in September of last year as as many of you will know, a shift towards a more active capital management approach to managing the portfolio and the vehicle. And that means that what we would expect to do more going forward is deploy capital more consistently through the cycle.

14:47 And the impact of that will mean if we're anchoring more towards having a consistent deployment pace annually that we would expect gearing to come in and out. So during the sort of trough of the cycle, you would see gearing at its peak in a net debt position. But as you recover through the cycle and go into what turns out to be the peak, you don't often know it at the time. But as you go into those sort of more, peak years where you see a lot of capital coming back from the portfolio, instead of just redeploying all of that into the portfolio, we would expect to build in that net cash position. And that's quite different for PIN. So up until 2024, we had managed the vehicle with a net cash position over time and that obviously creates cash drag. While there is some cash drag that comes from having a net cash position at periods of the cycle, This sort of evolution of gearing coming in and out, our modeling indicates will will generate better performance, throughout the the cycle.

15:46 So that's important, refinement of how we manage the vehicle. The next step of that that we announced in the interim report that was published at the end of February was how that plays out in terms of our investment strategies specifically. And there too, we are refining, refocusing what we're doing in terms of investments to try and drive more NAV performance and investment performance within the portfolio from focusing in on what we think of as a kind of core group of, managers around 25 managers, narrowing that down from around 90 relationships that we have in the portfolio at the moment. Some of which we've already stopped investing with, but really being a bit more focused around the groups that we believe as we think about the kind of changing in environment and how private equity can continue to generate returns going forward, there are some groups that have a strategy that is differentiated and can continue to generate really strong returns in this new world, in this new environment.

16:47 And there are others that maybe groups that have relied more heavily on using debt that was really cheap in the run up to that 2021 peak. Those groups might be more challenged in generating returns going forward. So focusing in on the groups that we think will have, the strategy, the people, the ability to generate the kind of private equity returns that that we would expect over the long term. Then on the next, box here on the left hand side, can see another important area of focus for us is becoming a more active seller of assets in the secondary market. We have done this over time. We've sold portfolios many times in the past periodically, but typically focused a bit more on tail end assets and trimming the portfolio.

17:37 What we expect to do is more strategic sales of assets that can help us accelerate that reshaping of the portfolio towards those, core managers that we want to back going forward and, you know, selling some of the interest in managers that we're already not supporting going forward. But also it means that we can more actively manage the the pace of realization from the portfolio. So that during periods as we've seen in recent years where the distribution rate fell quite meaningfully relative to long term averages, we can be more proactive in terms of generating liquidity from our portfolio. You need to think carefully though about how you generate that because because we have different types of investment in the portfolio, they're not all readily saleable in the secondary market. There's a deep market for fund positions in the secondary market. But selling direct assets isn't as a deeper universe of of buyers and there isn't the same kind of interest and appetite for those assets and pricing for those assets. So there are parts of the portfolio where we can look to more proactively use the secondary market.

18:50 So those two parts of this in particular are aimed at improving, the organic performance if you like of the portfolio and the things that we have within our control to drive investment performance. There are a couple of things here that we've focused on that are on the cost side. So the the headwinds and the, expenses that take away from the performance that we generate from the portfolio. And there are two important things that we've done in the last nine months or so. One was in October last year, we refinanced the revolving credit facility to get better commercial terms while extending the tenor of the facility, and that has resulted in about a million pound saving. And then also on our cost base, we negotiated the management fee with the the board during this period and have come up come up with this new structure that is far simpler than what we had before.

19:46 Our previous fee was based on the value of investments with different tiers at different levels of NAV, a fee on unfunded. It was a lot more complicated. And what we've done here is really simplify that to a flat 1% fee of the company's NAV that is very simple to understand and project going forward. That has resulted in around a 19% reduction in the the fee paid to PANTHEON to manage the the vehicle. And that's when you compare last year for the financial year 2025, compare the actual fee that was paid over that year to what it would have been under this new structure. And then a couple of other initiatives that we've been working on have been areas of focus for for us alongside the board.

20:35 Capsule allocation is an important one and how much of the cash being generated from the portfolio goes into new investments relative to going into share buybacks. And, obviously, while the discount remains wide, it's an important priority for the the board to be, investing capital in buybacks. We changed structure of the, capital allocation policy in September last year. And instead of having, an approach that was based on a percentage at different discount rates relative to net portfolio cash flow, again, it was quite a complex structure. We've simplified that with 20% of gross distributions going into a pool that the board then uses their discretion to apply and allocate into buybacks in the market.

21:25 And then finally, we're always looking to be more transparent and provide more information and insight into the portfolio. We do, as I said at the outset, have a diversified portfolio. So no one company is driving the returns of the overall portfolio. But it is important to try and give some visibility and insight into what is driving returns and try and come up with some statistics and analytics to help investors get a sense of what's going on in the underlying portfolio. And so we've spent quite a bit of time over recent months coming up with this value bridge. And you may have seen this in the interim report that we published that gives you some insight into the portfolio.

22:11 What we've done here is for the directs part of the portfolio. So that's 53% of the, the NAV, and we have 86% coverage of those directs here. We've dug into what is driving their return and tried to match the operating performance of those companies with the valuation movements that we've seen within PIN. On the right hand side here, you can see that for that cohort of investments is about half the portfolio. The revenue grew over this annual period about 13% and EBITDA for the companies that are valued based on EBITDA grew about 12%. If you include all companies, their EBITDA grew 15 and a bit percent, but we're just capturing here the companies that were actually valued on an EBITDA basis.

23:00 We're looking at a June to June period here. So that isn't one of PIN's reporting periods, but it's helpful to look at that period instead of sort of a November or a May, period end. Because this allows us to have the closest match between the financial reporting that we see from the underlying companies and the valuation movements that PIN has experienced. What this bridge tells us is that those growth statistics, 13%, 12% translate into a 15.7% increase in valuation. So that is amplified because these are levered businesses. But then there are a number of headwinds that take away from that operating company performance and the impact that that has had on valuation.

23:48 So you can see here in the gold bars, net debt increased over this period. Multiples contracted over the period. There were some assets that were written down to below point naught five times. So what we're trying to capture there is something that is pretty much at at zero and trying to be quite conservative there. It isn't necessarily a company that is a write off, which is what we publish in our interim and annual reports, the amount of NAV that has been written off where there's a permanent impairment. This is anything that's being held close to zero. So that you're capturing companies that... Where the manager is still working on them and there is a possibility of, recovery of value, but we're being conservative here in, in capturing anything that's that's being held close to zero.

24:36 And then finally, there's an FX impact. So I mentioned this before in the '25 financial year, we saw a strong impact from FX of almost 5% headwinds there. And that has started to to reverse in the subsequent period. The next step after that identifying where these different drivers are in terms of, quantifying the the measure that they're impacting valuation is to sort of say, what actually is going on in reality in those underlying businesses? Does debt increasing mean that there is weakness in the portfolio or an inability to to fund the capital structure of these businesses. And that wasn't the case. So we dug into here these companies that are increasing debt.

25:22 What has happened? And are there any themes there across the the portfolio? So building all of this up from what the managers disclosed to you and that is a little bit of a constraint here on on what you can, provide in terms of, information on the portfolio. But what we saw when we dug into the companies that had increased their debt over the period was that primarily they were using that increased debt to fund add on acquisitions. There were businesses operating a buy and build strategy where they were buying smaller add on acquisitions. That has a wider impact than just, an increase in net debt. So you see that also contributing to the revenue growth here. This isn't just pure organic revenue growth. There's an element that's coming from those add ons, the m and a activity that's been happening within the portfolio.

26:13 It also has an impact on EBITDA margin. In many cases, we saw that that acquisition activity came alongside investment in integrating those companies into the wider business. Although in the medium term, you would expect that to turn into, a margin improvement potential because as they start to realize synergies, embed those add ons into the platform business, you should start to see an impact coming from synergies, cross selling, being a more scaled business. It also has an impact on the multiples here. So many cases that managers would be accounting for that add on just at the price that they paid for it rather than rerating it to the valuation multiple being used for the overall, platform business.

27:05 So there's a number of different factors going on here. But when we take a step back and look at what has gone on and whether that indicates kind of weakness or concern within the portfolio, what we didn't see in the, increase in debt was that that was coming, from companies where they were unable to pay their cash, interest payments, and so had turned the debt into picking debt to try and sort of postpone having to to pay the interest coupon. So that's the kind of thing that would indicate some distress within the portfolio, but that wasn't really the case for what we observed. It was primarily m and a. Some in instances where the managers had done a dividend recap, so they'd paid down debt very quickly with the business and took that debt back up to make a return to equity investors in the business.

27:59 But, you know, we don't love that as a source of of returns, but it doesn't indicate that there is weakness in the portfolio. And actually in some cases, particularly if that's associated with a continuation vehicle, it is coming at a point where they're restarting the clock and, going after a new two, three, four times return on that business. So that gives a little bit more visibility into what's going on in in the portfolio. We will, continue to update this and provide this information. So you'll see this again in the the annual report at the end of this financial year. If we take a step back and just think about what's been going on in the market and how that's impacted PIN's portfolio. On the top left here, we're showing the distribution rate. And you can see that over the eighteen months from May 2024, which has turned out to be the trough of the distribution rate to November of last year, we've seen the distribution rate almost double over that period from 8% to 15.

29:01 And if you've seen the the newsletters that we've published each month, since the half year, you can see that that distribution rate is continuing to maintain at that level. On the right hand side at the top, you can see that we continue to see uplifts when we are exiting companies in the portfolio. So as we start to see that distribution rate get back to more normal levels of 20 plus percent, we will see more of that bump at exit coming through into the NAV performance of the portfolio. And then at the bottom here, we've got the call rates. This rate that seems like it's dropped up to 27% is skewed by particular investments within the portfolio that were using subscription lines and that have made, a number of capital calls during that first half period. If you exclude the skew that comes from that, the underlying call rate is about 21%.

29:54 So it is ticking up a little bit that reflects what we've seen in the wider market where particularly in q three and q four of last year, we saw very robust new deal activity, recovering after the slight pause that it was after the tariffs in q two of last year. But the the portfolio continues to generate net cash, 1,500,000,000 over the last ten years. Each period continues to be net cash flow positive, and that gives us a good source of capital to, manage the balance sheet and reinvest in new investments and buybacks. You can see here the statistics around the capital structure. So just under 9%, gearing at the, again, we've rolled this forward to February, so that nine month period, this is the most recent data, 9% geared, And all of our different metrics around the kind of health of the balance sheet are pretty robust, and we think it's pretty prudently managed. So the the financing cover, the undrawn coverage ratio that you see on the right hand side here, all very healthy metrics for the the portfolio.

31:05 So a very, know, robust balance sheet that that we have in place. So if you think about that net cash that's being generated, we have seen some exits on the right hand side here that have... These are the largest companies that we've seen exited across the portfolio with really strong returns on on these businesses, typically in the kind of two to three plus type territory with some outliers in the, four times plus. On the left hand side at the bottom, you can see the net portfolio cash flow that I've mentioned already. It's really increased significantly at the financial year end of May. It was more than three and a half times the, the rate at the prior year. And for this first half, the six months to November, a strong start to to PIN's financial year.

32:00 In the pie charts, you can see that that's coming from businesses exiting across all kinds of different sectors. But on the right hand side pie chart, there's an interesting dynamic that we've seen in the six month period where those exits have primarily been in secondary buyout. So that is sponsored sponsor deals, so where a larger private equity manager is buying a company from a smaller private equity manager. Typically for PIN, exits are pretty evenly split with most of them being between trade sales, which are kind of corporate buyers and the secondary buyout. So we've seen a skew over this period towards the the larger sponsors who've been really active in the market as in particular, they're looking to deploy the end of those twenty twenty one vintage funds that are coming to the end of that kind of five year investment period, getting that capital deployed. They've been more active than corporate buyers.

32:55 And what we are looking for through 2026 is for corporate buyers to get a bit more certainty, a bit more confidence to come back into to the market. In terms of the uses of capital, we've continued to deploy some capital. But as you can see in the left hand pie chart here, we are very mindful of where the discount is, on our shares and making sure that there's a good component of the discretionary capital. So after capital calls and other obligations of the company have been met, The additional capital that is available there, the the majority of that is going into buybacks. So 60% going into buybacks, around 40% going into new investments. You can see at the bottom here, the co investments and the manager led secondaries, those direct assets are where we can use discretionary capital.

33:44 Across the top, you can see we've consistently been deploying capital into buybacks. I wouldn't put place too much emphasis on the new commitments here and the splits here. The stage is very much in line with what we expect. The geography here, the regional split is skewed towards Europe because of the timing that happens with these particular investments. But this level of investment activity relative to a £2,500,000,000 portfolio isn't skewing and it isn't indicative of, a sort of strategic shift towards European assets. We're showing the top companies assets here and a number of companies that we know are in sale processes or, contemplating that. One thing to point out is that subsequent to, this half year period, we received proceeds from the Wizz exit that was announced in March of last year. We received those in March of this year. So that was a meaningful, distribution coming back from the the portfolio.

34:48 So as we look forward from here, maybe just to touch on some of the themes and concerns in the the market environment at the moment. First one that we've called out here is AI and, you know, the concerns around how that might disrupt software businesses and the impacts that it could have both on valuation multiples with the public market movements translating into private markets, but also on the underlying businesses and their ability to grow in the way that they have done historically. We spend a lot of time with our underlying managers. And in particular, we invest in software specialists. So groups like HG, Toma Bravo, Francisco Partners, they are the ones that are living and breathing software day in, day out.

35:39 And AI is not a new development for them. If you think about a group like HG, they have a huge AI team within the organization that is working with each of their underlying portfolio companies, building AI tools that are integrated into their software products, not just needing to sort of rely on another AI provider to give a kind of overlay. They are live to not just the risks that come from AI and the potential threats, but the opportunity there. And I'm making sure that they're embedding that into their software businesses, themselves and using the advantages that they have from things like access to proprietary data and private sets of data that aren't available for something like Claude or ChatGPT to scrape data and come up with a similar solution to what a software product might might have provided historically.

36:39 The kind of businesses that, our managers are investing in primarily are in parts of the market where, they have quite a strong competitive edge being an incumbent software provider. And they're not typically businesses that come under threat from AI. So one good example if you think about it is a software business that was taking publicly available data. So maybe, SEC filings and ingesting all of that data, you know, using analytical tools on it, providing a user interface that made it much more easy for, a customer to get the information that they wanted and see it presented in a really nice format. That kind of business has a huge threat from AI because someone can just go on to Claude, ask it to go and scrape that data, put it in a nice format, do the analysis for me. That is the kind of business that is in jeopardy from the development of AI. But a lot of the businesses that we have invested in are working with proprietary sets of data where Claude can't compete with them because they are able to train their own LLMs on the private proprietary dataset that they have and develop workflow tools that are embedded in a piece of software, that can help a customer to, maybe replace an individual that was doing a particular workflow with a part of a software that actually can be an opportunity for that software business to grow their TAM.

38:07 So our conclusion here around software is that software is not dead. There will be winners and losers. And as we look through our portfolio and think about where where the risk is, and we're doing that at the moment with our manager and continue to do that on an ongoing basis. There is more to come here, and we'll we'll see that play out over the the medium term. Private credit is another, theme that has been in the headlines. We don't have any credit assets within the the portfolio, so there's a a limited direct impact of of that within our portfolio. And obviously, as I mentioned at the outset, there's the ongoing conflict in the The Middle East. In terms of direct impacts from from that, we don't have exposure, significant exposure to assets with operations within the region, including Israel in the sort of wider Middle Eastern region.

38:59 But there will be knock on effects and broader impacts that we start to see evolve. We're already seeing a little bit of that with energy prices. There's a risk around inflation, all the just sort of geopolitical risk that comes from this conflict. But it's really too early to tell, a, how that will play out in terms of the macro picture, and then, b, how that translates into our portfolio. But, again, it's something that we are mindful of and continue to review about our portfolio. As we think about 2026, I think people started '26 with quite a positive outlook off the back of that strong activity in the the latter half of twenty twenty five.

39:45 I think there is still cautious optimism that we will continue to see a kind of recovering set of activity numbers through 2026 for private equity. We've seen still quite strong activity, within the secondary market in, private equity and deal activity continuing on. So, we'll we'll see how that plays out because I think there's certainly more to come in terms of how the Middle Eastern war will impact the macro and in turn, deal activity and valuations. But so far, we are continuing to see that, higher pace of distributions maintained across the portfolio. And we continue to keep all of these sort of market themes under review, as we get cash coming back from the portfolio and consider how to redeploy that.

40:40 So what if we take a step back and look think about the last three years, I think we've been in a period that from a private equity perspective has been a much more persistent slower period than we have seen historically. But today as we look about... Look at the impact of the last few years, where we sit today and where we could go from here, we've seen the moderation in valuation multiples come through in the portfolio. We've seen some companies written down to zero that may come back. But right now in terms of the NAV today, they are fully accounted for. So that gives us some optimism about where the portfolio goes from today. The sort of the noise and the headwinds of the most recent few years have flowed through the portfolio in large part. And we think we're positioned well to start to see the operating performance at those underlying companies really start to drive NAV performance, from from here.

41:41 So just to to end here on, the longer term performance, we've generated, you know, just under 12% over the last ten years since inception. We continue to believe that this is an attractive way to access private equity and that the market is at a point where we hope to be turning the corner and and getting back to the more historical levels of of returns that that we've experienced in the past. So maybe with that, I'd turn it back to open up for some q and a now. Absolutely, Charlotte, that's great. I may just jump back in there. Thank you very much indeed, for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the right hand corner of your screen. Charlotte, we have received a number of questions throughout your presentation this morning. And thank you to all of those on the call for taking the time to submit their questions.

42:33 But Charlotte, if we may just dive straight into it. The first question that we have here asks, are all your direct investments also in the primaries that PIN has invested in? Yeah. So PIN benefits from the PANTHEON platform. So it sees all the deal flow that PANTHEON invests in across the platform. And its primary buy list is narrower than than PANTHEON's buy list. So we get deal flow in terms of co investments from all of the managers that PANTHEON has invested in across the platform, and PIN benefits from that. So some of the co investments that PIN is invested in aren't alongside primaries that are in PIN's portfolio, but they're alongside, primary managers that PANTHEON has picked within its buy list. So still very high quality managers that PANTHEON sees in its in its buy list.

43:30 You still get the benefit of that kind of two layers of screening. So the manager, first of all, is screened in terms of whether it meets the criteria for us to make a primary commitment, but not necessarily from PIN. And then the second level of diligence around the company specifically. So they're not all alongside PIN's primaries, but they're alongside primaries that PANTHEON has made. Perfect. Thank you. Just turning to the next question. What are your parameters for doing a single asset secondary? So single asset secondaries are similar to co investments in a lot of ways in that they're just a company that we're underwriting. Similar again to co investments, what we're looking to do is invest alongside managers that we know already. So where we've got a relationship, not necessarily within PIN, but elsewhere on the the PANTHEON platform.

44:19 And that's really important because it gives you insight into the rationale for a transaction, why a manager is thinking about owning a company again. So those single asset deals are continuation vehicles. It's where a manager has a company that they absolutely love. They've done really well with it, and they see a path way to do the same thing again. So we're looking for assets where, it's a manager that we know well, where we can see that what they're planning to do in that second hold genuinely is what they've already done in the past. So buy and build that I talked about earlier is a really good example of that where, they've operated a kind of consolidation play. They have built out a pipeline. They've maybe run out of capital, to be able to keep investing in in add ons. And so they want to hold that again to be able to have a bit more time and a bit more capital to, execute on that buy and build strategy.

45:14 So something that they've done before is really important. And it's really important that the manager is aligned with us. So we typically require them to reinvest, alongside us, any capital that is being realized from their existing investment to reinvest that alongside us. And we negotiate the price and the terms around that transaction to make sure that there is is good alignment there. And then in terms of the underlying assets, the type of businesses that we're looking for across our whole portfolio, we're looking for the same sorts of things. So companies that have some sort of resilience, maybe have some sort of market, tailwinds that that they can, benefit from. But also kind of groups where we know that the manager is experienced and has the expertise in the particular sector where that that company is is operating. Those those are some of the things that we look for in the single asset secondaries.

46:14 Thank you. Will you continue to invest in software companies? Excellent question. And I think that is is a very topical one for for right now. As I sort of alluded to in talking about the impact of of AI, software is not dead. So it's not a part of the market that we will say, we're not gonna do any more investments there. There's no chance to to generate returns. But I do think the landscape is is changing. And one of the things that was on that that slide, just to kind of bring out a little bit more, is what we see as one of the changing parts of software isn't so much around AI and the impact that that may have, but is around the kind of revenue model for for software.

47:02 So it's really important to dig into how a specific business is positioned. Is it gonna benefit from some of the changes that are happening in the in the market, or is it gonna be, threatened by those? How is it positioned? How can it win? We're not gonna stop investing in software altogether. But I would say that right now, the bar for software investments is quite high, and we still need to see play through both in terms of the portfolio evaluations, but also in terms of new deals when we see opportunities arising, what the valuation environment looks like for for software businesses.

47:42 So we we won't stop investing in software. It is an important part of private equity, and I think it can still generate really strong returns if you're on the right side of the different themes that are emerging. But we do have, a very high bar there and and a lot of scrutiny around the kinds of deals that we will want to invest in right now. Thanks, Charlotte. And we have someone asking, can you give examples of companies that have done well? And would more investment in Asia be sensible? Yeah. So maybe just take the second half of that first. Asia is, obviously a big region, and there are very different themes within different companies in in Asia. So if you think over the last five or ten years, I think China was one of the biggest themes in Asia. It was a, an economy that was growing really rapidly with a lot of really interesting themes to invest behind.

48:40 But I think the regulatory environment there can be quite challenging, and has been a sort of area of of Asia that we have deemphasized in in recent, periods. While somewhere like Australia for us is counted as part of Asia where, one could argue that it's more similar to European or, North American, economies and an area where it has a very deep well established pool of private equity investors. We do continue to invest quite a lot of capital in Asia. Other parts of Southeast Asia in particular, have had really interesting economic backdrops, but actually the manager universe in those regions has been underdeveloped.

49:28 So for us, because we are not directly investing ourselves and running assets ourselves, it's really important to identify managers that we can invest alongside that we think are really credible and have the ability to generate returns. And we haven't seen that manager universe, be as developed in, for example, Southeast Asia. India is, a region within Asia that I think is one of the most exciting countries to to invest in right now with a really deep pool of managers, and similar kind of themes in terms of the the growth of the economy there and the types of, macro and kind of geopolitical themes that that you can, expect to see play out. The other consideration though in Asia that can be a real challenge for a vehicle like PIN, is you're often investing in different currencies.

50:23 And, the Indian rupee in particular is one that has been quite volatile over time. Australian dollar, there are a number of different currencies there. And we don't hedge currency, and some of those currencies are quite difficult to hedge even if you wanted to. And that can be something that can really impact returns. So we continue to invest in Asia. We are selective about the geographies and the specific countries within Asia that we'll invest in. And when we're underwriting deals, it's really important to factor in that FX risk and and all the kind of risks that are particularly pertinent to to Asia and specific countries within Asia, that we don't see elsewhere. So right now, we don't have plans to increase our exposure to Asia, but that's something that with all our kind of strategy we keep under review, as you know, markets evolve going forward.

51:18 And then in terms of some companies that have have done well, you know, one of the exits that we saw in this period was from Frenary, which is an ice cream manufacturer. So they make brands... They do private label, but they also, make brands like Nui and Haagen Dazs. They are one of the biggest ice cream manufacturers globally. And that transaction generated over a two times return approaching three times return. It's a case study that you can find in our interim report. That's a business where on the one hand, you might think that ice cream is, a very sort of discretionary spend, but it's something that actually is perceived by individuals as a bit of a sort of affordable luxury. So actually even in, challenging economic times, people continue to spend on ice cream and in particular on the types of ice cream that you buy the supermarket and take home, which is part of what, what they manufacture.

52:22 So that business has has done really well. I think it's really important when you think about consumer businesses, and that's not something that we tend to overweight in our portfolio. The kind of businesses that we invest in within consumer tend to be these more staple type businesses. Action is another good example that's in our top companies, that isn't exited, but it is a company that continues to grow really strongly. We first invested in that business as part of a single asset secondary. So one of these manager led secondaries, it was continuation fund vehicle alongside three I. We invested in that in 2020 and our original investment reinvested since then. Our original investment is over six times return over that six year period since then. So it's a really strong asset. It is consumer because it's it's a retail business.

53:15 But because it is discount retail, it's operating a very unique business model, that is... Doesn't really have any kind of competitors in that space and continues to have significant white space to open new stores. It continues to grow compound over time, even though it is on the face of it a consumer business. And the last area that I'd kind of touch on is healthcare. And again, in healthcare, we invest with specialist GPs. It's incredibly important to invest with groups that really understand the landscape and can identify subsectors and particular niches where there's an interesting opportunity. We exited in q four of last year, so in December, a medical devices business that was designing and manufacturing surgical tools for arthroscopy.

54:10 So think things like shoulder surgery, knee surgery, manufacturing and designing tools for those sorts of surgery. And within that space, surgeons are very loyal to a particular tool. If they like working with a particular tool, and they think it's the the best for a specific surgery that they do, they are in that kind of camp of customer stickiness, where they will continue to use the same tool over and over again. So that business exited in December and generated more than three and a half times, return. Again, that was another managed led secondary asset within the portfolio.

54:57 Thanks, Charlotte. How do you bid for participation in direct primary co invest opportunities on the PANTHEON platform?

55:05 So PIN benefits, as I said, from all the transactions that that PANTHEON underwrites and originates. So the way that we operate across our platform in each of our strategies is that there are different vehicles that we have that can participate in co investments for for example. And each vehicle that we have, so PIN being one of them, has a desired bite size for co investments. And when a co investment comes along, each of the different vehicles that invest has their bite size that adds up to a total bite size that we would want to secure in any transaction. If that is available, everybody gets their bite size.

55:51 If it isn't available, everyone gets scaled back pro rata. So it isn't the case that PIN needs to bid each time a transaction comes up. PIN is in the waterfall, and we're not trying to sort of cherry pick different transactions that that come along. We're in the waterfall so we can benefit from the deal flow that that comes up from the PANTHEON platform. Thanks, Charlotte. And that actually concludes all the questions for this morning. So thank you very much indeed for addressing all of those. And, of course, if there are any further questions that come through, we'll make these available to you immediately after the presentation has ended. Just for you to review, and we'll publish all those responses out on the platform. But, Charlotte, perhaps before really now just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a

56:38 few closing comments just to wrap up with, that'd be great. Sure. Well, I mean, it's been a a challenging few years for for private equity. And what we are starting to see in PIN's portfolio is that the market is starting to turn a bit of a corner. And you can see in terms of the activity that that we've been involved in, the things that we've been focused on as manager alongside the board, really thinking about what's happened in recent times and how we can drive performance going forward, in terms of the things that we can control around investment strategy, around managing the the vehicle, and how we allocate capital during periods when the discount is wide. And also just in terms of transparency, we're we're trying to do more to share with you what's going on in the underlying portfolio and continue to provide insight into what's going on and how returns will will come from from here. So, as I said through the presentation, we think that we've seen a lot of the noise flow through in valuations and that the the portfolio is well positioned to, to return to to growth trajectory from from here.

57:46 Thank you very much all for for joining. Perfect. That's great, Charlotte. And thank you once again for updating investors, this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback? On behalf of management team of PANTHEON INTERNATIONAL PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.