Pantheon International (LSE:PIN) — Interim Results

0:01 Good morning, ladies and gentlemen, and welcome to the PANTHEON INTERNATIONAL PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just 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 we'll publish those responses where it's appropriate to do so on the investor meet company platform. And before we begin, as usual, we would

0:31 just like to submit the following poll. And if you'd give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to Charlotte Morris. Charlotte, good morning. Morning. Well, it's a pleasure to to be here. I'm Charlotte Morris, investment partner at PANTHEON and co lead manager of PANTHEON INTERNATIONAL. So it's great to to be here in front of you today. We have a presentation to to go through, and then we'll answer some questions towards the the end. So maybe just to start on on this slide with a bit of a recap of what PIP is and why we think PIP is an interesting proposition. So PIP is an opportunity to invest in unlisted companies. So private equity is a way of investing in private companies, so businesses that aren't listed.

1:22 Over the long term, private equity has outperformed, public markets. And we've observed, particularly over recent years, that public markets have been shrinking over time, and more and more companies are remaining private for a longer period of time. And this is a good way to have exposure to that within your investment portfolio. PANTHEON INTERNATIONAL itself is an investment trust, and it's actively managed. PANTHEON is the the manager of this vehicle, and we have a platform that invests in all kinds of private businesses globally. And this PANTHEON International vehicle gives access to to each of those companies, and it's traded daily on the London Stock Exchange. So as an investor, you can buy shares and sell shares on a daily basis whenever it suits you without having the the lockups and long holds typically associated with private equity investments.

2:20 So PANTHEON INTERNATIONAL itself is one of the longest established investment trusts investing in private equity businesses. We've been around since 1987, and just over half the the companies in the portfolio are directly invested in. So we're not just investing in other PANTHEON funds. We're selecting specific companies for the the portfolio and thinking about portfolio construction, managing the balance sheet, how we deploy capital over time, and and manage the cash that comes back from the the companies when they're sold and really offering something that is a one stop shop and all weather portfolio that you can come into and, and gain access to private equity exposure in a balanced way.

3:07 One important element of investment trusts, is that we have an independent board. So they oversee governance of the the vehicle, keep us accountable as as PANTHEON, the manager, and are in the... Are there to put the shareholder interests, first. So on the next page here, you can see the, the the portfolio that PANTHEON INTERNATIONAL is currently invested in and the way that it's diversified across different metrics. So you can see in the first pie chart here that as I mentioned before, more than half of the portfolio, so 55% is invested in direct transactions. So those are the deals here that is then labeled as co investments and manager led secondaries.

3:55 And in most cases, that is where we are investing directly into one company where we can do diligence, think about that company, how is it going to grow, how will it generate a return to investors, and make a decision around one specific company. So we can be very deliberate about our deployment and, managing the balance of the the portfolio. The rest of the portfolio is in private equity funds. So that gives us exposure to other parts of the private equity landscape that perhaps don't come up in co investment or manager led secondary opportunities. One good example of that that you'll see in the next pie chart here is our 4% exposure to venture, where we only commit to those investments through the top 5% of of managers globally. It really makes a difference being with the absolute best managers in the venture space.

4:48 But when you look at the the stages more broadly, you can see on the pie chart here, almost half of the portfolio is in what we call small and mid market buyout. I'll come on to to speak a little bit about that later. And we have a good component in large and mega buyouts. So three quarters of the portfolio is in buyout transactions. So those are companies where, they're established businesses, profitable businesses, And the flavor of companies that we are looking for at PANTHEON INTERNATIONAL is businesses that just are really steady, reliable growers that tend to have some sort of more resilient or defensive characteristics to them, but they're solid businesses that will continue to compound and generate growth for investors.

5:35 There's an element there of venture, as I mentioned, 4% and almost 20% that's in growth investments where they're still typically profitable companies. Most of those are, in terms of growth, but they're growing quite rapidly. And that, again, can offer a really interesting opportunity for returns for for investors. In terms of geography, the portfolio is balanced globally with more than half the portfolio in North America. That is the deepest, most mature private equity market. But with around a third of the portfolio in Europe, that is an interesting opportunity for private companies. It's a bit more fragmented than the North American market where there are different language skills, different cultures, different networks by country that a manager needs to tap into to identify some of the best investment opportunities in the the European landscape.

6:30 So that offers a possibility of of outperformance. And then finally, in terms of sector diversification in this last pie chart here, you can see that around half of the portfolio is in technology and health care investments. And they really demonstrate the themes that I was talking about before. So established businesses, solid growers, reliable, sources of of revenue and and earnings. And the kind of features that we find there also are that those sectors tend to have secular trends behind them. So tailwinds or features of the market like digitalization within technology or aging demographics, aging populations, within health care that often mean that if you invest behind those themes, they tend to be less impacted by market cycles.

7:24 So you can have a slightly more reliable and slightly more defensive, tilt to the the portfolio. So the next page here shows you the the recent performance of the the vehicle. So what we've done here is roll forward our half year performance to the November 30 through to the end of January. So to bring it a little bit more up to to date. And you can see here that over that period, their portfolio NAV has grown by 3.8%. And you can see in the top two lines here that since inception, we have consistently generated returns in terms of NAV and share price generating almost 12% compounded return year on year over the last thirty seven years. But even over the last five and ten years in terms of NAV per share growth, we've been generating 12 to 13%.

8:17 That has been a little bit more muted in the last, few years. Obviously, public markets, particularly in the last year, have demonstrated really strong performance, particularly concentrated in the magnificent seven or so called magnificent seven stocks in The US that are both concentrated and have a really sort of tech heavy focus. So we think that's a bit of a moment in time, but over the long term, private equity does generate consistent, attractive returns. And over the last couple of years where we've seen a more muted performance, we're hopeful that as as deal activity picks up in the coming years, and we're starting to see some some signs of that, coming through in the portfolio, that will get back to the more typical levels that that you've seen over the long term here.

9:08 You can see on the right hand side here that we saw valuation gains over the period of around 3% and a positive contribution from share buybacks. And I'll come to that really on the next slide here that gives you an update on, some of the activity that that we've seen over the the last period since the last financial year. So the first box here in the top left really talks about corporate policy. So in the prior financial year, some of you may remember, the board approved a £200,000,000 buyback program, which was accretive to NAV per share growth in that period. It added, just under 5% to the the NAV per share growth. This financial year has seen the implementation of the capital allocation policy. So through that policy, a further £15,000,000 has been allocated to to buybacks, which actually was at the board's discretion. So the formula would have implied a much lower figure being allocated to to buybacks, But the board sees the importance of having capital available for buybacks being in the market while the discount is still, wide.

10:21 We also committed £88,000,000 to to new investments over the period. Around 50 of that was actually to primary commitments. So where they're not, taking cash on day one, so we're still skewing quite a bit of cash towards buybacks and trying to capture that value for shareholders, but also investing in in new transactions. It's important to have a balance between the two and be committing capital to to both elements. So as I say, the the buybacks offer the opportunity to capture value for shareholders while the shares are still trading at a discount to NAV. But the new investments lay the groundwork for returns in coming years.

11:07 So it's important actually to ensure that we're also investing for the value creation in the in the years to come. Then on the bottom left here, we talk about the, strategic work that's going on with the the board. So a strategy subcommittee was was formed during the, period since the last, the end of the last financial year. The objective there is really to refine strategy across corporate leverage investment elements really by reviewing what's working well and how we are positioned for for the future market environment. The board is intending to articulate a north star, really, to to give a renewed sense of of purpose going forward.

11:54 And with that in mind, with the clear north star, we turn to how we sort of present that to the market and and

12:00 get that message out there. And that's the top right here enhancing our our marketing efforts. You you may have read in the interim report and also in the annual report at the end of the last financial year, our chair speaking about the the efforts going into to narrowing the discount. I've spoken already about the the share buybacks and that element of trying to address the discount and and make sure that we're capturing the the value that is available there for for existing shareholders. But longer term, share buybacks aren't the silver bullet to address the the discount. And, really, the the key to that is being able to attract new investors, stimulate demand for the shares.

12:46 And as we've mentioned before, we engaged a marketing agency last year to help us with some of that work in particular with messaging, sort of helping us to cut through the the industry jargon. There's a... An important element here around education, both in terms of articulating to potential investors what is, attractive about private equity and why that has a place in an investor's portfolio, but also being able to dispel some of the myths around private equity and, what it really actually is doing and how it creates value and help investors to understand what has traditionally been quite a sort of opaque industry. We're aiming to be and we have been over the over the recent years really trying to be as transparent as possible and and help investors understand how private equity works and and why it is an attractive element to, the portfolio.

13:45 And finally, in the the bottom right here, the key focus, number one, on the the board's agenda is putting shareholders first. And that's really what's driven a lot of the, agenda for the board this year, whether it's being in the market with buybacks, thinking about long term, how to, address the the discount and narrow that from the levels that it's at right now. But also as we sort of approach this, strategy and refining what we do going forward, it's really important that we do all of that with shareholders in mind and really engaging with shareholders. Some of you may have met with our chair. He makes a a big effort to, to speak to shareholders directly and understand firsthand the the changing views and and needs of, our investor base.

14:38 One thing to to mention in terms of the the board is that, they conducted a search this just before the end of last year. And in January, the board appointed three new non executive directors, all of whom come with significant private equity experience, really veterans of the private equity industry, which is helpful in approaching the strategy work and, messaging to to the market. They really understand, private equity and have have brought some... Already brought some really great experience and expertise to to the board. So maybe just to come back to to the portfolio and talk a little bit here about the evolution of the portfolio over the last ten years or so, because it has changed quite meaningfully over that period. In the first bar chart here, you can see that ten years ago, we were really a fund of funds portfolio. We'd invested in secondary punt... Fund portfolio transactions as well as investing in primary fund commitments, but everything really was through, commitments to funds.

15:49 Fast forward to the end of the half year November 2024, And you can see here, as I mentioned before, 55% of the portfolio is now in direct investments, so where we are accessing investments in companies directly and selecting each of those investments deliberately case by case and augmenting that with, very selective fund picks where that brings something else to the portfolio that we can't access through those direct co investments and manager led secondaries. In the middle here, you can see that, that approach of being more direct and deliberate in our investment strategy has reduced the the diversification and increased the concentration of the portfolio, where ten years ago, 80% of the portfolio was made up of over 900 companies, and now that is fewer than 500 companies.

16:45 And then finally here, by investing in those direct transactions where the hold period is shorter than what you typically see with, fund holdings, we've reduced the average life of the portfolio from seven and a half years to around five and a half years. Now, again, digging a bit further into the the underlying portfolio. In the middle here, you can see that we talk about the loss ratio. So we don't see this published by many other investment trusts, but it's to give you a sense of the risk within the portfolio. So on the investments that we made over the last ten years, we have seen profitable returns from 97% or so of the the portfolio. So just a very small amount, that's kind of 2.6% that has lost money. And the way that we approach the the loss ratio is not just realized losses, but where, an investment has been marked below cost. So unrealized, losses that could actually over time, end up being, gains by the time those those investments are are realized. So we're being quite conservative in how we think about the the loss ratio over the last ten years. And then finally, on the right hand side here, we've given an indication of the growth within the portfolio.

18:10 So across the the companies where we get the information for their revenue and EBITDA growth, We've seen over the last five years annualized growth that has been at that 17% revenue, 19% EBITDA growth, which you can see here on the the chart is really outperforming what you'd see on similar assets, in the the MSCI. So it's a public, benchmark there. In the last year, those figures have come down a little bit. So the EBITDA, growth is around 16%. The revenue growth has been around 11%. So reflecting what you've... You'll have observed in the the macro environment over the last couple of years where interest rates have risen from, you know, a kind of very low interest rate environment that was was present over the the longer term.

19:01 And the the broader macro picture has been a little bit more challenging. So against that backdrop, we're we're sort of comforted by the fact that the the companies in the portfolio are continuing to to grow and generate value for for our shareholders. And then the last one on the right... On the left hand side here is just to mention that when we exit companies and when a company in the portfolio is sold, the average that we've seen over the last ten years is for the return on, companies that are sold to, another buyer has been around 3.0 since 2015. So really nice, exits across the the portfolio. Now those proceeds come out, when we when we exit a company.

19:49 And what you can see on the top left here is a measure that gives you a sense of the embedded value within the portfolio. So over the last half year to November 2024, the proceeds that we received from companies that were sold during that period were 26% higher than the valuation that that company on average had been held at before the the sale process was was launched. So it gives you a sense that there is value within the portfolio, not just in terms of the the valuation that a company is being held at, but that often at exit, a manager is able to really, if they find the right kind of buyer for that particular company, drive additional value at the point where they they sell the company. So you can see in this top left bar chart that we have experienced that consistently over the last, thirteen years or so that is shown here.

20:46 But actually over the long term, it's a feature of private equity and particularly a feature of the mid market where there's there's often embedded value in the the valuations, and and we see that pop at exit. Over the last ten years, the average uplift that we've experienced has been around, 30%. On the right hand side here though, you can see that those exits are more muted relative to to long term historical levels. So we've seen around 8% distribution levels for the last financial year. That ticked up to 10% at the end of the half year in November. When we roll that forward through the end of last year... And that does include some seasonality because December, the end of the calendar year, is typically a point where you do see quite a bit of exit activity.

21:38 We've seen that tick up to around 12%, currently. So some encouraging signs that we're starting to see a little bit of a recovery in the the broader market activity levels. And on the bottom left here, it's been a similar story in terms of the the call rate. So broadly, activity in the private equity market has been muted. And you can see here that we've been at that sort of 18, 19% level compared to historical levels that have typically been a little bit higher than that. We're hopeful, though, you know, we've seen some of the signs coming into the beginning of this year into 2025 of a start of a pickup in activity. So what's happened through the course of 2024 off the back of a couple of really slow years in terms of activity is interest rates have started to tilt down a little bit. So we've seen some cuts, and I think whilst we don't expect there to be a significant set of cuts that bring you back to low or no interest rates that we saw in the past. We do think that interest rates will be higher for longer.

22:49 The fact that we are starting to see a sort of stabilization in interest rates is helpful for investors being able to underwrite underwrite new deal activity. Similarly, through the course of last year, we saw a number of elections. Particularly important was the US election, taking place in November of last year. And whilst there's there's still some uncertainty in the The US market for sure that we've experienced, particularly over the last month or so, the fact that we do know that Donald Trump will be, running that administration for the next four years is helpful in terms of some... Bringing some certainty and confidence to to the market, going forward. So we're hopeful that we'll start to see activity levels, pick up over the coming year.

23:40 The slide here gives you a sense of just for the half year period to November, what we saw across the the portfolio. So the NAV per share growth over that six month period was 2.3%. We talked before about the the 10 NAV per share growth that's sitting at more like 13%. The share price has remained pretty stubborn over that period, so it's it's pretty much flat to the start of of the period. And as I say, we are still working on what we can do to narrow that that discount and not just create value for shareholders with NAV growth, but also be able to to narrow that discount and return back hopefully to to more typical historical levels.

24:27 All of this is stated net of fees.

24:32 And then digging into that a little bit just again over that six month period. On the left hand side, you can see the over 3% was generated from valuation gains. And as we saw before, about point 3% accretion from the the share buybacks we completed in the program. In terms of those valuation gains, that was really across the portfolio. Venture can be quite volatile in terms of, movements. And as I said before, that only represents 4% of our portfolio, but that demonstrated particularly strong performance over the six month period. But across each of the different stages, we generated, positive gains across the the portfolio. It really kind of shows that across the different companies, sectors, stages, different countries that we've invested in, that diversification underpins nice resilient performance over time.

25:27 I talked a little bit about the the distribution and call rates before. So you can see on the left hand side here, that eight, 9% distribution level has has really been sticking at that level for the last couple of years. So we ticked up to 12% at November. As I mentioned, running through the end of the year, that comes up to 12%. And you can see across the bottom here the the net portfolio cash flow that has been generated in each of the periods, going back the last ten years. We've generated £1,700,000,000 of cash inflows over the last ten years. And in the last six months, we saw 45,000,000 of, cash inflows, more in that six month period than we saw in the entirety of the prior financial year where we saw 37,000,000 generated. So as I say, we're starting to see some early indications of a bit of a pickup in the, in the market, and I'm hopeful that that will gradually see us return to more normalized activity levels through the course of 2025 and beyond.

26:36 Just talk about the the balance sheet for a moment here. On the left hand side, you can see that at January, our net debt to NAV is sitting at 7.6%, which we think is quite prudent. And on the right hand side, we have good coverage of our undrawn commitments. The fact that we are investing more in direct transactions helps us to to manage the undrawn part of the portfolio because we only really pick up those undrawn commitments from the primary commitments that we make and a little bit from some of the manager led secondaries. So really nice cover there, in terms of that 4.2 times, cover. And then just to cover the board, I mentioned earlier that we've, seen three new directors join the board.

27:25 Across the bottom here, you can see Tim, Tony, and Canada were all appointed by the board in January of of this year. And across the the board members, they still hold significant shares themselves, which offers great alignment of interest with shareholders. So around 4,700,000 shares that are held by the board. And just within PANTHEON as the the manager across 15 partners, we hold 1,500,000 shares. So, again, really strong alignment. And that doesn't include, the the shares that held more broadly across the the company. PIP's actually held pretty widely by employees of of PANTHEON, but we're unable to, like, disclose those figures for compliance reasons.

28:15 So maybe then just to to end the presentation, we can get into answering some questions. As you can see here, over the long term, we've generated really solid, consistent performance over time. 12.6% over the last ten years, almost 12% since inception in 1987 through this actively managed, nicely diversified, balanced portfolio, we're able to generate that that long term outperformance. And we're really hopeful that with the embedded value that that we see within the portfolio that we'll be able to continue to generate strong returns, going forward. So with that, maybe let's turn to some of the questions. Absolutely. Charlotte, if 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.

29:12 But just while the team take a few moments to review those questions that were submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published q and a can all be accessed via your investor dashboard. Charlotte, as you can see there, we have received a number of questions. So perhaps if we dive straight into it, the first question that we have here has actually been submitted a few times. So if we may just group these together. The board has been recognized for the for the actions that it is taking to try and close a discount. However, it remains wide. Why do you think this is, and how is the board looking to address this? Yes. The the discount is a a source of frustration for us. I mean, it it continues to be quite wide, and it's a problem across our similar peers in the the sector.

29:59 It is absolutely the key topic on the the board's agenda. So as I mentioned, the the board undertook a significant buyback program, eighteen months or so ago that was was launched and took us through to the end of the financial year last May, and it followed on from that with the ongoing capital allocation policy. And as I mentioned before, you know, the amounts that the formula would have generated were very small, and yet the board used its discretion to allocate £15,000,000 again so far this year for for buybacks. That amount should increase as market activity picks up and distributions increase. But as I've sort of mentioned before, buybacks don't fix the discount problem on their own.

30:47 They are absolutely worth doing because they are accretive to, NAV per share, and they capture some of that value while we are trading at a discount for for the shareholders. What I would say though is that market activity picking up more broadly is likely to impact the the discount for for other reasons than just the amount of capital that would be available for for buybacks. And according to the formula, as we pick up distributions, we we will have more cash, you know, directed towards buybacks. But I I talked about this in the the presentation a little bit. When companies in the portfolio are being sold, we typically see proceeds that are 30% on average higher than the last valuation.

31:34 And that is a way that we demonstrate the embedded value in the portfolio and endorse the valuations that are in the portfolio. Part of the reason why the the discount widened a couple of years in the first place was a perception that the the valuations weren't real and weren't reflecting the reality of what happened in in public markets and broader sort of macro, environment evolution. So as well, I think as we start to see these uplifts come through on a larger proportion, a larger volume of of cash proceeds, that should help to build more confidence that there is embedded value in the portfolio and it is an attractive offering and help narrow the the discount. Fundamentally, we also need to increase demand for for the shares.

32:23 And as I mentioned in the the presentation, we are, working with a marketing agency. We're also meeting potential investors, wealth managers, working around kind of marketing campaigns that should help raise awareness, increase knowledge of listed private equity, and, you know, what private equity is, what it isn't, how to think about it, and most importantly, position PANTHEON INTERNATIONAL specifically as an attractive buy. And over the the medium term, that's really, where we we hope to address the the wide discount. Perfect. Thank you. Just turning to the next question, which asks, how are you working to educate financial advisers and wealth managers on the benefits of investing, in listed private equity trusts?

33:14 Yeah. I mean, that's that's a great question because it is completely linked to this question around the the discount that I was just talking about. So getting the message out into the the market is critical and and helping financial advisers and wealth managers to understand how to think about not just private equity itself and why that is a valuable component to have within a portfolio, but also specifically listed private equity and why that as a channel to access private equity is is really valuable. Those are two key things. So we have a number of papers and materials, studies that that we have put together as PANTHEON, the the manager, that we use with our institutional clients across our kind of closed end vehicles that that we manage as well that explain the benefits of investing in private equity so we can use those with financial advisers and wealth managers to help with that education piece around private equity specifically.

34:19 The website also has a lot of that information if there's anybody listening to the call that, is is interested in accessing some of that. And and by all means, also, do feel free to get in touch with us. We'd we'd be delighted to share anything with you or just kinda cover specific questions, one to one. We're also doing more and more educational work such as podcasts, attending and speaking at conferences, participating in articles about the the industry to try and dispel some of the myths around private equity and articulate specifically why listed trusts are an attractive way of accessing private equity. I was just the day before yesterday, actually, speaking on, roundtable about listed private equity and, why it is an attractive way of of accessing private companies and and building that into your portfolio.

35:17 And, with the the marketing agency, we're we're working on simplifying our messaging. So making it really easy to understand, cutting out a lot of the jargon that we we often use and I probably have been using today in this presentation. So there'll be more to come on on that front over the the coming months. I would just say that the the key message is that listed trusts provide a means for accessing private equity that gives all the things that I was talking about, balanced, diversified exposure to these private companies that otherwise aren't accessible or available for individual investors. And unlike those traditional ten year vehicles, the structures that are used in in private equity, an investor thinking about a listed private equity trust can invest with smaller amounts. You don't have to worry about investment selection, cash flow management.

36:11 And as we've touched on, the trusts have these independent boards there to ensure there's good governance and work on behalf of the the shareholders to hold the manager accountable and make sure that that their investment is appropriately managed.

36:32 Thanks, Charlotte. And I guess, a nice question just to follow-up there would be, how do you view the relative attractiveness, of the small slash mid slash larger slash mega markets? Yes. So we invest across the buyout spectrum, and there are different characteristics that you see across the the different stages right from the kind of small end all the way up to mega buyout, which is what what we kind of think of as the the largest companies that are out there. The first element of that, I'd say, is around the different pathways that you have for value creation. What we tend to see is that the the smaller end, there tend to be multiple different levers for for growth as companies scale.

37:19 So that could be different ways of approaching the market and growing their customer base. It could be in taking market share from, other companies working in the space. As you sort of go up the size, spectrum into the kind of mid market and larger end, it can often mean expanding geographically or executing on a buy and build strategy where you're buying smaller companies to to build into and integrate into the business. Generally speaking, we see that at smaller end, there are a lot of different, levers for for growth and tend to be fewer, options at the larger end. In terms of valuations, what we see is at the smaller end, oftentimes, you get quite attractive entry multiples.

38:05 You're often buying from founder led businesses, or families, where you're working in a bilateral transaction and can can get some really attractive, entry valuations. And that means that you have a bit more of an opportunity for multiple expansion at exit that's related to the scale of the business transforming. We also typically see lower levels of debt being used at the smaller end of the spectrum. And at the larger end, it tends to be a bit fuller multiples and more persistent use of debt to to generate returns. Also linked to the fact that that growth is, a little bit less, a bit a bit more challenging to to generate, at kind of levels that you can see at the the smaller end.

38:55 But I'd say another facet of it is exit opportunities. So at the smaller end, there are a number of different ways to exit your business. You might sell to a larger strategic buyer. You might sell to one of those large or mega buyout managers. If the company gets big enough, maybe you might think about an IPO, but it's not typically a big exit route for the smaller mid market end. While at the larger mega end, it's really reliant on IPO. A lot of those businesses, there isn't a larger sponsor that would be interested, and the number of strategic buyers that are really large businesses that could integrate an an already large add on are are much fewer. So so the exit sort of optionality is more limited at the the large end.

39:47 And the last thing is around supply and demand. So there are thousands and thousands of small mid market companies that those managers can can go after. The larger business gets, the fewer of them that are out there. And so what we found, to some extent at the moment, a lot of the dry powder is at the larger mega end of the the market where there is a more limited supply of companies that are large enough for those funds to deploy efficiently. So our view is, and it's a kind of pantheon house view, we love the small and mid market end of the spectrum. It's where we focus. It's where we deploy most of our capital. And it's where we think there's the most attractive value in terms of, you know, those growth levers, the the values, relying on debt too much, and having that optionality around exit.

40:39 And what that means in practice is that we're just very selective. There are some great managers at the the large end that we do support, but we're much more selective there and ensure that we're supporting managers that have an edge and some kind of differentiation that that gives them the ability to generate strong returns where it's generally speaking a little bit more tricky to to do that, a large mega end.

41:05 Perfect. Thank you. We've had a question come here, coming here which asks, in a competitive market for co investments, how does PIP secure allocations in the most attractive deals? Do you have preferential access, due to PANTHEON's relationships with GPs? Well, so PANTHEON International is in quite a unique position actually with its relationship with PANTHEON as a manager. So across the PANTHEON platform, we have a number of relationships with underlying managers, and that is a benefit for PANTHEON INTERNATIONAL. We offer access to the deal flow across a much wider universe of manager relationships than the smaller, very selective group of managers that PANTHEON INTERNATIONAL itself actually commits to, through primaries.

41:55 So it's it's able to benefit from all of the deal flow that we see on the co investments, across actually all of the managers that that we work with and not just the ones that are within PANTHEON INTERNATIONAL's portfolio. We also, as PANTHEON, position ourselves as a partner to the managers that we work with. We can participate at any point during the deal process from co underwriting a bid, co bidding alongside a a manager, taking a piece, right at the very back end once they've actually closed the deal and offer a syndication. We can work with them at any stage in the process. So that flexibility and the ability to kind of work really efficiently is something that's valued by the the managers and means that we are often the first port of call, and therefore see some deals that might not actually ever be offered to to another potential, co investment partner. Especially if we are in there early and we've co underwritten or co bid on a transaction with the manager, we can often secure our allocation and the desired, piece of that deal that that we we would like right at the front end, that offer means we're the only co investor, in a deal. And the last thing I'd say is that we only complete about 15% of the transactions that we source within co investments. So we're really very selective about what we pursue.

43:21 But that's off a base of really making sure that we see as much as we possibly can out there and and get as as great access as we can to to the deal flow to then be able to pick what we think could be absolute best opportunities from that that deal set.

43:39 Thank you. How does PIP assess the alignment of interest between the private equity sponsor, existing LPs, and new investors in a secondary transaction? Well, that is an excellent question. Alignment is absolutely crucial in manager led secondaries, which which I think is is the specific kind of secondary transaction that this person is is asking about. There's no one element that on its own indicates strong alignment. It's a sort of nuanced concept. And at PANTHEON, we think about the overall package across a transaction structure. So the starting point for us is the rationale for the the deal in the first place. So is the sponsor considering what's truly best for their existing LPs, or do they have some other motivations that maybe aren't in the best interest of their investors?

44:36 And when we're thinking about that, we're thinking, you know, how long have they held the company? How many years are left in the term of the fund that that company is is held within? What are they expecting to do with this company in the the next hold? And and does that make sense? Is it something that they actually still just could be doing within the fund itself? Do they need to be rolling this into a continuation fund to be able to to do that? That's that's one key point. Why why are they doing it in the first place? Another important element are the terms of the transaction. So we'll assess, you know, how much is the manager investing into the new deal and not just the the source of that capital. So are they generating carry by exiting that that company, or is there some other cash that they're they're getting, you know, maybe on their GP commitment in that company?

45:32 Is... Are they putting all of that into the new deal? Are they maybe actually putting new cash? You know, it's just sort of from their own bank accounts investing additional cash into the transaction. And specifically, who is investing in the deal from the the manager. Is it the people who are involved in the management of that actual company, or is it maybe someone who's close to retirement?

45:59 You know, I put a lot more weight on the amount of capital that someone who's involved in the company is putting in, especially if for that person, it's a really meaningful amount. And, again, there, there isn't an obvious, you know, exact number. If they put in, you know, x number of dollars into the deal, then that's good alignment. It has to be relative to what's meaningful for that specific individual. And we do the same exercise, not just for the the GP, the manager, but also for the actual management team of the the company. Another element that's really important actually is how the process has been run and have they sort of operated in a very fair and transparent manner? Are they working with an adviser that has knowledge of the best practice in in running these manager led secondaries?

46:53 Are they including the LPs in their discussions and talking to them very early on to make sure that this is something that the LPs actually want themselves, and that they value the the manager, initiating that transaction. But at the end of the day, once this... Once the deal is completed, we aren't just the buyers. We become the existing LPs. So it's important that we trust the manager and believe that they have run a transparent and fair, process. And we tend to work more with the managers that we already know well from the the platform and from our existing relationships. Because, you know, in those cases, we know how they work. We know how they operate.

47:39 We have built trust over many years and often would already know the backstory to the asset in the transaction because we'll have been traffic tracking it over over time. Perfect. Thank you. We've actually had a couple of questions coming on a similar topic here. So perhaps if we take this one, as I think it speaks to the others as well. How does PIP differentiate itself from other listed private equity funds? And what's your key competitive advantages?

48:08 Yeah. So so there are a few different types of listed private equity funds. I'd say there's kind of a spectrum between single manager funds that are typically more concentrated because it's just a manager that is investing in their own assets. And in some cases, they could be single sector too. So if that manager, pursues just one particular sector, then naturally, all of the assets that they invest in will be just in that one managers approach that one sector. So they're concentrated, and that is one particular type of risk return profile. At the other extreme, you have multi manager portfolios such as ours. Some of those can be very diversified.

48:53 So with thousands and thousands and thousands of of companies. We offer what we think is sort of the best of both worlds. So we have sufficient diversification to mitigate the concentration risk that you get with those single manager funds. But as I've mentioned a few times, 55% of the portfolio is in direct investments where we're deliberately selecting these companies and we can control to a greater degree, the... You know, what we're putting into the portfolio much more than you can with a true fund of funds approach where you're just investing in in funds. So, the profile of each new investment is something that we're deliberately choosing to add to the portfolio.

49:40 And as I mentioned a little bit before, it makes for a different profile of unfunded commitments that that we take on. So we really... We leverage the PANTHEON platform. As I've sort of alluded to before, PANTHEON invests in primaries, co investments, and secondaries, but PANTHEON INTERNATIONAL, this vehicle, only participates in the direct investments that that we select for it alongside a really also highly selective group of of primary commitments. We're mid market focused, and we lean into those sectors that I mentioned before, technology, health care, that have those attractive, dynamics, like secular trends, you know, high customer retention rates tend to be much more resilient through market cycles. So we see ourselves as something of a one stop shop to to access private equity.

50:36 And we... That we offer a sort of all weather portfolio that is is an attractive way for someone to get an allocation to, to private equity on a stand alone basis. Perfect. Thank you. Just turning to the next question that we have here, which asks, there's been much said that 2025 could see deal flow increasing. Does that have to be reassessed after such a rocky start to the year? I mean, that is a great question too. I think to some extent, it needs to be, reassessed, But some of the drivers of the expectation that 2025 will will start to see a bit of a recovery are still in place and and haven't yet sort of altered.

51:22 So we may see a change in interest rates. We may see a move in inflation. I think until those things actually start to to happen, our managers are still, you know, selectively really looking within the, the landscape to identify new company opportunities and still have some pressure that has built up over the last two, three years to generate distributions from their portfolio and exit some of the companies, within within their portfolios. So that needs to generate proceeds back to investors. And the the fact that it's built up over multiple years, is still there, and I think we'll continue to to put pressure on managers to to generate exits.

52:12 And, again, in terms of the sort of call side of things, the new investment activity, there's a lot of dry powder at the large and and mega end of the, buyout landscape. And those funds need to deploy that capital. So they'll be operating with funds that have typically a sort of five year investment period. And, you know, two, three years have already gone past. So, again, pressure is building up to deploy that capital. I think that means that in practice, probably, you know, investors on both sides, whether it's thinking about buying companies or, when they're they're launching exits within their portfolio, the managers, strategic buyers, the IPO market may still take a little while to get back to normal levels.

53:03 But I think within that backdrop, even with the sort of volatility that we've seen over the last month or so, that we will see a gradual tick up over this this year because there's still those strong forces in terms of the pressure to still deploy and and still generate, sales and and proceeds back to investors. Thank you. And perhaps one final question. Can you give some specific examples of companies you've invested in, how they're progressing, and where realizations have been greater than the last valuation?

53:37 Yeah. So if you take a look at our interim report, there are a couple of of case studies in there of two examples within our portfolio of exits that we saw within the period, and there there are a couple of meaningful exits. So they're helpful, I think, in in giving you a sense for for what's going on in the the portfolio. So one of them is an American business, Arnott, that produces air suspension for all different kinds of of cars. So, you know, it taps into not just OEM, like new car manufacturer, but also, you know, maintenance and repair of of existing cars. And they've been able to to grow taking market share in The US, but also expanding outside the The US. And when you look at that case study, you can see that over the hold period, that manager was able to generate really strong organic growth. So growing top line by that kind of expanding into other markets, taking market share, but also making the business more efficient.

54:48 Often you see that as a business grows and it has economies of scale and better buying power, for its input costs that it's able to improve margins. And the combination of the two, generates attractive EBITDA growth. So when you look at the the value bridge that's in the the case study for that particular exit, you can see that the the, majority of value came from operating performance in increasing the top line and and efficiency of the company generating EBITDA growth. There's a little bit of a bump from multiple expansion. So we don't typically underwrite to multiple expansion. But sometimes you see it in the exits because the, the manager is able to to drive value at exit and and position the company well to get a a bump on the valuation multiple.

55:42 What was interesting with both of the the case studies actually that are in the interim report is that they both were sold to larger sponsors. So really playing into the theme that I mentioned before that those larger sponsors have dry powder that they need to deploy and have been active in the market for good quality businesses. And and we believe that the the mid market assets we have in the portfolio are really top quality assets. They're the kind of businesses that that will trade despite the sort of uncertain macro picture. The other business is a good example of kinda customer stickiness. So it's a business called Iris. It's a software business. It includes software across a number of different elements, including, accountancy and and payroll.

56:30 It also has, what is particularly interesting because it's not a piece of software that that I use myself, a software that they sell to schools to communicate with the the parents of the children in the school. So my my children's school uses this piece of software, so we get communications from the school. We would also go on there to pay for school trips or anything like that, be able to set up parent teacher evenings, book our appointments. Once you have a school that has engaged with this piece of software like that and they have set it up with their parents. The parents know how to use it. The teachers know how to use it. The administrators of the school know how to use it. There's a bit of an inertia there to changing to a different software product because they know how it works. They rely on it and don't really want to swap to something else. So you generate that stickiness with a customer, and that kind of drives really strong customer retention rates. And, again, that business really generated most of its return through operating performance and the the company growing, top line and improving its efficiency to to drive, margin growth.

57:47 Perfect. Thank you, Charlotte. And that's actually all of the questions there. So thank you very much indeed for being so generous of your time and addressing all of those questions that came in this morning. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended. 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 few closing comments just to wrap up with, that'd be great. Yeah. Well, appreciate everyone joining and listening for for the hour today. I mean, we really believe in in the PANTHEON INTERNATIONAL portfolio and think that there is a great set of assets there to to generate performance over the the coming years. We're working hard on the... Addressing the the discount, and that is absolutely front of mind. So, yeah, please feel free to to send us feedback. We love to hear what is on your minds is whether that's in actual investors, potential investors, things that you'd like to see more of.

58:47 And I'd also encourage you to go and take a look at the the website for any other information and and absolutely do get in touch if there's anything that that we can help you with. Thanks for joining. Perfect. Thank you, Charlotte. That's great. 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 order that the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the 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.