Q4 2022 Onex Corp Earnings Call
The conference will begin shortly to raising Malawi Johan during Q&A, you can dial star one one.
[music].
Yeah.
Welcome to Onyx fourth quarter, and full year 2022 conference call and webcast. During the presentation. All participants are in a listen only mode. Afterwards, we will conduct a question and answer session with prequalified analysts at this time, if you have a question.
Please press star one one on your telephone keypad.
This conference call is being recorded.
I'd now like.
To introduce your host for today's conference call, Joe <unk>, managing director of shareholder Relations Communications at <unk>.
Please go ahead.
Thank you good morning, everyone and thanks for joining US we're broadcasting this call on our web site hosting the call today are Gerry Schwartz, our founder and CEO , Bobby Leblanc, Onyx as President and head of Alex Partners and Chris Kevin Arch.
<unk> financial officer.
Earlier. This morning, we issued our fourth quarter and full year 2022 press release, MD&A and consolidated financial statements, which are available on the shareholders section of our website and have also been filed on SEDAR.
Supplemental information package is also available on our website.
As a reminder, all references to dollar amounts on this call are in U S. Unless otherwise stated I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors relating to any forward looking statements contained in today's presentation and remarks.
With that I'll now turn the call over to Jerry.
Thanks Jill.
Good morning.
Thanks to everyone for joining us today.
We just completed our 35 full years of public company timeshare flush.
I can't help but look back on what's been an incredible journey.
Since our IPO in 1987.
<unk> has helped to build more than 100 businesses and completed more than 700 acquisitions.
With a total value exceeding 100 billion.
Over that time, we've generated a compound annual return for.
For shareholders of nearly 13% and thats versus 8%.
The standard and Poor's PSX index.
We did this by sticking to our disciplined investment philosophy, and maintaining a strong liquidity position.
Take advantage of market dislocations and opportunities.
Of course.
We did face many challenges along the way and 2022 share had its fair share.
The economy and capital markets struggled to find their footing.
There were supply chain disruptions geopolitical conflict rising interest rates and the highest inflation 40 years.
In the face of these headwinds.
Annexed did make good progress last year.
We grew investing capital per share.
Delivered solid risk adjusted returns to our fund investors.
And made attractive new investments that should yield and we expect will yield future rewards.
We raised $2 $1 billion of new fee generating capital across our credit platforms. We.
We did this as investors were drawn to our creative capital solutions and defensive positioning in volatile markets.
Fundraising environment for private equity was more challenging, reflecting a crowded and consolidated market.
That said.
We continue to actively fundraise across our private equity platform.
And remain focused on delivering operating excellence across the portfolio.
And attractive returns to our limited partners.
We made progress in 2022, but we recognize there is much more work ahead.
To deliver on our objectives.
The next few years will be pivotal as we execute our strategic plan and continue to build the value our shareholders have come to expect.
We've set the course.
It's crucial to have the right leadership.
Executing on our plans.
Our proposal to appoint Bobby Le Blanc as CEO .
Following our next AGM.
We will accelerate this progressive transition.
To that end, we look forward to proactively engaging with shareholders in the coming days and weeks as.
As we aim to move forward with our planned leadership transition.
This will be an important milestone the evolution of our business and Bobby and the team look forward to taking on X New Heights in the years ahead, and I am sure they will.
We're confident in our strategy and our future.
On behalf of our entire team.
Thanks to you for <unk>.
Your continued support.
I'll now turn the call over to Bobby Bobby.
Good morning, everyone and thank you Gerry.
<unk> had a good Q4.
Underlying by improved investment performance.
Investing capital per share was up 8% in the quarter and 7% for the year.
We continue to deliver attractive risk adjusted returns.
With our private equity investments up 7% in the quarter.
And 3% for the year.
We also made solid progress.
And key strategic initiatives.
He said we.
No we have more to do.
This is an important period in <unk> evolution.
And we're looking ahead with focus and commitment.
Our Investor day growth plan was largely predicated on increasing our fee generating assets under management.
In 2022.
We raised over $2 6 billion of fee generating AUM.
Although not what we had projected at the beginning of the year.
We believe it is a solid achievement.
And what was a very challenging year for markets.
Our credit business raised over $2 1 billion of fee generating AUM.
With our CLO platform continuing to be a source of scalable growth.
<unk> franchise value.
We raised $1 $7 billion of CLO during 2022.
Very close to our $2 billion target despite the market being constrained for much of the year.
2023 is off to a good start with the pricing of our 26 U S. CLO last month raising.
Raising about $400 million.
Ronnie Java and the team are actively managing our CLO portfolio and delivering good relative results.
Our U S CLO underlying loan portfolio outperformed the credit Suisse leveraged loan index by 1% in the year.
And we continue to be a top performing manager globally.
Key industry metrics.
We are adding new investors to our platform drawn to our fundamental credit expertise.
<unk> to navigate tough markets.
Long term track record.
Sandeep Elba and the junior capital direct lending teams.
We're also delivering positive results.
Following a strong first close for Falcon seven in November .
<unk> is busy putting money to work.
Fund six is completed investing and we are already executing deals for fund seven.
The market for mezzanine funding remains active with many attractive opportunities.
Our pace of investing.
As well as our top quartile performance for funds five or six chip.
It should benefit us as we aim to reach our target of $1 5 billion and a final close later this year.
Our fee generating AUM growth plans rely heavily on a meaningful contribution from credit.
We are pleased with what the team has delivered this year and.
And are excited to see what they can achieve in the years ahead.
The fundraising environment for mid market private equity.
Unfortunately continues to be challenging.
In addition to LP timing of PD over allocation considerations.
We are also feeling the impact of Lp's allocating more of their investing dollars to the larger consolidated alternative asset managers.
Given today is still uncertain environment.
We are confident in the value of our client relationships and our ability to drive long term investment performance for our Lps.
The team is working hard towards maximizing our second close for on X partner six.
And we will continue to provide updates on our progress.
<unk> five <unk> to close in December for Lps wanting to allocate in 2020 to.
Raising approximately $360 million, including <unk> commitment of $250 million.
The team is seeing strong client engagement.
Which is not surprising given the <unk> portable track record.
We're expecting a subsequent close next quarter.
Well Lp's are generally taking more time to confirm commitments. We are confident in reaching our target fund size of $1 5 billion later this year.
We are mindful that environments like these can be positive and opportunistic from an operational perspective.
Recent performance within our on cap portfolio is proof of the outcomes, we can achieve with proactive management.
As an example, pure Canadian gaming recently completed a sale leaseback of its real estate assets.
Surfacing meaningful value and strengthening its capital position, while also paying a distribution to investors.
The International language Academy of Canada or ILEC.
Has performed strongly since pandemic restrictions eased.
The company's recent recapitalization and related Investor distribution.
Contributing to the current gross realized MRC for our investment up to seven times.
There are many more of these examples across our portfolios.
A testament to our team's focus on delivering performance.
Even in periods of market headwinds.
Our private wealth business class can shop.
Also delivered solid results in the year.
The business had gross sales of close to $1 billion Canadian dollars during 2022.
Following $1 1 billion of gross sales in the previous year.
This is an impressive result.
Particularly as it was achieved without increasing the size of our adviser team.
We have ambitious plans to grow our private wealth assets under management.
The team is making good progress with a transformational infrastructure and technology project.
This work when completed will give us the foundation to quickly accelerate scale.
Both with advisors and investors.
Last year, we also continue to actively buyback our shares.
Reaching a total of just over 6 million shares repurchase.
As we always say, it's an opportunity we prefer not to have.
But we have conviction in the value of our business.
As Gerry said earlier 2023 will be a pivotal year for onyx.
I feel confident in our long term growth plans and our team's ability to execute.
We continue to make progress as we evolve into a truly multi strategy alternative asset manager.
And yet we know there's more to do.
We are committed to doing what is needed which includes ensuring we are allocating capital and human resources to our most attractive opportunities.
Many of you have told us that fee related earnings at the potential to be a real catalyst for our stock performance.
We agree.
And recognize that FRE is about revenues and expenses, we are very focused on both.
You can expect to hear more about the work we are doing on expense management as the year progresses.
As we look ahead to our annual meeting.
We hope that you will see a clear path forward for on X.
And then we will have your support.
As a 23 year on X veteran I feel a strong commitment and accountability to this organization.
To our team to our clients and to you our shareholders.
Chris with that I'll now turn it over to you.
Thanks, Bobby and good morning, everyone.
On X is investing capital per share was up 8% in Q4 and 7% in 2022 driven.
Driven by fair value increases across our portfolio and the positive contribution from share buybacks.
We bought back $2 4 million Arctic shares in Q4, bringing our repurchases in 2022 to more than 6 million shares, which captured more than $330 million Canadian dollars of hard NAV.
For our continuing shareholders.
Looking back a little further over the last five years Onyx is invest in capital per share has grown at an 11% CAGR. Despite some challenging markets.
Our private equity portfolio continued to perform and was up 7% in the quarter.
Turns were well distributed across the portfolio with our four largest verticals all posting gains for the quarter and full year.
As Bobby mentioned, our PE investments provide attractive risk adjusted returns in 2022.
With a net gain of 3% compared to declines of about 18% for the S&P 500, and the MSCI World mid cap index.
Demonstrating the value of a diversified private equity portfolio.
Turning to credit.
We generated a $7 million gain our 1% return from credit investments in Q4, driven.
Driven by an increase in the fair value of our CLO investments consistent with strengthening leveraged loan markets.
As a reminder, CLO represent about 50% of on X as credit investments.
In addition to the attractive return potential this allocation of on X capital allows Ronnie and the team to issue CLO and a wide range of markets and consistently grow the FRE of that business line.
Having said that we've actually reduced the capital intensity of our CLO portfolio over the last couple of years and plan to continue to grow with little or no net increase in on X as balance sheet exposure.
Overall, our investing capital per share ended the quarter at $96 95.
We're just over 131 Canadian dollars.
Now turning to the asset management side of the business.
Onyx as fee generating AUM of $34 1 billion was up 4% in Q4 and 3% for the year.
While gross capital raised was about 8% of the opening balance it was short of our plans due to the challenging market that Bob referenced.
But our CLO platform had a solid year, raising $1 7 billion and fee generating AUM from two refinancings and three new CLO.
The CLO team continues to build high performing defensively positioned portfolios, which are seeing increased demand from investors.
As Bobby mentioned, our U S CLO underlying loan portfolios outperformed the credit Suisse leveraged loan index by 1% in 2022.
And a year that saw default rates creep up to one 2% in the U S. We maintained a zero percent default rate and ended the year in the top decile in terms of Triple C exposure.
Following on the heels of a European CLO in November Onyx was one of the first managers to price a U S deal in 2023.
All of it debt tranches were oversubscribed with nearly 30 unique investors across structure, including seven investors that represent new relationships.
Turning to fee related and distributable earnings.
Overall FRE in Q4 was negative $4 million, including a $1 million loss from the asset management platform.
The improvement in FRE from the third quarter was primarily driven by a reduction in incentive based compensation.
FRE for the year was negative $44 million.
But adjusting for an under accrual of 2021 compensation that was therefore expense in 2022 were essentially flat to the prior year.
As a reminder, we do expect a reduction in on X partners management fees in 2023, when OPEC five exits its commitment period, and we began accruing fees on a lower base associated with the initial close of <unk>.
As we progressed on fund raising in 2023, we will keep you updated on our near and long term impacts to FRE.
While our asset managers are focused on growing FGA AUM and management fees were also committed to optimizing our cost structure.
After a couple of years of significant growth in our cost base to support the launch of many new platforms and products, we expect to find meaningful opportunities to improve go forward margins.
Looking at distributable earnings we generated $67 million in Q4, driven by <unk> and CLO distributions.
For the full year on X had distributable earnings of $308 million.
Finally, an update on on X is carried interest opportunity.
We ended the year with $281 million of unrealized carried interest.
The Q4 increase was driven by on X partners for reflecting the recovery of Mark to market losses from earlier in the year and the magnified impact of the catch up phase of that Fund's waterfall.
We continue to see meaningful upside for shareholders from carried interest.
Onyx had an interest in nearly $26 billion.
Of carry paying AUM at year end.
All in all Onyx as performance in 2022 was mixed a relatively strong increase in investing capital per share, but progress in growing FRE delayed by a difficult fundraising market.
Looking forward, we expect the PE platform to drive shareholder value in 2023 through attractive net returns on shareholder capital.
Whereas fee generating AUM growth in the credit platform should accelerate in 2023 and drive a marked improvement in FRE contribution from that platform.
Even in an uncertain environment are investing expertise strong balance sheet and network of relationships will allow us to build value in the years ahead.
That concludes the prepared remarks, so we'll be happy to take any questions.
Certainly ladies and gentlemen, if you have a question at this time simply press Star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Our first question comes from the line of Nik Priebe from CIBC. Your question. Please.
Okay. Thanks.
The U S competitors have suggested potential for.
A relatively more healthy fundraising environment in 2023 are you able to update us on progress at <unk> and just when we might expect to see a second close on that fund.
Yes, So hi, Nick it's Bobby.
People were Lps were.
Definitely over allocated in 2022, some are still over allocated.
In 2023, I think it's really LP specific some of its.
Regions of the world specifics in terms of people wanting to get more money and p/e than they've had historically.
But it's clear that.
That is taking longer to get commitments in this market.
It has been in our history, that's not just us as you saw with the but the other big U S. Players announcing it we're in a cycle right in terms of RP business.
Again on cap and <unk>.
<unk> seven we still are planning on closing those funds this year and we feel confident about the targets I do expect <unk> to likely go into the beginning of <unk>.
Calendar year 'twenty four.
And we should we're going to target to have an update for you on our second quarter, what we're calling internally one be by the end of Q2.
Okay very good.
And then just a second question on buybacks.
Share repurchases were pretty healthy in the quarter just in the context of being 87% invested is there.
Minimum cash balance you would want to maintain just in the context of existing commitments to the funds or do you expect to remain pretty active over the course of this year if that.
The current magnitude of the discount to NAV persists.
Hey, Nick it's Chris Govan.
I don't think we're anywhere close to our minimum cash balance today.
We're very comfortable with our liquidity position I would say, though that given the markets that we're in including fundraising market. We do believe there's going to be some pretty exceptional opportunities for us over.
Over the next handful of months.
The year to on one hand invest through some of our platforms, but in a way that probably provides real platform value.
Where our balance sheet can be used to support the extension of our platform. So that in the long run we've got a better platform from an FRE perspective, and then the other thing there is a lot of GPS out there obviously living in the same fund raising market, we are but don't have a balance sheet.
And I think we'll be open to.
Potentially growing our business inorganically, so we're probably a little bit.
More conservative on the stock buyback right at the moment given how invested we are as you pointed out but should our liquidity improve we'll be right back at it because obviously, we have got great faith in the intrinsic value of our shares and think it's a screaming buy at the current rate.
Understood. Okay. That's good color that's it for me. Thank you.
Thank you.
One moment for our next question.
And our next question comes from the line of Geoffrey Kwan from RBC. Your question. Please.
Hi, Good morning, just wanted to follow up on the last question was Chris So your comment.
It sounded like you may look to within some of your platforms make acquisitions to try and grow and scale those up and grow the FRE.
Is that correct and then just and Bobby maybe our Nigerian General Gist.
Comments on kind of the monetization environment in the acquisition pipeline, it's choppy out there, but just wanted to get your latest thoughts.
Again, when we laid out our strategic plan.
16, or 18 months ago that plan was all organic when you have market turbulence like youre seeing today, it's not that we are.
<unk> announced a new acquisition.
For the for the <unk> platform, if you will but I would like to have the liquidity at hand to be able to take advantage of market dislocations right, but again as Chris said.
As we get more liquidity in from monetization over the coming months or quarters.
Once that cash position begins to get a little bit higher obviously, we're going to be back in the market buying these measures we can find them.
I guess I was just saying.
There are these times.
Really quite good to have strong liquidity to be able to take advantage of opportunities in.
In terms of the.
Pipeline on the PE side, it's relatively slow.
The credit markets Havent opened up to any meaningful extent.
Given that there are people are not coming to market.
With assets, because they don't think they're going to be able to maximize price.
Some people are still trying to come to market.
Given theyre trying to post PPI for fund raising or for other reasons.
We're I think we're going to begin to see better pipeline.
As in corporate carve outs, which we haven't seen for almost a decade at any meaningful in any meaningful way the cost of capital at these corporations is also going up and for a long time, given they're essentially borrow Brazil. There wasn't a lot of scrutiny in terms of how to how to fund the growth of the business I think that's going to begin to change and.
Decisions are going to have to be made so between that and founder owned businesses. We're spending most of our time, there rather than waiting.
Waiting for the secondary market to improve and we've never we've always tried to rely less on the secondary market for obvious reasons, but overall.
It is not a good market to buy.
It's a good market to buy it but theres just not a lot of inventory.
Got it.
Just going back to your comments on the fundraising and then just trying to take this in comparison to your comments from last quarter I mean.
Would you say that the fundraising environment, how do you feel about it today is unchanged last quarter would you say it's a.
That bit more.
Cautious in terms of your outlook or maybe even a little bit better than what you were saying last quarter.
I think it's about the same.
Theres been no step function change.
One way or the other again, it's taking longer.
Grind out getting the commitments than we've been used to historically that assessment LP. That's like across our platform has just taken a bit longer but no I wouldnt say its gotten better or worse, let's say, it's about the same.
The overall market.
Okay.
Last question was.
I think you made a comment earlier about.
Lps.
Some of them, maybe and consulting summit there their investments with other alternatives or larger alternative managers does that.
Have you think about.
Onyx as product offering maybe expanding into other verticals and if so is it something that doing it organic versus acquisition has more appeal.
Yeah look we're studying all of those things I think where some of the larger players have had successes.
Bundled sales.
Like <unk>.
Multibillion dollar commitments within LP, where theyre doing business across the platform, that's obviously somewhere we'd like to get.
Ourselves as well.
We are constantly looking for ways to build on our PE and credit businesses and those those ways are both organic and inorganic.
And we would be open to longer term other legs of the stool, if we can find.
Right, the right partner and the right culture fit.
Hum.
With another firm or or lateral hire of some sort.
So we're constantly looking at those things and I think those opportunities may actually be.
More maybe more of them right just given the current environment, which comes back to the liquidity point, Chris and I were talking about.
Okay, great. Thank you.
Thank you.
Thank you one moment for our next question.
Our next question comes from the line of Graham Ryding from TD Securities. Your question. Please.
Yes, Bobby just on that consolidation theme like does it make sense to consider being a seller and all do you have any assets that you think would be attractive and you're trading at a big discount.
You announced that you are the market is not giving you much value for the asset management businesses.
Considering anything.
From that lens are you only considering sort of scaling up and growing the business.
So much more so the latter Mike.
Several quarters ago.
When we looked at the way our PE portfolio is trading.
In terms of our share our share price right. There are there are secondary markets that have arisen with are quite large actually a bid.
For LP Stakes and PE portfolios, we're obviously the largest LP.
In our in our.
Businesses so when.
We've actually thought about trades, where we would show.
The shareholders that people were willing to pay more of them.
For a chunk of our portfolio. It has an implied value of $31. If you adjust for cash and marketable securities. So we've explored that that market like the rest of the market that the bid in that market is still well above.
Where we're being valued by public shareholders, but not.
Not high enough, where I'd want to actually sell.
So we are constantly looking at all of those things and tried to provide proof points.
To our shareholders that why are we why are we continue to buy back so many shares and why we think it's undervalued.
Got it that's helpful.
You gave us some pretty good update I think on Ob and on cap in terms of expectations around fundraising anything on the transportation fund and maybe just credit overall for 2023, what should we be.
Looking forward in terms of fundraising expectations.
Yes, so transportation early in English.
Getting good reception, though just in terms of.
The market that is trying to address which is not.
A highly saturated market in the <unk> and for world, depending on where you just lapped that and we think that it is more of an in between.
Return between the PD.
Form again Falcon seven is in the market real time.
We the target there is one five versus their fund size of one point to last time.
Mezz generally when you look at.
The opportunity set across the balance sheet measures very attractive.
Pricing right now.
So I expect that attractiveness to yield good results for some deep, particularly.
And his team, particularly because their last two funds have been.
First quartile.
Seem to be no guarantees in this world, where they seem to be.
Just in the right spot I'm going to capital markets and what that track record that that should be okay. Clo's look we've done one already this year, but.
Really do need a somewhat healthy LBO market too to really do a lot of CLO.
We're really happy with the team that <unk> built both here in the U S.
In London, but it's hard for me to predict how many CLO is we'll be able to to issue. This year, so somewhat capital markets dependent but they've also been pretty creative and figuring out ways to get them done even in this market. So overall.
So those are the things that shouldn't be in market. This year for credit Crystal and think I'm missing the institutional for direct lending, yes, Steve alongside the BDC with the other I'll call it needle mover a year.
But I think Graham Graham.
Our plan would be to have.
More again, its market dependent CLO, but significantly more AUM raised and credit this year than in 2022, it should be an up year.
Okay understood and then just my last question would be for you Chris just.
Given your outlook for fund raising which remains fluid can you get FRE positive in 2023 years, it's more likely.
2024 target.
I think overall granted it's not going to be 2023, particularly because.
I've sort of mentioned over the last few calls there is going to be a step down in fees for <unk>.
Just given the way if the fund raising continued into 2024, which we fully expect regardless how much things improve in 2023, when we go out of the commitment period for <unk>.
<unk> five we're likely to see a step down.
In the private equity in year fees.
So it's not going to be a 2023 event, but I think what you should keep an eye on and what will be sort of highlighting over the course of the year is the progress of FRE growth within the credit business on a standalone basis.
Tie it back a bit to your question about whether we've got businesses within on it that we think are valuable and we certainly think we do have businesses that are a valuable today within on X and I think youll see some real progress at credit in terms of their FRE contribution.
Okay understood does that do you know when that step down on <unk> I was going to happen or is that still fluid as well.
It's fluid because it really depends upon when we close out the fund.
So if we were to make the last investment.
Shortly then it would step down shortly but the outside date, unless we were to get an extension on the commitment period is November .
Understood. Okay. That's helpful. Thank you.
Thank you one moment for our final question.
Okay.
And our final question for today comes from the line of Scott Chan from Canaccord. Your question. Please.
Yeah, Thanks and fly.
First question just on Lufkin shaft, you talked about the gross sales.
Really strong last year to 1 billion, but you did have net outflows are modest net outflows.
Implying some significant gross redemptions and a high.
Redemption rate relative to peers that we track.
So it doesn't seem like the issue is on the gross sales side on the redemption side and I was wondering if you could comment on on that part of it.
Yeah.
There were read their dumpsters Theres no question about it I think there were met.
Net was $200 million, maybe $300 million of pirate party.
Correct I don't have the numbers in front of me there were some larger redemptions.
Related to a couple of institutional clients in a couple of.
Yes.
The state planning situations, if you will that were abnormally large.
I continue to see.
<unk> made good progress on the <unk>.
Filming of the <unk>.
Filming of AUM and I do expect the redemptions to get more muted over time relative to the dollars coming in.
We were absolutely a couple of hundred million net negative.
Inflows versus outflows.
Okay, and then on the private equity side when you breakout your now.
<unk> performance by segment.
Therefore prior ones, because we need to do well.
The last one in consumer and retail, which does comprise eight businesses, but it's the lowest proportion.
It was down quarter over quarter and down 26% year over year.
Is that more segmented.
Issue.
Within private equity and that consumer and retail are there specific investments bear that.
That you would call out that impacted that.
No.
No business that I would call out to say, yes.
We've got a business in trouble, that's making up most of that decline it's really.
It's getting more and more difficult.
And retail businesses to deal with inflation and wage pressures.
And you're just seeing the effect of that sort of across that part of the portfolio more so than in our other segment.
Okay, and then Chris just lastly on.
On your <unk>, you said you said pausing after.
Being best in the last few quarters and into 2020 and you also talked about liquidity.
And sourcing.
Was wondering if you could maybe elaborate on that if you see some near term imbalance, perhaps within your direct investment public investments or maybe lastly monetization opportunities.
Yes, I don't think Scott that I wouldn't signal any specific source of liquidity I don't think thats sort of been our strategy. We don't think thats. The right thing to do to talk about particular opportunities that we might be thinking about.
But we've got a large private portfolio with 30 some names.
And we've got a significant amount of our value in five or six public companies across the portfolio and although its difficult market.
Hum.
From time to time, it's the right time to sell businesses, even in more challenging markets, just because of where youre at in the investment thesis. So when I just sort of step back and think about that size of the portfolio that much of it in public names. It sort of just starting just makes sense that one should expect that we regularly have liquidity event.
Okay. Thank you very much.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Gerry Schwartz for any further remarks.
Thanks, operator, but especially thanks to everyone for joining us today.
We have had really nice support from shareholders and we continue.
To appreciate really truly appreciate the support.
And we look forward to continuing this conversation, particularly as it comes up in the next quarter. So thanks, everyone and season.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Okay.
The conference will begin shortly to raise and lower Johan during Q&A you can dial one one.
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Welcome to <unk> fourth quarter, and full year 2022 conference call and webcast.
The presentation all participants are in a listen only mode. Afterwards, we will conduct a question and answer session with prequalified analysts at this time. If you have a question. Please press star one one on your telephone keypad as a reminder, this conference call is being recorded.
Now like.
To introduce your host for today's conference call, Joe <unk>, managing director of shareholder Relations Communications at <unk>.
Please go ahead.
Thank you good morning, everyone and thanks for joining US we're broadcasting this call on our web site hosting the call today are Gerry Schwartz, our founder and CEO , Bobby Le Blanc, Onyx as President and head of Onyx partners and Chris Kevin.
<unk>, our chief Financial Officer.
Earlier. This morning, we issued our fourth quarter and full year 2022 press release, MD&A and consolidated financial statements, which are available on the shareholders section of our website and have also been filed on SEDAR.
Supplemental information package is also available on our website.
As a reminder, all references to dollar amounts on this call are in U S. Unless otherwise stated I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors relating to any forward looking statements contained in today's presentation and remarks.
With that I'll now turn the call over to Jerry.
Thanks Jill.
Good morning, and thanks to everyone for joining us today.
We just completed our 35 full years of public company timeshare place.
I can't help but look back on what's been an incredible journey.
Since our IPO in 1987.
<unk> has helped to build more than 100 businesses and completed more than 700 acquisitions.
With a total value exceeding 100 billion.
Over that time, we've generated a compound annual return for.
For shareholders of nearly 13% and thats versus 8%.
The standard and Poor's PSX index.
We did this by sticking to our disciplined investment philosophy, and maintaining a strong liquidity position.
Take advantage of market dislocations and opportunities.
Of course.
We did face many challenges along the way and 2022 share had its fair share.
The economy and capital markets struggled to find their footing.
There were supply chain disruptions geopolitical conflict rising interest rates and the highest inflation in 40 years.
In the face of these headwinds.
<unk> did make good progress last year.
We grew investing capital per share.
Delivered solid risk adjusted returns to our fund investors.
And made attractive new investments that should yield and we expect will yield future rewards.
We raised $2 $1 billion of new fee generating capital across our credit platforms. We.
We did this as investors were drawn to our creative capital solutions and defensive positioning in volatile markets.
Fundraising environment for private equity was more challenging, reflecting a crowded and consolidated market.
That said we.
We continued to actively fund raised across our private equity platform.
And remain focused on delivering operating excellence across the portfolio.
And attractive returns to our limited partners.
We made progress in 2022, but we recognize there is much more work ahead to deliver on our objectives.
The next few years will be pivotal as we execute our strategic plan and continue to build the value our shareholders have come to expect.
We've set the course.
Now it is crucial to have the right leadership.
Executing on our plans.
Our proposal to appoint Bobby Le Blanc.
CEO .
Following our next AGM.
We will accelerate this progressive transition.
To that end, we look forward to proactively engaging with shareholders in the coming days and weeks.
As we aim to move forward with our planned leadership transition.
This will be an important milestone the evolution of our business and Bobby and the team look forward to taking on X New Heights in the years ahead, and I am sure they will.
We're confident in our strategy and our future.
On behalf of our entire team.
Thanks to you.
Your continued support.
I'll now turn the call over to Bobby Bobby.
Good morning, everyone and thank you Gerry.
<unk> had a good Q4.
Underlying by improved investment performance.
Investing capital per share was up 8% in the quarter and 7% for the year.
We continue to deliver attractive risk adjusted returns.
With our private equity investments were up 7% in the quarter.
And 3% for the year.
We also made solid progress.
And key strategic initiatives and as Jerry said, we know we have more to do.
This is an important period and onyx as evolution.
And we're looking ahead with focus and commitment.
Our Investor day growth plan was largely predicated on increasing our fee generating assets under management.
In 2022.
We raised over $2 6 billion.
Fee generating AUM.
Although not what we had projected at the beginning of the year.
We believe it is a solid achievement.
And what was a very challenging year for markets.
Our credit business raised over $2 1 billion of fee generating AUM.
With our CLO platform continuing to be a source of scalable growth.
<unk> franchise value.
We raised $1 $7 billion in CLO during 2022.
Very close to our $2 billion target despite the market being constrained for much of the year.
2023 is off to a good start with the pricing of our 26 U S. CLO last month raising.
Raising about $400 million.
Ronnie Java and the team are actively managing our CLO portfolio and delivering good relative results.
Our U S CLO underlying loan portfolio outperformed the credit Suisse leveraged loan index by 1% in the year.
And we continue to be a top performing manager globally.
Key industry metrics.
We are adding new investors to our platform drawn to our fundamental credit expertise.
To navigate tough markets and long term track record.
Sandeep Elba and the junior capital direct lending teams are also delivering positive results.
Following a strong first close for Falcon seven in November the <unk>.
Team is busy putting money to work.
Fund six is completed investing and we are already executing deals for fund seven.
The market for mezzanine funding remains active with many attractive opportunities.
Our pace of investing.
As well as our top quartile performance for funds five six chip.
Should benefit us as we aim to reach our target of $1 5 billion and a final close later this year.
Our fee generating AUM growth plans rely heavily on a meaningful contribution from credit.
We are pleased with what the team has delivered this year and.
And are excited to see what they can achieve in the years ahead.
The fund raising environment for mid market private equity.
Unfortunately continues to be challenging.
In addition to LP timing of PD over allocation considerations.
We are also feeling the impact of Lps allocating more of their investing dollars to the larger consolidated alternative asset managers.
Given today is still uncertain environment.
We are confident in the value of our client relationships and our ability to drive long term investment performance for our Lps.
The team is working hard towards maximizing our second closed for an ex partner six.
And we will continue to provide updates on our progress.
<unk> five <unk> to close in December for Lps wanting to allocate in 2020 to.
Raising approximately $360 million, including <unk> commitment of $250 million.
The team is seeing strong client engagement.
Which is not surprising given on caps foreign oil track record.
We're expecting a subsequent close next quarter.
While lp's are generally taking more time to confirm commitments. We are confident in reaching our target fund size of $1 5 billion later this year.
We are mindful that environments like these can be positive and opportunistic from an operational perspective.
Recent performance within our on cap portfolio is proof of the outcomes, we can achieve with proactive management.
As an example, pure Canadian gaming recently completed a sale leaseback of its real estate assets.
Surfacing meaningful value and strengthening its capital position, while also paying a distribution to investors.
The International language Academy of Canada or ILEC.
Has performed strongly since pandemic restrictions eased.
The company's recent recapitalization and related Investor distribution.
Contributing to the current gross realized MRC for our investment of two seven times.
There are many more of these examples across our portfolios.
A testament to our team's focus on delivering performance.
Even in periods of market headwinds.
Our private wealth business plus can shop.
Also delivered solid results in the year.
The business had gross sales of close to $1 billion Canadian dollars during 2022.
Following $1 1 billion of gross sales in the previous year.
This is an impressive result, particularly as it was achieved without increasing the size of our adviser team.
We have ambitious plans to grow our private wealth assets under management.
The team is making good progress with a transformational infrastructure and technology project.
This work when completed will give us the foundation to quickly accelerate scale.
Both with advisors and investors.
Last year, we also continue to actively buyback our shares.
Reaching a total of just over 6 million shares repurchase.
As we always say, it's an opportunity we prefer not to have but we have conviction in the value of our business.
As Gerry said earlier 2023 will be a pivotal year for onyx.
I feel confident in our long term growth plans and our team's ability to execute.
We continue to make progress as we evolve into a truly multi strategy alternative asset manager.
And yet we know there is more to do.
We are committed to doing what is needed which includes ensuring we are allocating capital and human resources to our most attractive opportunities.
Many of you have told us that fee related earnings has the potential to be a real catalyst for our stock performance.
We agree.
And recognizing that FRE is about revenues and expenses, we are very focused on both.
You can expect to hear more about the work we are doing on expense management as the year progresses.
As we look ahead to our annual meeting.
We hope that you will see a clear path forward for Onyx.
And then we will have your support.
As a 23 year on X veteran I feel a strong commitment and accountability to this organization.
To our team to our clients and to you our shareholders.
Chris with that I'll now turn it over to you.
Thanks, Bobby and good morning, everyone.
On X is investing capital per share was up 8% in Q4, and 7% in 2022, driven by fair value increases across our portfolio and the positive contribution from share buybacks.
We bought back $2 4 million Onyx shares in Q4, bringing our repurchases in 2022 to more than 6 million shares, which captured more than $330 million Canadian dollars of hard NAV.
For our continuing shareholders.
Looking back a little further over the last five years Onyx is invest in capital per share has grown at an 11% CAGR. Despite some challenging markets.
Our private equity portfolio continued to perform and was up 7% in the quarter.
Returns were well distributed across the portfolio with our four largest verticals all posting gains for the quarter and full year.
As Bobby mentioned RPE investments provide attractive risk adjusted returns in 2022.
With a net gain of 3% compared to declines of about 18% for the S&P 500, and the MSCI World mid cap index demonstrating.
Demonstrating the value of a diversified private equity portfolio.
Turning to credit.
We generated a $7 million gain our 1% return from credit investments in Q4, driven.
Driven by an increase in the fair value of our CLO investments consistent with strengthening leveraged loan markets.
As a reminder, cielo is represent about 50% of on X as credit investments.
In addition to the attractive return potential this allocation of on X capital allows Ronnie and the team to issue CLO and a wide range of markets and consistently grow the FRE of that business line.
Having said that we've actually reduced the capital intensity of our CLO portfolio over the last couple of years and plan to continue to grow with little or no net increase in on X as balance sheet exposure.
Overall, our investing capital per share ended the quarter at $96 95.
We're just over 131 Canadian dollars.
Now turning to the asset management side of the business.
On excess fee generating AUM of $34 1 billion was up 4% in Q4 and 3% for the year.
While gross capital raised was about 8% of the opening balance it was short of our plans due to the challenging markets that Bobby referenced.
But our CLO platform had a solid year, raising $1 7 billion and fee generating AUM from two refinancings and three new CLO.
These CLO team continues to build high performing defensively position portfolio, which are seeing increased demand from investors.
As Bobby mentioned, our U S CLO underlying loan portfolios outperformed the credit Suisse leveraged loan index by 1% in 2022.
And a year that saw default rates creep up to one 2% in the U S. We maintained at zero percent default rate and ended the year in the top decile in terms of Triple C exposure.
Following on the heels of a European CLO in November Onyx was one of the first managers to price a U S deal in 2023.
All of it debt tranches were oversubscribed.
With nearly 30 unique investors across structure, including seven investors that represent new relationships.
Turning to fee related and distributable earnings.
Overall FRE in Q4 was negative $4 million, including a $1 million loss from the asset management platform.
The improvement in FRE from the third quarter was primarily driven by a reduction in incentive based compensation.
FRE for the year was negative $44 million.
But adjusting for an under accrual of 2021 compensation that was therefore expense in 2022 were essentially flat to the prior year.
As a reminder, we do expect a reduction in on X partners management fees in 2023, when OPEC five exited commitment period, and we began accruing fees on a lower base associated with the initial close of one six.
As we progressed on fund raising in 2023, we'll keep you updated on our near and long term impacts the FRE.
While our asset managers are focused on growing FCA AUM and management fees were also committed to optimizing our cost structure.
After a couple of years of significant growth in our cost base to support the launch of many new platforms and products, we expect to find meaningful opportunities to improve go forward margins.
Looking at distributable earnings we generated $67 million in Q4, driven by <unk> and CLO distributions.
For the full year on X had distributable earnings of $308 million.
Finally, an update on on X is carried interest opportunity.
We ended the year with $281 million of unrealized carried interest.
The Q4 increase was driven by Onyx partners for.
Reflecting the recovery of Mark to market losses from earlier in the year and the magnified impact of the catch up phase of that Fund's waterfall.
We continue to see meaningful upside for shareholders from carried interest.
Onyx had an interest in nearly $26 billion.
Of carry paying AUM at year end.
All in all on ex US performance in 2022 was mixed a relatively strong increase in investing capital per share, but progress in growing FRE delayed by a difficult fundraising market.
Looking forward, we expect the PE platform to drive shareholder value in 2023 through attractive net returns on shareholder capital.
Whereas fee generating AUM growth in the credit platform should accelerate in 2023 and drive a marked improvement in FRE contribution from that platform.
Even in an uncertain environment are investing expertise strong balance sheet and network of relationships will allow us to build value in the years ahead.
That concludes the prepared remarks, so we will be happy to take any questions.
Certainly ladies and gentlemen, if you have a question at this time simply press Star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Our first question comes from the line of Nik Priebe from CIBC. Your question. Please.
Okay. Thanks.
The U S competitors have suggested potential for.
A relatively more healthy fundraising environment in 2023 are you able to update us on progress at <unk> and just when we might expect to see a second close on that fund.
Yes, So hi, Nick it's Bobby.
People were our Lps were.
Definitely over allocated in 2022 or some are still over allocated.
In 2023, I think it's really LP specific some of its.
All regions of the world specifics in terms of people wanting to get more money than <unk> had historically.
But it's clear that.
That is taking longer to get commitments in this market.
It has been in our history, that's not just us as you saw with the with the other Big U S. Players announcing it we're in a cycle in terms of RP business.
Again on cap and <unk>.
<unk> seven we still are planning on closing those funds this year and we feel confident about the targets I do expect op six to likely go into the beginning of <unk>.
Calendar year 'twenty four.
And we should we're going to target to have an update for you on our second quarter, what we're calling internally one be by the end of Q2.
Okay very good.
And then just a second question on buybacks.
Share repurchases were pretty healthy in the quarter just in the context of being 87% invested is there.
Minimum cash balance you would want to maintain just in the context of existing commitments to the funds or do you expect to remain pretty active over the course of this year if that.
The current magnitude of the discount to NAV persists.
Hey, Nick it's Chris Galvin.
I don't think we're anywhere close to our minimum cash balance today.
We're very comfortable with our liquidity position I would say, though that given the markets that we're in including fundraising market. We do believe there's going to be some pretty exceptional opportunities for us over.
Over the next handful of months in.
And the balance of the year to on one hand invest through some of our platforms, but in a way that probably provides real platform value.
Where our balance sheet can be used to support the extension of our platform. So that in the long run and we've got a better platform from an FRE perspective, and then the other thing.
There is a lot of GPS out there obviously living in the same fund raising market, we are but don't have a balance sheet.
And I think we'll be open to.
Potentially growing our business inorganically, so we're probably a little bit.
More conservative on the stock buyback right at the moment given how invested we are as you pointed out but should our liquidity improve we'll be right back at it because obviously, we have got great pacing the intrinsic value of our shares in and think it's a screaming buy at the current rate.
Understood. Okay. That's good color that's it for me. Thank you.
Thank you.
One moment for our next question.
And our next question comes from the line of Geoffrey Kwan from RBC. Your question. Please.
Hi, Good morning, I just wanted to follow up on the last question was.
So your comment.
It sounded like you may look to within some of your platforms make acquisitions to try and grow and scale those up and grow the FRE is that correct and then just and Bobby maybe are.
Jerry in general just.
Comment on kind of the monetization environment in the acquisition pipeline, it's choppy out there, but just wanted to get your latest thoughts.
Again, when we laid out our strategic plan.
Our 16 or 18 months ago that plan was all organic when you have market turbulence like Youre seeing today. There is not that we are about to announce a new acquisition.
For the for the FRE platform, if you will but I would like to have the liquidity at hand to be able to take advantage of market dislocations right, but again as Chris said.
As we get more liquidity in from from monetization over the coming months or quarters.
Once that cash position begins to get a little bit higher obviously, we're going to be back in the market buying as measures that we can find.
I guess I was just saying.
There are these times.
Quite good to have strong liquidity to be able to take advantage of opportunities.
In terms of the.
Pipeline on the PE side, it's relatively slow.
The credit markets Havent opened up to any meaningful extent.
Given that there are people are not coming to market.
With assets, because they don't think they're going to be able to maximize price.
Some people are still trying to come to market.
Given theyre trying to post PPI for fund raising or for other reasons.
We're I think we're going to begin to see better pipeline.
As in corporate carve outs, which we haven't seen for almost a decade at any meaningful in any meaningful way the cost of capital at these corporations is also going up and for a long time, given that essentially borrow Brazil, where there wasn't a lot of scrutiny in terms of how to how to fund the growth of the business I think that's going to begin to change and.
Decisions are going to have to be made so between that and founder owned businesses. We're spending most of our time there rather than.
Waiting for the secondary market to improve and we've never we've always tried to rely less in the secondary market for obvious reasons, but overall.
It is not a good market to buy.
It's a good market to buy but theres, just not a lot of inventory.
Got it.
Just going back to your comments on the fundraising and then just trying to take this in comparison to your comments from last quarter.
Would you say that the fundraising environment, how you feel about it today is unchanged versus last quarter would you say it's a.
A bit more.
Cautious in terms of your outlook or maybe even a little bit better than what you were saying last quarter.
No I think it's about the same.
Theres been no step function change one way or the other again, it's taking longer.
To grind out getting the commitments than we've been used to historically that assessment LP, that's like across our platform, which has taken a bit longer but no I wouldnt say its gotten better or worse I would say it's about the same.
The overall market.
Okay.
Last question was.
I think you made a comment earlier about.
Lps.
Some of them maybe.
Consulting summit, there their investments with other alternatives or larger alternative managers does that.
Have you think about.
<unk> product offering maybe expanding into other verticals and if so is it something that giving it organic versus acquisition has more appeal.
Yes look we're studying all of those things I think what are some of the larger players have had successes in.
Bundled sales.
Like <unk>.
Multibillion dollar commitments with LP, where theyre doing business across the platform those obviously somewhere we'd like to get.
Ourselves as well.
We are constantly looking for ways to build on our PE and credit businesses and those those ways are both organic and inorganic.
And we would be open to longer term other legs of the stool, if we could find the right the right partner and the right culture fit.
<unk>.
With another firm or whether or not go higher of some sort.
So we're constantly looking at those things and I think those opportunities may actually be.
More maybe more of them right just given the current environment, which comes back to the liquidity point that Chris and I were talking about.
Okay, great. Thank you.
Thank you.
Thank you one moment for our next question.
Our next question comes from the line of Graham Ryding from TD Securities. Your question. Please.
Bob just on that consolidation theme like does it make sense to consider being a seller at all do you have any assets that you think would be attractive when youre trading at a big discount to you.
You announced that you are the market is not giving you much value from the asset management businesses.
Are you considering anything.
From that lens are you only considering sort of scaling up and growing the business.
Yes myself much more so the latter.
Several quarters ago.
When we looked at the way our PE portfolio is trading.
In terms of our share our share price right. There are there are secondary markets that have arisen with are quite large actually bid.
For LP Stakes and PE portfolios, we're obviously the largest LP.
In our in our businesses.
We've actually thought about trades, where we would show.
The shareholders that people were willing to pay more of them.
For a chunk of our portfolio that has an implied value of $31. If you adjust for cash and marketable securities. So we've explored that that market like the rest of the market that the bid in that market is still well above where were being valued by public shareholders, but.
Not high enough, where I'd want to actually sell.
So we are constantly looking at all of those things and tried to provide proof points.
To our shareholders that why are we why are we continue to buy back. So many shares and why we think is undervalued.
Got it that's helpful.
You gave us a pretty good update I think on op and on cap in terms of XP.
Expectations around fundraising anything on the transportation fund.
And maybe just credit overall for 2023, what should we be.
Looking forward in terms of fundraising expectations.
Yeah, So transportation's early in English.
Getting good reception, though just in terms of the market that is trying to address which is not a highly saturated market.
<unk> and per world, depending on where you are just a lot better and we think that it is more of an in between type return between the <unk>.
The platform again <unk> seven.
In the market real time.
The target there is one five versus their fund size of one two lost time.
Mezz generally when you look at.
The opportunity set across the balance sheet measures very attractive pricing right now.
So I expect that attractiveness to yield good results for sandy, particularly b and his team, particularly because their last two funds have been first.
First quartile.
Seem to be no guarantees in this world, where they seem to be.
It's just in the right spot.
Capital markets and what that track record that that should be okay. Clo's look we've done one already this year, but you really do need a somewhat healthy LBO market too to really do a lot of CLO.
We're really happy with the team that <unk> built both here in the U S.
In London, but it's hard for me to predict how many CLO is we'll be able to to issue. This year, so somewhat capital markets dependent but they've also been pretty creative and figuring out ways to get them done even in this market. So overall I feel good that those are the things that should be in market. This year for credit Crystal I think I'm missing the.
<unk> for direct lending, yes, Steve alongside the BDC with the other I'll call it needle mover year, yes.
But I think Graham Graham.
Our plan would be to have.
Significantly more again its market dependent.
But significantly more.
AUM rate and credit this year than in 2022, it should be an up year.
Okay understood and then just my last question would be for you Chris just given your outlook for fund raising which remains fluid can you get FRE positive in 2023 years, it's more likely to.
<unk> thousand 24 target.
I think overall grammar.
Not going to be 2023, particularly because.
As I sort of mentioned.
You mentioned over the last few calls that there is going to be a step down in fees for LP.
Just given the way it's the fund raising continued into 2024, which we fully expect regardless how much things improved in 2023, when we go out of the commitment period for <unk>.
<unk> five we're likely to see a step down.
In the private equity in year fees.
So it's not going to be 2023 event, but I think what you should keep an eye on and what will be sort of highlighting over the course of the year is the progress of FRE growth within the credit business on a standalone basis.
Tied back a bit to your question about whether we've got businesses within on it that we think are valuable and we certainly think we do have businesses that are evaluable today within on X and I think youll see some real progress at credit in terms of their FRE contribution.
Okay understood does that do you know when that step down on <unk> I was going to happen or is that still fluid as well.
It's fluid because it really depends upon when we close out the fund.
So if we were to make the last investment.
Shortly then it would step down shortly.
<unk> date, unless we were to get an extension on the commitment period is November .
Yeah.
Understood. Okay. That's helpful. Thank you.
Thank you one moment for our final question.
Okay.
Yeah.
And our final question for today comes from the line of Scott Chan from Canaccord. Your question. Please.
Yeah. Thanks, Thanks, a lot.
First question just on our Lufkin.
Watkins shaft, you talked about the gross sales being really strong last year to 1 billion, but you did that Matt Hello flows and modest net outflows.
And applying some significant gross redemptions and a high.
Redemption rate relative to peers that we track.
It seemed like the issue is on the gross sales side on the redemption side and I was wondering if you could comment on on that part of it.
Okay.
There were read their dumpsters Theres no question about it I think there were.
That was $200 million, maybe $300 million, if I recall, if I recall.
Colin correct I don't have the numbers in front of me there were some larger redemptions.
Related to a couple of institutional clients in a couple of.
Yes.
The state planning situations, if you roll that were abnormally large.
I continue to see.
<unk> made good progress on the <unk>.
Filming of the building.
<unk> AUM and I do expect the redemptions to get more muted over time relative to the $1 coming in.
But we were absolutely a couple of hundred million net negative.
Inflows versus outflows.
Okay, and then on the private equity side when you break out your NAV.
<unk> performance by segment.
Therefore, <unk> continued to do well.
The last one in consumer and retail, which does comprise eight businesses, but it's the lowest proportion.
It was down quarter over quarter and down 26% year over year.
Is that more segmented.
Issue.
Within private equity and that consumer and retail are there specific investments there that.
That you would call out that impacted that.
No.
No business that I would call out to say, yes.
We've got a business in trouble thats, making up most of that decline it's really.
It's getting more and more difficult.
And retail businesses to deal with inflation and wage pressures.
And you're just seeing the.
The effect of that sort of across that part of the portfolio more so than in our other segment.
Okay, and then Chris just lastly on.
<unk> you said, you said pausing out there.
The rest of the last two quarters and in 2020 and you also talked about liquidity.
In sourcing liquidity and I was wondering if you could maybe.
Brian on that if you see some near term imbalance, perhaps let me correct investment public investments or maybe lastly monetization opportunities.
Yes, I don't think Scott that I wouldn't signal any specific source of liquidity I don't think thats sort of been our strategy. We don't think thats. The right thing to do to talk about particular opportunities that we might be thinking about.
We've got a.
A large private portfolio with 30 some names.
And we've got a significant amount of our value in five or six public companies across the portfolio and although its difficult market.
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From time to time, it's the right time to sell businesses, even in more challenging markets, just because of where youre at in the investment thesis. So when I, just sort of step back and think about that side of the portfolio that much of it in public names. It's sort of just sort of just makes sense that one should expect that we regularly have liquidity events.
Okay. Thank you very much.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Gerry Schwartz for any further remarks.
Thanks, operator, but especially thanks to everyone for joining us today.
We have had really nice support from shareholders and we continue.
To appreciate really truly appreciate that support.
And we look forward to continuing this conversation, particularly as it comes up in the next quarter.
Thanks, everyone and see you soon.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.