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Good morning, and welcome to the Catella Q2 2023 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I would now like to turn the conference over to Mr. Christoffer Abramson, CEO. Please go ahead.
Thank you, and good morning, and welcome, everyone, to Catella's 2023 Second Quarter Report and apologies for the slight delay of this webcast. In addition to myself, with me today is Michel Fischier, our Chief Financial Officer and Head of Investor Relations. As per usual, we will go through our main events in the quarter and the financial performance. And after that initial presentation, we'll take questions on the phone and online if you so prefer. And, of course, our financial reporting and presentation materials are always available on the web. So let's start, as we normally do, presentation on Page 3 with a brief overview of Catella. I'm sure most of you, but we hope there are some new people online, but most are likely familiar with our strategy and our operations by now. Catella operates in 3 property-focused business areas: Investment Management, Principal Investments and Corporate Finance. We now manage nearly SEK 150 billion in our pan-European investment management platform. Just over 75% of the assets under management are managed in property funds and the remaining part in a significant number of asset management mandates across Europe. Principal investments is where we invest our own equity into a broad and diversified portfolio of European investment projects together with partners. Corporate Finance is our real estate advisory and brokerage arm with leading positions in 5 large European markets. Corporate Finance is also an important internal advisor to our other business areas, Investment Management and Principal Investments. So with that brief introduction, I'd like to start this quarter's presentation slightly differently with a market summary on Page 4. The European real estate transaction volumes are at historically low levels. Levels not seen since the global financial crisis in 2008 and '09. And furthermore, the drop in transaction volumes is even higher than what we experienced during the GFC. Clearly, this affects all of our 3 business areas. The transaction-driven income in Corporate Finance is directly and mostly -- most affected by our areas in a very slow transaction market. In Principal Investments, the main impact is obviously that the uncertainties in the market, delays, divestments of completed and fully let investment projects. And for Investment Management, it reduces the variable income that stems from acquisitions and disposals of our fund assets and also performance-related fees. However, as we've grown over the last -- large number of years and continue to grow our asset base, the underlying fixed fees continue to grow and partially cover the lower variable fee income. But of course, this is not an easy environment at the moment and put the numbers in a little bit of context. So with that market backdrop, let's move to Page 5 for a summary of our key operational highlights of the quarter. So despite a slow market throughout Europe, it has been an eventful quarter for Catella. We signed an agreement to acquire a French company, Aquila, which we're very excited about, besides adding roughly SEK 16 billion to assets under management. It also has significant synergies to Catella. We now have the opportunity to internally manage our French fund assets, which are about SEK 6 billion. And we are present in the French market now with an attractive asset management proposal in the current volatile market. Additionally, we have a partner for Principal Investments in France. And finally, crucially, it adds a new source of investment capital through the retail platform, [indiscernible]. Retail investments from individuals is a source of capital that we see continue to grow or at least stay strong even in current market conditions, which is a great diversification and source of capital for us. Our focus is always on long-term value creation for our shareholders. Those of you who normally listen in, know that we never really focused too much about the quarter. It's about long-term steady growth. And we have made progress this quarter despite a very, very calm market. It allows us to focus on these long-term initiatives. With a very strong 2022 behind us and a continued strong liquidity and financial position, we are in a good position to grow the company through investments in digitalization, capital raising, by evaluating M&A opportunities, obviously Aquila being a good example and by making opportunistic investments with partners and also by launching new products, tailored to the new market environment with a clear sustainability profile and ideally with a pan-European reach. So we focus on investment management. But even though the transaction market is currently very quiet, we just show an increase in AUM of nearly SEK 9 billion in the quarter, supported by finalized development projects, entering our assets in funds, but also some exchange rate positive effects as the Swedish krona continues to depreciate. Looking ahead, we have capital commitments of approximately SEK 10 billion in our funds and several development projects coming to completion, so both of which will support AUM growth going forward. After quarter end, Catella APAM in the U.K. want a 12-month significant advisory mandate for Transport for London. This represents yet another prestigious assignment for our U.K. platform. Initially, the contract will evolve assisting TfL in understanding and realizing the potential of primarily retail assets around subway platforms and the stops although in the longer term, it may also open up opportunities for growth in assets under management for Catella APAM.
Turning to Principal Investments, relatively quiet. However, we sold a logistics property in Sweden, generating a profit of SEK 5 million and furthermore, at the end of July, so after the quarter, we divested our 50% holding in Infrahubs and associated project companies, bringing an end to that partnership. The value of the transaction corresponds to the return of the total invested capital, plus SEK 12 million for the value of the platform and assets. Our partnerships with Infrahubs successfully contributed to the Swedish market needs for sustainable logistics solutions. And the rationale behind the transaction was really to reduce our exposure to these particular development projects and to free up capital for other growth investments across Europe. For our remaining investment projects in Principal Investments, we expect divestments to be limited during 2023. However, as we've discussed in the past, we are in a good position where we can be patient with divestments of completed and cash flow positive properties, while we're flexible and ready to utilize liquidity for other investment opportunities that we are actively working on. For Corporate Finance, obviously, the most challenging business area in this market environment. The transaction market remains hesitant, and those revenues are limited. But the pipeline ahead is sent to ground large and more complex transactions. So there are -- there is potential, but the timing continues to be very uncertain and success stories are somewhat binary.
However, one landmark transaction during the second quarter was advising a Finnish government-owned residential company and the sale of a major residential portfolio to KKR. This was KKR Stores acquisition in Finland and the biggest real estate transaction so far this year in the Finnish market. It's a good sign that for whatever transactions are occurring at the moment, we have the teams and the expertise to work with the biggest players in the most complex transactions.
So on Page 6, we have a summary of the group's consolidated results in the second quarter. Our year-over-year revenues decreased by SEK 75 million. The main driver behind lower revenue were simply significant transactions last year. We had a record-breaking 2022. We divested 2 logistic properties in Sweden with significant profit margins and received quite material performance fees in Investment Management. In the current market environment, it's also inevitable that it was hard to match the transaction revenues in Corporate Finance from last year. Now as an effect of the lower revenue, EBIT ended at SEK 84 million contributed both to Catella shareholders compared to SEK 328 last year. But I think it's important to put this in context. And I would like to point out that SEK 84 million in a quarter historically is a very solid result for Catella, but with around SEK 100 million from last year's divestments and a similar drop in variable fund income, the year-over-year comparison is tough. But as a side note, the underlying income in Investment Management keeps growing. And this was, in fact, Investment Management's second best second quarter in history. It's just a very tough comparison to 2022, but we still deliver SEK 84 million of EBIT, which on a long-term trend, it is not a bad result. Investment Management then continues to grow with substantial AUM increase of SEK 14 billion over the last 12 months. Quarter-over-quarter, AUM increased by SEK 9 billion, mainly driven, as I talked about inflows into residential funds, completed development projects, but also we have some currency tailwind, of course. But the operating profit here is important to put into context.
Our fixed fees continues to show the resilience of the underlying business model. Even though there were very, very few transactions and virtually no variable fees, we have a solid profitability in the segment. And fixed fees are up 14% year-over-year. And this will continue to increase our long-term earnings baseline and reduce its volatility. I think in the current market environment, where we see limited change in the short term, this is a real strength for us and shows the long-term focus of our business model. In Principal Investments, a bit more choppy and short term sometimes. One, divestment, as I said, was realized, generating a profit of SEK 5 million. Imagine, we exited the Infrahubs' partnership in July, and looking forward and ahead, we will continue to focus on developing our current pipeline of projects in the pace that we find appropriate. And I think more importantly, pursuing co-investments aimed at generating new mandates and revenue streams for our various companies and mandates across Europe. And long term, we're working on some exciting new opportunistic investment strategy to meet the changing market dynamics and investor demands. And of course, more of that when those are launched.
The historically slow transaction market that we started the call with, naturally affected revenue in Corporate Finance as well, which led to a negative SEK 22 million EBIT compared to a positive SEK 26 million last year. While looking out ahead, we have a strong pipeline. We're working on just like our competitors with big complex transactions, helping players across Europe. But the market, as I said, is somewhat binary driven by these large transactions, and it is difficult to predict precisely how and when deals will be realized. I think there's -- in several countries, still hesitancy and a slight discrepancy in price expectations, but we have seen in several markets buyers and sellers starting to come together. So we -- a slight optimism going into the second half of this year. So let's move to Page 7, where we discuss a little bit about Investment Management in more detail. One of our favorite charts since the inception of Investment Management, we have delivered a strong average annual growth rate of 24% in AUM. And as I said, over the last 12 months, SEK 14 billion and even SEK 9 billion in the last quarter. Majority of that over the last year has been inflows to our residential fund offerings, but also with some FX. Again, we view 2023 cautiously positive as we continue to have a pipeline of transactions to complete development projects to finish and capital commitments of SEK 10 billion to be invested now in a changing market with prices having moved down. But we still remain prudent and have continued dialogue with our investors on how to best utilize the capital that we have available. We also have some positive trends and remain very positive on our outlook in growing asset management. The pipeline for new mandates is strong with opportunistic investors being more active and existing property owners are really in need of our expertise at the moment as some of them have workout needs, sustainability improvement requirements. And some of this is really playing into our strength. And one example is evidenced by our new mandate with TfL in the U.K., for example. And as I started with a little bit, we are taking the time now in a slower environment, develop the next strategy in the next funds and products and mandates to meet the investor demands in a somewhat more volatile and sustainability focused market. So on Page 8, the continued underlying AUM growth drives increased fixed fee income. I can't stress this enough, and it is our key underlying investment management metric and a main long-term profit driver in Catella. And as you can see, our fixed fees have increased by 50% since 2020 and I think this is something that we take great comfort. And I think from an investor perspective, it's really important to look at this long-term trend and take the good quarters when they come, but look at the long-term trend on the underlying fixed income. Right now, over the last couple of years, we've passed this hurdle where our fixed fee income materially exceeds our nonvariable operating expenses. I'm not saying this is unique among our peers, but we are in a solid and strong position with very little goodwill and other depreciation on our balance sheet impacting us. This is going to go well even in a slow transaction market without significant variable fees. In Q2, variable fees such as acquisition disposal and performance fees were essentially lower than a year ago, again as an effect of lower transaction volumes and underlying valuations. Again, we had an amazing first half of 2022, but we had a strong second quarter in 2023. Besides capital commitments to funds, our broad offer in asset management provides critical competencies in turbulent markets to primarily reposition and redeveloping assets. This is an offering which balances core AUM growth in economic downturns and a slower transaction market and really it should provide a significant variable fees in the coming years.
So we are now turning to Page 11 to talk about Principal Investments. Our diversified portfolio consists now of 10 active projects in different asset classes as well as some projects in predevelopment basis spread across 6 European countries. In addition, we also have a portfolio of smaller co-investments, and we hope to be able to grow this in the coming years that both meet our return targets and more importantly create new partnerships with investors, and generate new revenue streams through asset management and development mandates. Operating profits during the quarter was mainly driven by rental income from our Kaktus development project in Denmark and the sale of the logistic property in Sweden. And besides the sale in Sweden, no substantial transactions were made. And in the current market environment, we expect divestments of completed projects to be limited, frankly, in 2023. We have made some steps forward in utilizing liquidity and started a couple of new projects during the quarter, and we'll talk more about those when we get further ahead. But look, our strong financial position here is key. That gives us the flexibility to be patient with cash flow positive properties. And we already utilize our liquidity and pursuing new investment opportunities as they emerge. But at the moment, we're maybe a bit more prudent than we have been in the past and waiting patiently like most others. But we have made steps even in the second and third quarter to move our positions ahead a little bit. So Corporate Finance, which is on Page 13. It's a slow transaction market. There's no way to get around that fact. All our competitors, our peers, our friends in the market are facing the same issues. But the pipeline confirms that Catella Corporate Finance maintains a strong position in our 5 markets. But the uncertainty in the market is pushing transactions forward. It takes longer to close. It's renegotiated several times, and all buyers can't get their deals together. It's nothing new. It happens a lot in the type of environment. But a slow hasten market affects all our business areas and especially Corporate Finance. And until this bit of gap between sellers and buyers close, we expect relatively low transaction volumes and revenues to continue. At the same time, demand for valuation services continues to be strong as well as demand for more complex capital markets and restructuring services. These are, as mentioned, pretty lumpy and unpredictable. But if we close a few of these in the pipeline, it will turn out to be an okay year despite this rather challenging be kind environment. So with that, I'll hand over to Michel, who will share a brief financial summary, beginning on Page 15.
Thank you, Christoffer, and once again, welcome to our call. I hope you all enjoy your holidays. And for me, I'm happy to present my second quarter as CFO of Catella and not to repeat what has already been said, at least too much. The year-over-year comparables were challenging due to a lower variable revenue in Investment Management, limited profit from sales of Principal Investments and of course, fewer transactions in Corporate Finance. In essence, these were the drivers behind an EBIT, SEK 244 million lower than last year. Although SEK 84 million is still something in EBIT, it's still something that we view as a solid quarterly income. If we take a look below the EBIT line, both currency effects and an improved structure and structured intercompany lending has supported an improved financial net compared to last year. Also, a more transparent and straightforward group structure has taken us closer to a point where we need local and group tax obligations. The financial net and taxes led us to a net profit at the same level as EBIT. And as seen, the lower earnings resulted in an operating margin of 11% and an EPS of SEK 0.95, both positive but still substantially lower than last year and the reasons behind this have already been explained. If we continue to Page 16 to look -- to have a look at our financial and liquidity position, our balance sheet and equity ratio remains strong and provide the necessary dry powder to support our growth plans. The cash position is broadly unchanged year-over-year, but lower than last quarter. And this follows our decision to replace expensive mezzanine financing with internal shareholder loan in the development project in Kaktus in Denmark. And this shows our ability to be flexible and have the opportunity to invest capital where necessary. In this instance, we have the liquidity to replace expensive financing, and we did so.
And to conclude and reiterate what we've said previously, we're comfortable with our liquidity position and the outstanding market debt, which matures in early '25. Our position, of course, provides us the headroom necessary to continue to invest in long-term value creation and creating these and also the firepower to harvest opportunistic ideas going forward. With that said, I'll hand back over to you, Christoffer.
Thank you, Michel. So before we conclude and open up for Q&A, I'd like to briefly summarize the quarter from our perspective on the final slide or Slide 18.
Look, for everyone in this market, the first half of 2023 has been slow. Slow is a generous word. It's down dramatically. But we're still pleased. We have been active. We're building the future Catella. We have invested in long-term value creation within the organization and through M&A. The current market does affect all of our business areas, but at the same time, it creates opportunities for companies which can lean on a flexible product offering, a sound financial position and balanced leverage such as Catella, and we are in a favorable position to act in this market. The agreement to acquire Aquila adds one piece to our strategy of profitable growth, combination of led synergies, increased diversification, both of assets and capital inflows and provide new revenue streams going forward. Looking ahead, our sound financial position and capital commitments and funds puts us in a good position to capture growth opportunities and invest for profitable growth in the coming years. We'll do everything to work on long-term shareholder growth and value regardless of the market sentiment. So with that, I'd like to thank you all for listening and open up for questions.
[Operator Instructions] Your first question comes from Patrik Brattelius with ABG.
Then, a couple of questions from me. Firstly, you -- I want to go to the acquisition that was highlighted in the quarter. This strengthened your footprint in France. So how do you view further M&A from here? Are there any geographies or segments in the market where you want to strengthen further or any black spots that you want to enter?
Yes, it's an important and delicate question. We can't obviously talk specifics. But first, I want to highlight Aquila, SEK 16 billion of assets to add to our AUM is a significant transaction. It's profitable -- quite profitable from day 1, and it gives us the ability to, over time, at least, hopefully, pretty soon manage our own French fund assets. That's SEK 6 billion that we could move internally. And France is a huge market, and it gives us the opportunity to work with corporate finance. It gives us an opportunity to access new capital base and gives us a partner for Principal Investments. But most importantly, the company that we are going into business with is just like us, they are -- they work across the value chain. They work across the risk curve. They are flexible and entrepreneurial and have a strong name and footprint across brands. So we're super excited about it. Going forward, I think we've talked about it. We are continuously looking at opportunities to pursue interesting M&A activities across Europe. Right now, we have been focusing a little bit on debt, which is a segment where Catella doesn't have much presence as far as -- and we do not have debt funds, for example. The challenge in that market today is existing investments on most of these fund platforms. It's a great forward-looking investment, but we -- you have to be very precise and when you enter and what they have in existing portfolios. So that's one segment that we're looking at. Geographically, we think that's -- we probably fill a big hole now with France, and we'll see what we look at going forward.
Your next question comes from Emil Jonsson with DNB.
Just want to begin by asking if you compare now to...
Again, I'd like to point out, we have significant capital commitments available already in our funds. We have development projects that are ongoing that will add assets to our funds and the capital that we're really focused on short term is more in separate mandates and club deals with specific strategies rather than expecting a huge inflow into funds in the coming, let's say, couple of quarters.
All right. Understand. And if we compare with last quarter, what changes have you seen in the amount of capital getting flagged for withdrawals in Investment Management?
Yes. That's a very important question. And look, when the funds flow, inflows are somewhat limited with fund, you kind of play defense. We have a strong investor base with great relationships. And right now, I'd say you're in daily dialogue with your investor base to make sure that they understand that you work on their assets, that you reposition and trade as needed. We have seen a, I would call it, a very modest call for capital across our funds. Again, most funds have a 12-month notice period minimum, which provides a lot of ability to act where you can offer those redemption requests to other investors. You can obviously renegotiate with the investors and as the last resort work on liquidity by trading some assets. But there's no significant increase or change. We're continuously tracking at a modest level, but it's something that we monitor and work with on a daily basis.
All right. And speaking of capital commitments. So they were at SEK 10 billion this quarter, just like they were in Q1 and just like they were in Q4. Does that mean that this SEK 10 billion has not yet been utilized? Or does it mean that some of it has been utilized and that more capital has been committed to sort of compensate for that?
It's a combination. I mean, frankly, the capital that has been utilized over these last couple of quarters has been to continue or finalize development projects and some new capital has come in to replace that, which means we're largely in the same position. Acquisitions have been very modest. So that a lot of that capital is -- investors just like us are being patient, and they're okay to be patient with their capital at the moment.
All right. That makes sense. And just a question on Principal Investments. Speaking of Kaktus in particular. So when Kaktus gets eventually divested, let's say, maybe H1 of next year, how much do you think the IRR on that property will have been affected by the sort of drawn out divestment process? Are we talking like 1 or 2 percentage points? Or are we talking 10 percentage points?
I would simply say it's going to be negatively impacted. Look, the -- as most of us are acutely aware of, it's hard to speculate exactly on timing and price levels at the moment. But of course, there's no -- we've been transparent that it's not our business generally to have large balance sheet positions and finished cash flow positive assets on our balance sheet, but we can and the current income on that property makes a cash flow property positive. And that's okay. Now if it drags out, yes, the IRR will go down. But the IRR in this instance, I think, is a lot less important than the actual total return. The Copenhagen market is still strong with yields, at least with a few comparables they are, they are trading well. And we expect still profit on this project. And I think the absolute number of that is more important than the IRR on this particular project.
All right. That makes sense. Just one final question. So in Corporate Finance, 53% of the revenues in Q2 were made up by something called residential. Could you just explain what that is?
Yes. So 2 things really in that. One, we have a specific residential advisory team in France. That is a very prominent market position and also specifically in this quarter, the large specific residential transaction in Finland accounts for quite a lot of those revenues in the second quarter.
Your next question comes from Jesper Von Koch with Redeye.
Good job on the quarter. So let me start with the profit for letting the commercial spaces of Kaktus. Could you just give us an update there?
Cautiously positive and very drawn out process. We have been in and out with one big tenant for a long time. Nothing is fast at the moment in the market. I'll say that. We have a good prospect for a very significant letting. We have also discussions with other potential tenants should that feel fall through on similar terms. And we have actually, I think, very close to completing all the other smaller commercial areas. So look, it's not as fast as we would have liked it to have been. But the more important thing is to get the right tenant in on the right terms, that's ongoing. Again, obviously, you understand I can't comment much more detail than that.
No, of course. And then I mean, regarding finding a buyer also, do you have like a prospect buyer that is kind of like waiting for you to close the last like tenant deals or yes, what's the process?
The short answer to that is yes. The more complex answer is that is no guarantee for a short-term close. But yes, we have had long conversations with one -- I mean, we've been an exclusivity. That's where we are.
Okay. Good and then just around capital allocation and the bond loan of a bit more than SEK 1.2 billion, which is currently taking half, I guess, at almost 9% interest rates, so -- which means quite high interest cost annually, which obviously demands really good returns on your investment. And then in -- I think it's in mid-September now that you have the first opportunity to buy back the bond with the penalty fee of, I think, 1.4%. How do you think about this given your financial situation combined with perhaps completing Kaktus and selling it. I think it would have felt reasonable, but could you just elaborate on your thoughts?
Sure. First of all, we feel, Michel and I and the rest of the team that having available financing at a 4.75 spread in today's market is good. We're very happy with our outstanding bond. There's a lot of time left. And with the market of where it is and how it continues to move, we are very happy with liquidity. Now Kaktus, obviously, is a big chunk of liquidity being freed if we do get a sale through. But that just gives us more power and more flexibility. I mean there's -- both on the opportunistic co-investment side, I think that's where we would like to reinvest a lot of that money to create big new mandates across Europe. And frankly, with the investments that we have, those -- that money gets allocated pretty quickly if we have the right opportunities. And the M&A market today is -- and more and more people looking for growth capital. There are more and more people with a bit more sensible valuation expectations. And so we're happy to have the capital, and we're happy with the terms of our bond. We have, at least in the short term, no need to change that decision.
And then talking about deploying some of the personnel, what are the plans regarding the purchase option on the remaining 25% of APAM that's sort of during the fall?
Well, we have recently extended our partnership agreement for another 5 years. And today, we own 87.5% of APAM.
Good. And also, I mean, because it seems like the asset management part of your AUM is the one that is highly interesting in this market. Could you just talk about the general development of APAM as it appears to have hired quite a lot of new staff this year and I think...
No. I mean I think Catella APAM is doing extremely well. We've -- the TfL, Transport for London advisory mandate, had we chosen to record that as AUM, which you have the flexibility, we chose not to because we don't like volatility. That's a big number. It's a big advisory mandate, and it shows the type of clients that Catella APAM can now attract. As you know, we have an ongoing significant mandate with Greater Manchester Pension Fund. That is one of the largest institutional investors in the world in real estate. So from our perspective, that shows that we've moved up in the league. We can attract that type of capital. We can attract those types of clients because we have an excellent track record in this type of environment, repositioning and solving complex problems on a detailed level. And that, I think, is a competitive advantage that we may not highlight enough. But across Europe, having local operating partners that are vertically integrated is relatively unique. And it gives us a strength where we have hired people in APAM because we do a detailed job on site, on location with in-house people. We don't outsource it. We don't have a franchise. We have a partnership directly with our clients that deliver superior returns and a lot more service we would think than some of our competitors, and that is starting to really, really impact the type of clients and capital that we attract.
Clear. Good answer. And then regarding the product in [indiscernible], which I guess, I mean you have the tenant and most of the project is in place given any kind of like expected timing of selling that project?
Sure. I mean it's on the market. I mean, it's another one that has a decent yield on it, and we'll look to transact when the right buyer comes along. I mean it's no problem for us keeping it on the balance sheet for a little bit. The opportunity cost there is pretty good. It yields a solid return. And there's no rush. That's a great asset. It's fantastic first rate location. It's a really, really good tenant on a long-term lease with the terms. So I have no doubt that, that will be sold. But we're not going to sell it just because we need to free up capital. We have the liquidity to be patient. And this is yielding a decent return, so...
And then I was also wondering about your plans with the holdings [indiscernible]. It's rumored that it will go public this fall, I think what I've heard. And yes, I also saw that you did a write-off of the value of it now. But -- so how much do you own and what is your plan with the holdings?
[indiscernible] has an important history with Catella. It's -- it goes back a number of years and -- with investors and entrepreneurs working together. This is an entrepreneurial -- entrepreneurs for entrepreneurs basically. And we like this team. We have investments in now 3 funds and a small ownership stake in the investment management company of one, but it's not a massive amount on our balance sheet, but it's an interesting connection. It provides good discussions, good entrepreneurial connections. And we like the team. What their future plans are, I have no idea, and I can't comment on that, but we're not obviously owners or partners in [indiscernible] specifically, so...
Your next question comes from Patrik Brattelius with ABG.
I had some troubles with my headset. Sorry for that, but -- so a question then from my side is that if you look at some of your larger property funds, they have started to trend down since the start of the year, basically. And the current performance level is at levels we haven't seen in a couple of years, for example, in Catella European Residential Fund. So can you talk a little bit how dependent you are on that transaction market recovers in order for these funds to recover to the performance levels that we have seen for the last couple of years?
Patrik, look, short-term return to the performance fees over the last 2 years, it's not going to happen for us or any competitor, that's a simple fact. You have a high water mark, you have a very slow market. But like I stressed in the beginning, this is a period where we live off of our really, really strong fixed fee growth. Our fixed, as we call it, margin that's positive meaning that fixed fees are substantially higher than fixed costs. And that's going to be the story in Investment Management in funds in the near term for sure. It's going to take some dramatic terms to create big performance fees in the short term.
But on the other hand, anything that's being launched now, anything -- any new mandate, any new fund, any new investment, we think is going to be a really good vintage. Now that takes a little bit of time to turn around into performance fees in the future, but that's the nature of the cyclicality of fund management, fixed fees, fixed revenues, stable and growing AUM at a boring and very healthy situation to be in.
I see. But given that if we talk in Catella European Residential, which is a big fund for you guys and has generated significant performance fees for the last couple of years, are you saying that given the current environment, it could be hard for it to come back to the high water level in April next year already?
I think that would be a challenge. I mean we don't give forecasts. But since a lot of this is public, it's going to be hard. Sure. But if you look -- and we've obviously looked at it, all our peers, there are not a lot of performance fees in our industry at the moment. And that's the cyclicality that's completely normal. And we have a great underlying business model. And we do have a lot of capital available in these funds. So investments going in at a completely different level will create future performance fees. And that's not a bad place to be.
This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Abramson for closing remarks.
Thank you. Like I saw, it was a great call, fantastic questions today. We're happy to have actually increased our analyst coverage from DNB, which we're very excited about. And that challenges us to think even more detail about our business and our strategy. And we appreciate everyone's time and for listening in. And please reach out to myself or Michel if you have further questions. Otherwise, we wish you a great rest of the day and a wonderful weekend. Thank you.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.