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00:00I'm here with EQT CEO Per Fransen. Per, thank you so much for sitting down. I'd say it's a special
00:05time to be talking to you now because this is your one year anniversary month as CEO of EQT. How
00:10has the last year been, Per?
00:12It's been a busy year, but I think it was a good year for us. We stayed disciplined in our
00:18investment pacing. We actually had a record year of exits. We sent back 34 billion euros to our investors. And
00:27as a result, we made good progress also on our fundraising agenda and also on some of the strategic priorities
00:35that we set ourselves.
00:36And we acquired Kohler Capital, of course. And fun, fun anecdote. It's actually exactly a year ago that I met
00:44Jeremy Kohler for the first time here at Milken. And so we have a little bit of a celebration also,
00:50Jeremy and I here.
00:50OK, well, now I've got to ask, who have you been talking to this year that you're going to be
00:53buying?
00:55Well, yeah, the nice thing with Milken is that, I mean, there's all the relevant investors here, the key players
01:03in the industry. And it's really just always a great time to engage with everyone. And I'm doing this this
01:10year as well.
01:10Very well dodged. I have to say, just on that note, I mean, you've taken on this big acquisition. That
01:15was really fascinating. It makes sense. Get access to secondaries. We've talked about this before. Other areas you'd want to
01:21add.
01:23Anything kind of popping up, anything of interest at this moment, especially as the wider industry, some kind of feel
01:27more stressed or there are more opportunities right now, perhaps?
01:29So I definitely think that the consolidation of our industry will continue, probably accelerate, given just the environment that we're
01:39in. There's a number of factors driving that.
01:41If I look at our platform after Kohler, we're just really well set up to capture, like, the growth opportunity
01:47ahead also for the private markets industry.
01:50Of course, here in the U.S., we're still relatively speaking small. And if I look across our four business
01:58line strategies that we have today, private capital, infrastructure, secondaries and real estate, the area where we're still relatively speaking
02:05small is in real estate.
02:06We've been fairly narrow in our thematic focus so far in real estate, really focused on the logistics segment.
02:14So that could also be an area where we could grow through acquisitions going forward also here in the U
02:19.S.
02:19I just wonder, I actually heard from someone yesterday that likely the consolidation is starting to happen, kind of not
02:25at your giant level, but maybe one tier under unlisted funds who want to come together, that they need to
02:31be a platform like EQT to survive.
02:33Do you think that's the new reality that we're in, that some of the, again, bigger but not as big
02:37as you players need to come together?
02:39They need to form a platform or else they can't compete with the EQTs of the world.
02:43I do think that that's like a trend across sectors, right?
02:47And also in the private markets industry, AI, I think, is also fueling that.
02:52And businesses across industries just need to invest into their AI capabilities and requires a certain scale to do that
03:01and also a certain scale to be relevant for the key players in the ecosystem.
03:07At EQT, we have that scale and we can invest into our value creation capabilities across strategies and across geographies.
03:15So that is definitely also a trend that I expect will continue more broadly across the industry.
03:21How much of that also just gives itself to a new world that we're living in of what's attractive for
03:26companies and how we judge valuations?
03:28Because it used to be asset light, really high margins, and high cash flow.
03:33And now all these companies realize, okay, well, with this task of AI, I need huge access to compute.
03:38AI infrastructure is interesting.
03:40I know EQT is very active there.
03:41Are we kind of in a new world in terms of what makes for an attractive company?
03:47Definitely.
03:47I think business models are transforming, are changing across industries, also, you know, for our own industry, across the firm,
03:58across strategies.
03:58We really want to be invested in the AI trend.
04:02And we're just ideally set up to do that.
04:05Also in secondaries now, I mean, given some of the AI-driven disruption that we're seeing in the private markets
04:11industry, also in private credit,
04:13we can invest into that now out of our secondary strategies.
04:17And, of course, in infrastructure, you mentioned it, at the AI infrastructure level, that is really where we see very
04:23attractive risk-reward
04:24because this huge demand-supply imbalance, a demand for AI compute being so high,
04:31and it's just very unlikely also to change in the short term.
04:36And that's really also what we're investing into out of our infrastructure strategy.
04:40We own one of the largest data center platforms in the world called EdgeConnects.
04:44We're also a big investor into energy.
04:46And, of course, like access to energy is one of the bottlenecks in terms of the build-out of AI
04:53infrastructure.
04:54Have these platforms fully passed along the cost of energy to companies, to portfolio companies?
05:00Is there a risk that we go through a period of high-margin compression for AI-using companies
05:06and the cost getting passed to them of bottlenecks and energy?
05:09Because at the moment, the big platforms aren't exactly passing along all the costs.
05:13I do think that, like every business in most industries, is right now thinking about how do they set up
05:21their own internal processes,
05:22their governance, how do they build their internal AI capabilities to be able to also get the return
05:29on all of the AI-related investments that they're making long term.
05:33And so that's a focus for most of our portfolio companies.
05:37We, as an active owner, like we make sure that all of our portfolio company management teams are really AI
05:44-centric
05:44and have that return on capital employed and also invested into AI and AI compute top of the strategic agenda.
05:52That's also how I'm running EQT and my own firm.
05:58Have you partnered with any of the big foundational models?
06:02I feel like every day we hear some story of Google or OpenAI.
06:06Have you had those discussions at all?
06:07So, I mean, we've been investing into our internal AI capabilities at EQT for the past decade or so.
06:13And so we then make sure that our portfolio companies have AI-centric CEOs that then can leverage our own
06:23internal AI capabilities.
06:25But, of course, we also need to make sure that we have access to the best external capabilities.
06:30And, you know, we have the scale necessary in our industry to be relevant to all of the large language
06:36model providers
06:37and everyone else that can provide us with those AI transformation capabilities.
06:42And we constantly have dialogues, discussions, and we might also formalize some of those discussions into more formal partnership agreements
06:51that we might announce going forward.
06:53By the way, when you say your own internal capabilities, is that like your own internal LLMs that you've developed?
06:58Or what exactly is that?
06:59So we have an in-house team of more than 50 digital experts, AI data scientists that are working closely
07:06with the investment organization,
07:08our portfolio companies to help them drive, you know, AI transformation.
07:11So you don't necessarily need the forward deployment engineers at the moment from these big companies
07:15because you're like, I got the experts.
07:17Is that kind of the idea?
07:17We have some of those experts in-house.
07:19But, of course, you know, given the size of our portfolio and the scale of transformation that's happening,
07:25we also want to make sure that we have access to those external capabilities.
07:28By the way, you said, you know, there might be announcements to come on partnering.
07:31How do you evaluate who the best partner is?
07:33Because it feels like this weird horse race where maybe OpenAI is better.
07:36Oh, actually, Anthropic has more advanced models.
07:38How do you sort of decide who to put your fortunes with?
07:41That's precisely why it's important that you also build your own internal AI capabilities.
07:47And that's why we believe it's also important that you have access to a diverse set of external capabilities
07:53and not only, like, bet on one horse, so to speak.
07:57So you mentioned, you know, you have more access to private credit now with the Collier acquisition.
08:02The fears around there have been squarely around wealth products.
08:06And I realize this is a very different flavor from the BDCs, the fears.
08:09But you did launch a retail infrastructure fund very recently in Europe.
08:14Again, very different flavor from what's going on.
08:15But I wonder if you kind of thought about this idea of what is appropriate for retail investors as you
08:21launch funds for this.
08:22Do you think that there's been some missteps by this industry as a whole in what they've kind of been
08:26marketing to more retail-oriented investors?
08:27This is, of course, a really important, very, very important strategic topic and discussion for us internally.
08:36We believe it's a good thing to give private wealth and retail investors access to the value creation that's happening
08:43in the private markets.
08:44It's the, you know, the share of the value creation in the global economy that's happening in the private markets
08:49keeps on growing.
08:50So, per se, that's a good thing.
08:52But, of course, it's very important that you design those products in a responsible way
08:57so that you can maintain the same underwriting standards as you have for your institutional products,
09:02also for that part of the industry, and most importantly, that you also market and sell those products in a
09:09responsible way.
09:10So, if I were to make one prediction for the industry, and in particular for private credit,
09:15is that the vocabulary, the word semi-liquid is going to disappear.
09:21These products are illiquid, right?
09:23And it's just very important that we're transparent about that.
09:26Yeah, I've heard stories at this Milken of family offices using some of these funds as cash management when they're
09:31squarely not.
09:32I mean, who does the blame lay with?
09:35Is it the advisors?
09:36Is it the funds for calling them semi-liquid?
09:38Where did we go wrong that that sort of dynamic happened?
09:41I really think it's, like, the responsibility for all players, all stakeholders in the industry,
09:47the private markets players, ourselves, but also the distribution partners, the banks,
09:53everyone else that is really involved in distributing these products.
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