Q2 2024 Onex Corp Earnings Call

August 8, 2024

Bye. Bye.

Speaker Change: Welcome to ONIC's second quarter 2024 conference call and webcast.

Speaker Change: During the presentation, all participants will be in listen-only mode. Afterwards, we will conduct a question and answer session with pre-qualified analysts. At that time, if you have a question, please press star 1 1 on your telephone keypad.

As a reminder, this conference is being recorded. I will now turn the conference over to Jill Homenuk, Managing Director of Shareholder Relations and Communications at Onex. Please go ahead.

Jill Homenuk: Thank you. Good morning, everyone, and thanks for joining us. We're broadcasting this call on our website. Hosting the call today are Bobby LeBlanc, Onex Chief Executive Officer, and Chris Govan, our Chief Financial Officer.

Speaker Change: Earlier this morning, we issued our second quarter 2024 press release, MD&A, and consolidated financial statements, which are available on the shareholder section of our website and have also been filed on CDAR. A supplemental information package is also available on our website.

Speaker Change: 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.

Bobby: With that, I'll now turn the call over to Bobby. Good morning, everyone. I want to first welcome Sarah Wechter to Onex's Board of Directors. This morning, we announced Sarah as a new independent director, and I'm very happy that she has joined us.

Speaker Change: Sarah is the Chief Human Resources Officer at Citigroup, where she is responsible for all talent management and employee relations programs.

Speaker Change: She's a recognized leader in effective and equitable compensation structures.

Speaker Change: that are aligned with strategic objectives.

Speaker Change: Her experience supporting leaders and boards through transition periods will be a particular benefit to Onex and me in the coming years.

Operator: Welcome to Onyx's second quarter, 2024 conference call-in webcast. During the presentation, all participants will be in listen only mode. Afterwards, we will conduct a question-and-answer session with requalified analysts.

Speaker Change: Now on to Q2 results. Overall, Onex had a good second quarter, with continued fundraising activity in priority areas, and strong progress on realizations across ONCAP and Onex partners.

Operator: At that time, if you have a question, please press star 1-1 on your telephone keypad. As a reminder, this conference is being recorded.

Speaker Change: Our investing capital per share had a 3% return in Q2, driven by gains across our private equity platforms, including a strong contribution from ONCAP.

Jill Homenuk: I will now turn the conference over to Jill Homenuk, managing director, shareholder, relations, and communications at Onyx. Please go ahead. Thank you.

Speaker Change: Both OP and ONCAP saw incremental progress with fundraising.

Robert Blanc: Good morning, everyone, and thanks for joining us.

Robert Blanc: We're broadcasting this call on our website, hosting the call today, or Bobbila Blanc, on its chief executive officer, and Chris Govan, our chief financial officer. Earlier this morning, we issued our second quarter, 2024 press release, MDNA, and Consolidate of Financial State Benz, which are available on the shareholder section of our website, and have also been filed on Cedar. A supplemental information package is also available on our website. As a reminder, I'll recognize the dollar amount from this call are in US, unless otherwise stated.

Speaker Change: Including Onyxx Commitments, our Onyxx Partners Opportunities Fund has now raised $820 million, while OnCap5 had reached commitments nearing $1 billion.

Speaker Change: Our PE teams are doing good work securing return on capital for our limited partners, which is a positive for our fundraising efforts.

Speaker Change: Last week, ONCAP completed the sale of Englobe, and recently, ONCAP IV sold its investment in Wise Meter Solutions to a single asset continuation fund to be managed by ONCAP.

Operator: I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors related to any forward-looking statements contained in today's presentation and remarks.

Speaker Change: This is ONCAP's first continuation vehicle and follows Onix Partners' successful continuation fund for Ryan LLC last fall.

Robert Blanc: With that, I'll now turn the call over to Bobbila.

Speaker Change: These funds will continue to play an important role in our realization strategies, providing valuable ongoing fee and carry generation opportunities for audits.

Robert Blanc: Good morning, everyone. I want to first welcome Sarah Wector to Onyx's Board of Directors. This morning, we announced Sarah as a new independent director, and I'm very happy that she has joined us. Sarah is the chief human resources officer at Citigroup, where she is responsible for all talent management and employee relations program. She is a recognized leader in effective and equitable compensation structures that are aligned with strategic objectives. Her experience supporting leaders and boards through transition periods will be a particular benefit to Onyx and me in the coming years.

Speaker Change: Through July , ONCAP has returned approximately $390 million to investors, or 15% of the value of ONCAP investments at the start of the year.

Speaker Change: The Econics Partners team was also active in Q2.

Speaker Change: Onex Partners IV entered into an agreement to sell approximately half of its shares in PowerSchool as part of a take-private transaction, which is expected to close in the third quarter.

Speaker Change: I am also pleased to report that the sale of ASM has met all required conditions and is expected to close by the end of this month.

Robert Blanc: Now on to Q2 results. Overall, Onyx had a good second quarter with continued fundraising activity in priority areas, and strong progress on realizations across On-CAP and Onyx partners. Our investing capital per share had a 3% return in Q2, driven by gain to cross our private equity platforms, including a strong contribution from On-CAP. Both OP and On-CAP saw incremental progress with fund raising, including Onyx commitments. Our Onyx partners' opportunities fund has now raised $820 million, while On-CAP 5 had reached commitments nearing $1 billion.

Speaker Change: Combined, the two transactions represent an expected return of capital of approximately 1.6 billion dollars to Onyx Partners and approximately 530 million dollars to Onyx.

Speaker Change: Turning to credit, our CLO platform has had a stellar year so far, raising or extending a total of seven billion dollars of fee-generating AUM through new issuances and resets of prior CLOs.

Speaker Change: In July , the team prices 34th U.S. CLO, which was the third largest broadly syndicated CLO this year, and its 10th European CLO, matching its largest CLO since inception.

Robert Blanc: Our PE teams are doing good work securing return of capital for our limited partners, which is a positive for our fund raising efforts. Last week On-CAP completed the sale of N-Globe, and recently On-CAP 4 sold its investment in wise-meter solutions to a single asset continuation fund to be managed by On-CAP. This is On-CAP's first continuation vehicle, and follows Onyx partner's successful continuation fund for Ryan LLC last fall. These funds will continue to play an important role in our realization strategies, providing valuable, ongoing fee, and carry generation opportunities for Audix. Through July, ONCAP was returned approximately $390 million to investors, or 15% of the value of ONCAP investments at the start of the year.

Speaker Change: With deals priced or closed through July , we have well exceeded the growth we had targeted for all of 2024.

Speaker Change: The team is continuing to take advantage of opportunities to further grow the platform backed by strong investor demand for allocations across the entire capital structure.

Speaker Change: Moreover, this growth has been very capital-efficient from a non-expansionary perspective.

Speaker Change: You have heard me say this before, but as we look to the future, we will continue to prioritize areas where we have a right to compete and win.

Speaker Change: Our teams in private equity have proven that they can persevere through industry cycles and continue to provide strong performance for investors.

Speaker Change: Ronnie and our credit team are showing what can be achieved when you build long-standing investor relationships based on proactive management, innovative client solutions, and high-performing portfolios that protect investor capital.

Robert Blanc: The ONCAP partners team was also active in Q2. ONCAP partners 4 enter into an agreement to sell approximately half of its shares in power school, as part of a take private transaction, which is expected to close in the third quarter. I am also pleased to report that the sale of ASM has met all required conditions, and is expected to close this buddy into this month. Combined, the two transactions represent an expected return of capital of approximately $1.6 billion to ONCAP partners, and approximately $530 million to ONCAP.

Speaker Change: Recently, we made the decision to separate Falcon from Onex to operate as an independent entity from now on. While we believe in the team's ability to deliver investing success,

Speaker Change: The synergies across the remainder of our platforms did not materialize to the extent that the Onex resources needed to support the business outweighed the benefits.

Speaker Change: We will continue to maintain a minority interest in Falcon, along with future Carriage's participation.

Speaker Change: Chris will provide more details in his remarks.

Robert Blanc: Turning to credit, our COLO platform has had a stellar year so far, raising or extending a total of $7 billion of fee generating AUM through new issuances and resets of prior COLOs. In July, the team price is 34th US COLO, which was a third-largeless, probably-sendicated COLO this year, and its 10th European COLO, matching its largest COLO, since inception. With deals priced or closed through July, we have well exceeded the growth we had targeted for all of 2024.

Chris: One of my commitments to Shareholders and Investors Day was to ensure we are disciplined in the use of our resources, particularly our balance sheet.

Speaker Change: Our balance sheet is a key differentiator, and we must use it wisely to drive increased shareholder value.

Speaker Change: Strategic alignment of our businesses and our balance sheet to our long-term objectives is my top priority and you can expect to hear more from me on our plans in the coming quarters.

Speaker Change: Thank you for your continued support as we work towards building a stronger Onyx for all stakeholders. With that, I'll now turn it over to Chris.

Robert Blanc: The team has continued to take advantage of opportunities to further grow the platform, backed by strong investor demand for allocations across the entire capital structure. Moreover, this growth has been very capital-efficient from a non-exbalance view perspective.

Chris: Thanks, Bobby, and good morning, everyone.

Chris: Onex ended Q2 with investing capital per share of $110.35, reflecting a return of 3% in the quarter.

Chris: Investing capital per share has returned 11% over the last 12 months and 13% annually over the last 5 years.

Robert Blanc: You have heard me say this before, but as we look to the future, we will continue to prioritize areas where we have our right to compete and win. Our teams and private equity have proven that they can persevere through industry cycles and continue to provide strong performance for investors. Rhining our credit team are showing what can be achieved when you build longstanding investor relationships based on proactive management, innovative client solutions, and high-performing portfolios that protect investor capital.

Chris: To put that five-year return in context, the $110 of investing capital per share today compares to just $67 per share five years ago, meaningful growth in the underlying value of our shares.

Chris: Onex repurchased approximately 880,000 shares in Q2, the second most active quarter since 2022.

Chris: Over the last 12 months, repurchases totaled 3.9 million shares, or almost 5% of outstanding shares, allowing us to capture $175 million of hard NAV for continuing shareholders.

Robert Blanc: Recently, we made the decision to separate Falcon from Onyx to operate as an independent entity from now on. While we believe in the team's ability to deliver investing success, the synergies across the remainder of our platforms did not materialize to the extent that the Onyx resource is needed to support the business outweighed the benefits. We will continue to maintain a minority interest in Falcon along with future carry-dances participation.

Chris: It was a solid quarter from an investment and realization perspective. As Bobby mentioned, Onex Partners closed out OP5 with the acquisition of Accredited in late June .

Speaker Change: On the realization front, we progressed and completed several transactions that crystallized attractive returns for our investors and will provide meaningful DPI.

Robert Blanc: Chris will provide more details in his remarks. One of my commitments to shareholders in an investor day was to ensure we are disciplined in the use of our resources, particularly our balance sheet. Our balance sheet is a key differentiator, and we must use it wisely to drive increased shareholder value.

Speaker Change: ONCAP recently completed the sale of Englobe and the sale of Wise Meter Solutions to a continuation fund that will continue to provide management fees and carried interest going forward.

Speaker Change: At Onex Partners, we announced an agreement to sell approximately half of the PowerSchool investment as part of a take-private transaction expected to close later in Q3.

Robert Blanc: Strategic alignment of our businesses and our balance sheet to our long-term objectives is my top priority, and you would expect to hear more from me on our plans in the coming quarters.

Speaker Change: We ended the second quarter with cash and near cash of $1.4 billion, or 16% of investing capital, with liquidity expected to increase in the near term in light of the realizations I just mentioned.

Christopher Govan: Thank you for your continued support as we work towards building a stronger ionic for all stakeholders, with that I'll now turn it over to Chris. Thanks, Bobby, and good morning, everyone. Onix ended Q2 with investing capital per share of $110.35, reflecting the return of 3% in the quarter. Investing capital per share has returned 11% over the last 12 months, and 13% annually over the last 5 years. To put that 5-year returning context, the $110 of investing capital per share today compares to just $67 per share five years ago, meaningful growth and the underlying value of our shares.

Chris: Looking at private equity, our PE portfolio produced a $121 million net gain or a 2% return in Q2.

Chris: The returns were fairly broad-based across our financial services, business services, and industrial businesses, while offset slightly by healthcare investments.

Speaker Change: In credit investing, our credit strategies delivered a $17 million net gain or a 1% return in Q2.

Chris: The gain here was also broad-based, across our credit portfolio, and generally consistent with the returns for the credit market at large.

Chris: Now let's turn to the asset management side of the business.

Chris: Onex ended the quarter with nearly $33 billion of fee-generating AUM.

Chris: This reflects the removal of FGAUM, associated with Falcon, substantially offset by $2.2 billion of new FGAUM raised across the Credit and PE platforms in Q2.

Christopher Govan: It was a solid quarter from an investment and realization perspective. As Bobby mentioned, Onix partners closed out OP5 with the acquisition of accredited in late June. On the realization front, we progressed and completed several transactions that crystallized attractive returns for our investors and will provide meaningful DPI. OnCAP recently completed the sale of N-Glode and the sale of Y's meter solutions to a continuation fund that will continue to provide management fees and carried interest going forward.

Chris: However, recent changes in Firmwide AUM may be masking the strong growth in our structured credit business.

Speaker Change: FGAUM and that business has grown 22% in the last 12 months, and more importantly, has been growing at an annual rate of 16% over the last four years.

Speaker Change: And a reminder, this growth has occurred while consistently requiring less and less of Onex's balance sheet capital.

Chris: In the first half of 2024, our balance sheet exposure was reduced by $93 million, driven by recurring distributions and the partial sale of equity interests more than offsetting new investments.

Christopher Govan: At Onix partners, we announced an agreement to sell approximately half of the power school investment as part of a take private transaction expected to close later in Q3. We ended the second quarter with cash and near cash of $1.4 billion or 16% of the dust in capital, with liquidity expected to increase in the near term in light of the realizations I just mentioned. Looking at private equity, our PE portfolio produced a $121 million net gain or a 2% return in Q2.

Chris: And over the last four years, Onex's ownership of the platform CLO Equity has decreased from 87% to 46%.

Chris: With about $75 million of run rate management fees and a much less capital-intensive business model, the Structured Credit Team has done a great job building a valuable asset management franchise over the last four years.

Chris: Turning to fee-related and distributive warnings.

Christopher Govan: The returns were fairly broad-based across our financial services, business services and industrial businesses, while offset slightly by healthcare investments. In credit investing, our credit strategies delivered a $17 million net gain or a 1% return in Q2. Again, here was also broad-based across our credit portfolio and generally consistent with the returns for the credit market at large.

Chris: Second quarter total FRE was a loss of $8 million, with a $2 million loss from the asset management platform.

Chris: These results improve slightly from Q1 and reflect the continued impact of cost-saving opportunities, as well as lower compensation in the quarter.

Chris: As we've communicated previously, the end of OP5's commitment period in late 2023, together with the change in our private wealth business model, are FRE headwinds in 2024.

Christopher Govan: Now, let's turn to the asset management side of the business. Onix ended the quarter with nearly $33 billion of fee generating AUM. This reflects the removal of FGEOM associated with Falcon, which thankfully offset by $2.2 billion of new FGEOM raised across the credit and PE platforms in Q2. 2. Over recent changes in firm-wide AUM, Bates may be masking the strong growth in our structured credit business. FGAUM in that business has grown 22% in the last 12 months, and more importantly has been growing at an annual rate of 16% over the last 4 years.

Chris: These will be partially offset as new fees come online from ONCAP5, the ONIX Partners Opportunities Fund, continuation vehicles, and the growth in structured credit.

Chris: Run rate management fees were $179 million a quarter end, down $18 million, primarily due to the Falcon separation.

Chris: As Bobby mentioned, the decision to have Falcon operate independently was in the best interest of both businesses, given the prospects for synergies with the rest of the Onyx platform.

Speaker Change: In terms of F.R.E.

Christopher Govan: And a reminder, this growth has occurred while consistently requiring less and less of Onyx's balance sheet capital. In the first half of 2024, our balance sheet exposure was reduced by 93 million dollars, driven by recurring distributions, and the partial sale of equity interests more than offsetting new investments. And over the last 4 years, Onyx's ownership of the platform CLO equity has decreased from 87% to 46%. With about 75 million dollars of run rate management fees and a much less capital intensive business model, the structured credit team has done a great job building a valuable asset management franchise over the last 4 years.

Bobby: The platform was essentially neutral to FRE over the last 12 months.

Speaker Change: The new arrangement will allow Onex to share in potential future upside through its 20% ownership of the manager and a carried interest in the next few funds.

Speaker Change: Additionally, all contingent consideration from the acquisition of Falcon in 2020 has been waived. And Onex's commitment to Falcon Fund 7 was reduced to $40 million from $80 million previously.

Bobby: Looking at distributable earnings, we generated 74 million of DE in Q2, driven by the recurring CLO distributions and the sale of Onex's interest in WISE as part of the ONCAP Continuation Fund transaction.

Christopher Govan: Turning to fee-related and distributed warnings, second quarter total FRE was a loss of 8 million dollars with a $2 million loss from the asset management platform. Even results improved slightly from Q1 and reflect the continued impact of cost saving opportunities, as well as lower compensation in the quarter. As we've communicated previously, the end of OP5's commitment period in late 2023, together with the change in our private wealth business model, our FRE headwind in 2024.

Bobby: Finally, an update on Onex's incentive and carry interest opportunity.

Bobby: We ended Q2 with $258 million of accrued carry, which reflects $14 million generated in the quarter, primarily from Onex Partners 5 and ONCAP 4.

Bobby: As a reminder, Onex has over $30 billion of private equity and credit AUMs subject to carry or incentive fees, which provides a meaningful opportunity for value creation going forward.

Bobby: In summary, we had a solid quarter with momentum building across the businesses.

Christopher Govan: These will be partially offset as new fees come online, from Onyx's partner's opportunity fund, continuation vehicles, and the growth in structured credit. Run rate management fees were $179 million at quarter end, down 18 million, primarily due to the Falcon separation. As Bobby mentioned, the decision to have Falcon operate independently within the best interest of both businesses, given the prospects for synergies with the rest of the Onyx platform. In terms of FRE, the platform was essentially neutral to FRE over the last 12 months.

Bobby: We will continue to prioritize decisions that allocate our resources where we have a right to compete and drive long-term value for our shareholders.

Speaker Change: That concludes the prepared remarks and we'll now be happy to take any questions.

Speaker Change: As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.

Speaker Change: Please stand by while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of Nik Priebe with CIBC Capital Markets.

Nik Priebe: Okay, thanks. So you're building a substantial amount of balance sheet liquidity here, and I'm just wondering what your priorities might look like from a capital allocation.

Speaker Change: standpoint. Does the experience with Falcon and Gluskin Chef reduce appetite for M&A at the Onyx Corp level? And I also noticed that Buyback stepped up in the quarter, and I'm just wondering if the intent would be to keep that going.

Bobby: Yeah, hi, Nick. It's Bobby.

Christopher Govan: Looking at distributed earnings, we generated 74 million of DE in Q2, driven by the recurring CLO distributions, and the sale of Onyx's interest in Y as part of the on-cap continuation fund transaction.

Speaker Change: Capital Allocation and how to use our wonderful balance sheet leave me this top of mind in my thinking and I hope to be able to come back to

Nick: All shareholders in the coming quarters to better articulate the plans around that. Obviously, share buybacks will continue to be a top priority for us. I don't think you'll see us slowing those down anytime soon.

Christopher Govan: Finally, an update on Onyx's incentive and carried interest opportunity. We ended Q2 with $258 million at the crude carry, which reflects $14 million generated in the quarter. Primarily from Onyx's partner's side and on-cap 4. As a reminder, Onyx has over $30 billion of private equity and credit AUM's subject to carry on incentives, which provides a meaningful opportunity for value creation going forward.

Speaker Change: And on your question about Falcon...

Speaker Change: Look, M&A on the asset management side is, you know, is more difficult, M&A than we're kind of used to within our PE funds, like they're people businesses or culture fit and things like that.

Speaker Change: are important. I don't, I don't, I don't see us prioritizing buying other asset managers in the near term. I think about capital allocation, like that much I can tell you, but as for the other plans we're working on, I think I just, I need a bit of time to be able to come back to shareholders.

Christopher Govan: In summary, we have a solid quarter with momentum building across the businesses. We will continue to prioritize decisions that allocate our resources where we have a right to compete and drive long-term value for our shareholders.

Speaker Change: Understood. Okay, that's helpful. And then this question is a bit premature, and I'm aware of that. But wondering what you might need to see in order to consider reinitiating fundraising for your larger cap buyout strategy? Is that a decision that's made in consultation with some of your larger

Operator: That concludes the prepared remarks and we'll now be happy to take any questions. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by when we compile the Q&A roster.

Speaker Change: LPs that you would expect to re-up or do you simply have more work to do regarding return of capital first?

Speaker Change: Yeah, so I think there's a couple of things. Firstly, you know, that opportunities fund should allow us to do, you know, four or five deals or so.

Nikolaus Priebe: Our first question comes in line of Nick Preet with CIBC Capital Markets. Okay. Thanks.

Robert Blanc: So, you're building a substantial amount of balance sheet liquidity here and I'm just wondering what your priorities might look like from a capital allocation standpoint. Does the experience with Falcon and Gilesk and Chef reduce appetite for M&A at the Onyx Corp level? And I also notice a buyback stepped up in the quarter and I'm just wondering if the intent would be to keep that going. Yeah, hi, Nick, it's Bobby, like capital allocation and how to use our wonderful balance sheet to leave me this top of mind in my thinking and I hope to be able to come back to all shareholders in the coming quarters to better articulate the plans around that.

Speaker Change: depending on the use of CoInvest. And importantly, Nick, the performance of Onyx Partners 5, right, and that's from an IRR and a return of capital perspective.

Speaker Change: will be an important milestone to go into Fund 6 and it's one

Speaker Change: where our LPs are obviously rooting for us. Everybody at OP5 wants that to be a good fund. But I do think we're going to need some more DPI.

Speaker Change: and a bit more seasoning, which is the whole point of the Ops Fund, is to have the next 18 months or so to do that, show those results, and then begin fundraising again on a normal kind of fund structure for OP6.

Speaker Change: Got it. Okay. And then last one for me. You've got a few relatively mature investments in the P&C insurance space.

Robert Blanc: Obviously, share buybacks will continue to be a top priority for us so you'll see us slowing those down anytime soon. And I'm your question about Falcon, look, M&A on the asset management side is more difficult and M&A than we're kind of used to within our PE funds, like there are people, businesses or culture fit and things like that are important. I don't see us prioritizing buying other asset managers in the near term when I think about capital allocation, that much I can tell you, but ask for the other plans for working on it. I need a bit of time to be able to come back to shareholders. Understood. Okay. That's helpful.

Speaker Change: Just wondering what your read or your internal thinking is around where we're at in that.

Speaker Change: cycle. It just kind of feels like the hard market cycle is pretty long in the tooth. You know, new money rates are dropping, which has been a tailwind for the carriers anyway. What's your view on that sector? And I'm just wondering how that might inform, you know, a hold or sell decision on some of those investments.

Speaker Change: Yeah, so what I'm seeing, I'm on the boards of those particular companies, Russ, so what I'm seeing is rates are still increasing.

Speaker Change: They're increasing at a decreasing rate and it really varies by reinsurance or insurance and it's even, you know, subsectors underneath of those two things, right?

Speaker Change: You know, on the balance sheet side of that industry, where you're able to invest assets alongside your liabilities.

Robert Blanc: And then this question is a bit premature and I'm aware of that, but I'm wondering what you might need to see in order to consider reinitiating fundraising for your larger cap by-out strategy. Is that a decision that's made in consultation with some of your larger LPs that you would expect to re-up or do you simply have more work to do regarding return of capital first? Yeah, so I think there's a couple of things.

Speaker Change: There's still a tailwind there, Nick, because...

Nick: You know, given that the duration of liability for a company like Convex, for example, is, you know, three to four years, dollars that were in the ground to support liabilities, even though rates are ticking down a little bit right now, are still materially higher than when those dollars got put to work.

Robert Blanc: Firstly, that opportunity fund should allow us to do four or five deals or so, depending on the use of co-invest. And importantly, the performance of Onyx Partners 5, and that's from an IRR and a return of capital perspective, will be an important milestone to go into fund 6, and that's one where our LPs are obviously rooting for us. I might know if I want that to be a good fund, but I do think we're going to need some more DPI and a bit more seasoning, which is the whole point of the out fund is to have the next 18 months or so to do that, show those results and then then begin fund raising again on a normal kind of fund structure for OPs, of course. Got it. Okay.

Speaker Change: But you're right, the rate increase is beginning to slow, but it's still growing, it's just slowing a bit across the board.

Nick: And look, a rate is the easiest form of revenue you can get. But what I really focus on, because you can't control rate, is are we winning, you know, new volume that we like the risk pricing on? And there, I think we're doing a nice job.

Speaker Change: Okay, that's a great color. I'll pass the line for now. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Geoffrey Kwan with RBC Capital Markets.

Geoffrey Kwan: Hi, good morning. I just wanted to go back to the Nafalcon transaction.

Robert Blanc: And then last one for me, you've got a few relatively mature investments in the P&C insurance space. Just wondering what your read or your internal thinking is around where we're at in that cycle. I just kind of feel like the hard market cycle is pretty long in the tooth. You know, new money rates are dropping, which has been a tailwind for the carriers anyway. What's your view on that sector? And I'm just wondering how that might inform a hold or sell decision on some of those investments?

Geoffrey Kwan: Can you elaborate on what drove it where you had the comment that the synergies were maybe not as much as you initially thought it and why the costs were outweighing the benefits?

Speaker Change: Yes, so again

Speaker Change: I'm rooting for them. I believe John and that team, they were a good part of it. We own a piece of the business.

Speaker Change: are going to participate in the carry, but.

Speaker Change: But it turned out for us Mez was really more of a PE product than a credit product, right? So it didn't

Robert Blanc: Yeah, so what I'm seeing on the boards of those particular companies, Russell, what I'm seeing is rates are still increasing. They're increasing at a decreasing rate. And it really varies by reinsurance or insurance. And it's even subsectors underneath of those two things. On the balance side of that industry where you're able to invest assets alongside your liabilities, they're still a tailwind there, Nik, because given that the duration of liabilities for a company like Convector example is three to four years, dollars that were in the ground to support liabilities, even though rates are ticking down a little bit right now are still materially higher than when those dollars got put to work, right?

Speaker Change: really fit in well with the credit platform and the fundraising around the credit platform. We actually had products that were competing with each other.

Speaker Change: you know, on a return profile that were different parts.

Speaker Change: When we looked at that and the priorities that we wanted for our distribution team,

Mez: We decided that Mez, as a PE business, and it's a specific thing, Mez.

Nick: would be a tougher thing to scale over time.

Nick: And that's where the sort of the limited energies we saw coming in.

Nick: came into play.

Nick: I do like the junior capital business and I think I've been pretty, you know, outspoken about that. But when I think about...

Nick: where we could create shareholder value in junior capital. I don't think it's really on the asset management side in traditional sense of the word. I think it'll be, you know, ONCAP or OP looking at a deal that is more appropriate for a junior capital.

Robert Blanc: So, but you're right, the rate increase is beginning to slow, but it's still growing, it's just slowing a bit across the board. And looking at rate is the easiest form of revenue you can get, but I really focus on it because you can't control rate is, are we winning new volume that we like risk pricing on a mayor? I think we're doing a nice job. Okay, that's a great color. I'll pass the line for now. Thank you.

Nick: We're going to be talking about the P-E type return versus the P-E return, and then trying to use our balance sheet to lean in on places where we really know the industry well. So I could see us still wanting to participate in junior capital. I do think there's going to be an opportunity.

Nick: from a lot of PE balance sheets that were issued in 2000, 2021, 22, where junior capital will look attractive.

Geoffrey Kwan: Our next question will come from the line of Jeffrey Kwan with RBC capital markets. Hi, good morning. I just wanted to go back to the LeFolk and Connection.

Speaker Change: But I think the way to play that will be vis-a-vis the balance sheet, again, in industries where we know we have a right to compete rather than trying to scale an asset manager, and that's how we came to the decision.

Robert Blanc: Can you elaborate on, you know, what drove it where you had the comment that the synergies were maybe not as much as initially thought it and why the costs were outweighing the benefits? Yes, so again, I'm rooting for them. I said, the job and that team, they were, they were good partners. So we're going to, we own a piece of the business and I'm going to participate in the carry, but look, it turned out for us, Mez was really more of a PE product than a credit product.

Nick: Like Chris said, we've been pretty clear that we're looking at things and making sure we're prioritizing our resources, and this is one of the decisions coming out of that.

Speaker Change: Okay, no thanks for expanding on it.

Speaker Change: Just my other question was, I think it was on Investor Day, you talked about

Speaker Change: ways to kind of reduce, let's call it, the vulnerability to times when the fundraising environment is not good.

Robert Blanc: So it didn't really fit in well with the credit platform and the fundraising around the credit platform. We actually had products that were competing with each other, you know, on a return full file that were different parts of the balancing. And we looked at that and the priorities that we wanted for our distribution team. We decided that Mez as a PE business and the specific thing Mez would be a tougher thing to scale over time.

Speaker Change: And I think there were things like, you know, maybe having more funds or strategies and kind of diversifying the fundraising cycle to kind of spread it out from a time perspective.

Speaker Change: I know that the fundraising environment, you know, kind of a bit mixed at this point, but just wondering if there's kind of an update on your thoughts on, on, you know, how you think about the fundraising and the strategies that you've got in place and ones you may look to launch at some point.

Speaker Change: Fundraising will always be an important aspect for OP and ONCAP and credit.

Robert Blanc: And that's where the sort of the limited synergies we saw coming in came into play. Like I do like the junior capital business and I think I've been pretty, you know, outspoken about that. But when I think about where we could create shareholder value in junior capital, I don't think it's really on the asset management side in traditional sense of the word. I think it'll be, you know, on cap or OPE come looking at a deal that it's more appropriate for a junior capital type return versus the PE return and trying to use our balance sheet to lean in on places where we really know the industry well.

Speaker Change: But you can't time a fundraising market and where LPEs sit within a cycle of wanting to deploy capital to PE.

Speaker Change: I think it's getting better.

Speaker Change: The market, I wouldn't say it's good, right? I think it's getting better. And there's certain LPs that were over-allocated that are becoming more balanced over time. And once that balance happens, I think you'll see the fundraising market become normalized again.

Speaker Change: P.E. market, right, might be 70% of what it was in 2021 or 22.

Speaker Change: But once the LPs get the DPI back that they need, right,

Robert Blanc: So I could see us still wanting to participate in junior capital. I do think they're going to be an opportunity from a lot of PE balance sheets that were issued in 2021-22. We're junior capital will look attractive. But I think the way to play that will be these are the the balance sheet again in industries where we know we have a right to compete rather than trying to scale an asset manager and that's how we came into discussion. And like Chris said, we've been pretty clear that we're looking at things and making sure we're prioritizing our resources.

Speaker Change: And I still think PE is going to be an asset class people want to allocate to. It's just been slow as that imbalance has persisted for probably longer than people thought. But you really can't time...

Speaker Change: You know the fundraising? You deploy the fund at a different pace and you begin to fundraise. But I think what we need to do as an organization for the places where we do want to emphasize our CAHPS team and they're raising a third-party capital is being more consistent.

Geoffrey Kwan: And this is one of the decisions coming out of that. Okay. No, thanks for expanding on it. This is my other question. I think it was on the better day.

Speaker Change: consistently in the marketplace where we're fundraising every day, even days when we're not asking for money for a new fund.

Robert Blanc: You talked about ways to kind of reduce what's called the vulnerability to times when the fundraising environment is not good. And I think there were things like maybe having more fund or strategies and kind of diversifying the fundraising cycle to kind of spread it out from a time perspective. I know that the fundraising environment, you know, kind of a bit mixed at this point, but just wondering if there's kind of an updated on your thoughts on, you know, how you think about the fundraising and the strategies that you've got in place and wanting to be able to launch at some point.

Speaker Change: Okay. Thank you.

Speaker Change: Our next question will come from the line of Graham Ryding with TD Securities.

Graham Ryding: Oh, good morning. Just on the fundraising theme, so it sounds like Momentum is intact on the CLO front.

Graham Ryding: What's the status on, and apologies if I missed it, but just the bridging fund and the ONCAP fundraising, where are you at in that process?

Graham Ryding: Yeah, so on the Ops Fund, Chris, correct me if I'm wrong, I think we're at $810 or $820 million? Yeah. At ONCAP, we're at about $1 billion.

Robert Blanc: Yeah, so like fundraising will, you know, always be an important aspect for OP and on-cap and credit. But I think you can't time I kept a fundraising market and where LP sit within a cycle of wanting the point capital to pee. I think it's getting better. The market, I wouldn't say it's good, right? I think it's getting better. And there's certain LPEs that were over allocated that are becoming more balanced over time.

Graham Ryding: with, you know, three months or so left in their fundraising. John Capps.

Speaker Change: actually has a good pipeline of people working towards last close. So, I believe that's in the earnings release as well, those numbers.

Speaker Change: Okay, so you're in the last closed stages for both of those funds? Yeah. Yep. Okay.

Robert Blanc: And once that balance happens, I think you'll see the fundraising market become normalized again. The normal PE market, right, might be 70% of what it was in 2021 or 22. But once the LPEs get the DPI back that they need, right? And I still think PEs can be an asset class people want to allocate to. It's just been slow, as that imbalances persisted for probably longer than people thought. But you really can't time, you know, the fundraising, you're, you're, you're, you deploy the fund to different patients, you know, you're beginning to fundraise.

Speaker Change: And then with the $2.2 billion, I think you flagged it, you raised in the quarter, how much of that was from credit and how much was from equity?

Graham Ryding: Oh, I don't have that breakdown right at my fingertips, Graham. We can reach out. I know it's in the SIP somewhere, but we'll identify it and get back to you.

Speaker Change: Okay, and then with the Falken...

Speaker Change: divestment. Can you just flush out what sort of capital you think this is going to free up? You mentioned a little bit, but I think we've got contingent payments that no longer do commitments maybe that are freeing up and then

Robert Blanc: But I think what we need to do as an organization for the places where we do want to emphasize our, our capacity in the raising a third party capital is being more consistent, consistent lead in the marketplace where we're fundraising every day, even days when we're not asking for money for a new fund. Okay, thank you.

Speaker Change: It sounds like you expect the impact on FRE to be minimal, despite MS3 losing about $20 million in run rate fees.

Graham Ryding: Our next question will come from the line of Graham writing with PD securities. Oh, good morning, just on the fundraising themes, what sounds like momented is intact on the CLO fund. What's the status on and Paul, if I missed it, but just the the bridging fund and the on cap fundraising, were you adding on sort of in that process? Yeah, so on the office fund, Chris, correct me if I'm wrong, I think we're at 800 and 10 or 820 million.

Speaker Change: Maybe just elaborate on that, please.

Speaker Change: Sure, yeah, yeah, I think you kind of hit all the high points there with the removal of the potential contingent.

Speaker Change: or earn out payments for the 2020 acquisition. We had 15 million on our balance sheet, but the maximum amount was quite a bit more than that, that they could have earned into. And then as part of the transaction as well, we took our commitment to their new fund.

Speaker Change: down from $80 million to $40 million, so you can sort of think about that as $55 million of capital we don't need to reserve, if you will, for that business.

Graham Ryding: And on cap, we're at about a billion. With, you know, three months or so left in their fundraising, so on caps, actually has a good pipeline of people working towards last close. So we did that they were, I believe that that's in the in the earnings release as well, those numbers. Okay, so you're in the last close stages for both those funds. Yeah, yeah. Okay. And then with the 2.2 billion, I think you flag it, you raised in the quarter.

Speaker Change: Yeah, and then, you know, going back to Bobby synergy point, you know, that business had not had scaled, but had not raised a fund of sufficient scale. And so we really was operating at a break even.

Bobby: a fully loaded perspective for Onyx from an FRE perspective. So there's really no change there, I'll say in our run rate FRE as a result of the transaction. But as Bobby said, what we wanna do is really get focused on places where we think we can grow FRE meaningfully and take action on those ones.

Graham Ryding: How much of that was from credit and how much was from equity? Oh, I don't have that breakdown right at my fingertips, Graham. I know it's in the somewhere, but we'll identify it and get back to you.

Speaker Change: Okay, and how much AUM actually left your platform from the Falken divestment? Around 3 billion.

Speaker Change: around $3 billion.

Speaker Change: Okay.

Speaker Change: Okay, that's it for me. Thank you.

Speaker Change: Thank you.

Speaker Change: Our last question today will come from the line of Nik Priebe with CIBC Capital Markets.

Christopher Govan: Okay, and then with the falcon divest, can you just flush out what sort of capital you think this is going to free up? You mentioned a little bit, but I think you've got contingent payments that no longer do commitments, maybe that are freeing up, and then, you know, it sounds like you expect the the impact on FRE to be minimal despite illustrating and listening about $20 million in run rate fees, maybe just elaborate on that please.

Nik Priebe: Yeah, thanks. I thought I'd just sneak in another question or two. I don't know a lot about the Wealth Enhancement Group, but I wanted to ask whether cash sweep income might represent any share of the economics of that platform like it does for the U.S. broker dealers. And it doesn't sound like it would, but I just want to confirm because of the heightened focus on that revenue stream.

Speaker Change: I don't believe it does and I'll confirm that with Adam Coburn, but I'm pretty close to that one. I'm pretty sure it does not, but if that's the wrong answer I'll call you back.

Christopher Govan: Sure, yeah, I think you kind of hit all the high points there. With the removal of the potential contingent earn out payments for the 2020 acquisition, we had $15 million on our balance sheet, but the maximum amount was quite a bit more than that that they could have earned into. And then as part of the transaction as well, we took our commitment to their new fund down from $80 million to $40 million.

Speaker Change: Okay, no, very good. I think that's good for me. I'll leave it there. Thanks very much.

Speaker Change: Thank you.

Speaker Change: That concludes our question and answer session. I'll now turn the conference back to Bobby LeBlanc for closing remarks.

Bobby LeBlanc: Thank you for your time today. Thank you for your support. We will continue to be transparent and update you on our progress, and we're working hard towards thinking about future capital allocation. Enjoy the rest of your summer. Thank you.

Christopher Govan: So you can sort of think about that as $55 million of capital we don't need to reserve if you will for that business. Yeah, and then, you know, going back to Bobby Synergy point, you know, that business had not had scaled, but had not raised a fund of sufficient scale. And so we really was operating at a great even, you know, fully loaded perspective for ONX from an FRE perspective. So there's really no change there.

Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.

Christopher Govan: I'll say in our run rate FRE is also the transaction, but as Bobby said, what we want to do is really get focused on places where we think we can grow FRE meaningfully and take action on those ones. Okay, and how much how much AUM actually left your platform from the Falcon? Around 3 billion. Okay.

Graham Ryding: Okay, that's it for me. Thank you.

Nikolaus Priebe: Our last question today will come from the line of Nick Breep with CIBC Capital Markets. Yeah, thanks. I thought I'd just sneak in another question or two.

Nikolaus Priebe: I don't know a lot about the wealth enhancement group, but I just wanted to ask whether cash sweep income might represent any share of the economics that platform, like it does for the US broker dealers. And it doesn't sound like it would, but I just want to confirm because of the heightened focus on that revenue stream. I don't believe it does. I'll confirm that with Adam Coburn, but I'm pretty close to that one. I'm pretty sure it does not, but if that's the wrong answer, I'll call you back. Okay, no, very good. I think that's good for me. I'll leave it there. Thanks very much. Thank you.

Speaker Change: Thanks for watching!

Operator: That includes our question and answer session.

Speaker Change: Go to Beadaholique.com for all of your beading supply needs!

Speaker Change: Welcome to ONIC's second quarter 2024 conference call and webcast.

Speaker Change: During the presentation, all participants will be in listen-only mode.

Speaker Change: Afterwards, we will conduct a question and answer session with pre-qualified analysts.

Speaker Change: At that time, if you have a question, please press star 1 1 on your telephone keypad.

Speaker Change: As a reminder, this conference is being recorded.

Jill Homenuk: I will now turn the conference over to Jill Homenuk, Managing Director, Shareholder Relations and Communications at Onex.

Speaker Change: Please go ahead.

Speaker Change: 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.

Jill Homenuk: With that, I'll now turn the call over to Bobby.

Bobby LeBlanc: Good morning, everyone.

Bobby LeBlanc: I want to first welcome Sarah Wechter to Onex's Board of Directors.

Speaker Change: This morning, we announce Sarah as a new independent director.

Bobby LeBlanc: And I'm very happy that she has joined us.

Speaker Change: Sarah is the Chief Human Resources Officer at Citigroup.

Bobby LeBlanc: where she is responsible for all talent management and employee relations programs.

Bobby LeBlanc: She's a recognized leader in effective and equitable compensation structures.

Speaker Change: that are aligned with strategic objectives.

Speaker Change: Her experience supporting leaders and boards through transition periods will be of particular benefit to Onex and me in the coming years.

Speaker Change: Now on to Q2 results.

Speaker Change: Overall, Onex had a good second quarter with continued fundraising activity in priority areas and strong progress on realizations across ONCAP and Onex partners.

Speaker Change: Our investing capital per share had a 3% return in Q2, driven by gains across our private equity platforms, including a strong contribution from ONCAP.

Speaker Change: Both OP and ONCAP saw incremental progress with fundraising.

Robert Blanc: I'll now turn the conference back to Bobby Leblanc for closing remarks. Thank you for your time today. Thank you for your support. We will continue to be transparent and update your progress and we're working hard towards thinking about future capital allocation.

Speaker Change: including Onyx Commitments.

Speaker Change: Our Onyx Partners Opportunities Fund has now raised $820 million.

Speaker Change: while ONCAP V had reached commitments nearing $1 billion.

Speaker Change: Our PE teams are doing good work securing return on capital for our limited partners, which is a positive for our fundraising efforts.

Speaker Change: Last week, ONCAP completed the sale of Englobe, and recently, ONCAP IV sold its investment in Wise Meter Solutions to a single-asset continuation fund to be managed by ONCAP.

Speaker Change: This is ONCAP's first continuation vehicle and follows Onix Partners' successful continuation fund for Ryan LLC last fall.

Robert Blanc: Enjoy the rest of your summer. Thank you. .

Speaker Change: These funds will continue to play an important role in our realization strategies.

Operator: Robert Blanc, Robert Blanc, Christopher Govan, Nigel Wright, Unknown Share[inaudible] Robert Blanc, Christopher Govan, Nigel Wright, Unknown Shareholder, Robert Blanc, Christopher Govan, Nigel Wright, Robert Blanc, Christopher Govan, Nigel Wright, Unknown Shareholder, Robert Blanc, Christopher Govan, Nigel Wright,[inaudible] Christopher Govan, Nigel Wright, Christopher Govan, Nigel Wright, Christopher Govan, Nigel Wright, Christopher Govan, Nigel Wright, Robert Blanc, Christopher Govan, Nigel Wright, Robert Blanc, Robert Blanc, Christopher Govan, Nigel Wright, Unknown Share[inaudible] Robert Blanc, Christopher Govan, Nigel Wright, Unknown Shareholder, Robert Blanc, Christopher Govan, Nigel Wright, Robert Blanc, Christopher Govan, Nigel Wright, Unknown Shareholder, Robert Blanc, Christopher Govan, Nigel Wright, Robert Blanc, Christopher Govan, Nigel Wright, Unknown Shareholder, Robert Blanc, Christopher Govan, Nigel Wright, Christopher Govan, Nigel Wright, Christopher Govan, Christopher Govan, Nigel Wright, Welcome to Onyx's second quarter, 2024 conference call-in webcast. During the presentation, all participants will be in listen-only mode. Afterwards we will conduct a question-and-answer session with pre-qualified analysts. At that time, if you have a question, please press star 1-1 on your telephone keypad. As a reminder, this conference is being recorded.

Speaker Change: providing valuable ongoing fee and carry generation opportunities for audits.

Jill Homenuk: I will now turn the conference over to Jill Homenuk, managing director of Shareholder relations and communications at Onyx. Please go ahead. Thank you. Good morning, everyone, and thanks for joining us. We're broadcasting this call on our website, hosting the call today or Bobbi LaBlanc on Chief Executive Officer and Chris Govan, our Chief Financial Officer. Earlier this morning, we issued our second quarter, 2024 press release, MDNA, and Consolidated Financial Station, which are available on the shareholder section of our website and have also been filed on Cedar.

Speaker Change: Through July , ONCAP has returned approximately $390 million to investors.

Speaker Change: or 15% of the value of on-cap investments at the start of the year.

Speaker Change: The Onyx Partners team was also active in Q2.

Speaker Change: Onex Partners IV entered into an agreement to sell approximately half of its shares in PowerSchool.

Speaker Change: as part of a TakePrivate transaction, which is expected to close in the third quarter.

Speaker Change: I am also pleased to report that the sale of ASM has met all required conditions.

Jill Homenuk: Our supplemental information package is also available on our website. As a reminder, all references to dollar or amounts on this call are in US unless otherwise stated. I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors related to any forward-looking statements contained in today's presentation and remarks.

Robert Blanc: With that, I'll now turn the call over to Bobbi. Good morning, everyone. I want to first welcome Sarah Wektor to Onyx's Board of Directors. This morning, we announced Sarah as a new independent director, and I'm very happy that she has joined us. Sarah is the Chief Human Resources Officer at City Group, where she is responsible for all talent management and employee relations program. She is a recognized leader in effective and equitable compensation structures that are aligned with strategic objectives. Her experience supporting leaders and boards through transition periods will be a particular benefit to Onyx and me in the coming years.

Speaker Change: and is expected to close by the end of this month.

Speaker Change: Combined, the two transactions represent an expected return of capital of approximately $1.6 billion to Onyx Partners.

Robert Blanc: Now on to Q2 results. Overall, Onyx had a good second quarter with continued fundraising activity in priority areas and strong progress on realizations across OnCap and Onyx partners. Our investing capital per share had a 3% return in Q2 to provide gain to cross our private equity platforms, including a strong contribution from OnCap. Both OP and OnCap saw incremental progress with fund raising. Including Onyx commitments, our Onyx partners' opportunity fund has now raised $820 million, while OnCap 5 had reached commitments nearing $1 billion.

Speaker Change: and approximately $530 million to Omex.

Speaker Change: In July , the team prices 34th U.S. CLO, which was the third-largest broadly-syndicated CLO this year.

Speaker Change: and its 10th European CLO, matching its largest CLO since inception.

Robert Blanc: Our PET teams are doing good work, securing return of capital for our limited partners, which is a positive for our fund raising efforts. Last week, OnCap completed the sale of Englub, and recently OnCap 4 sold its investment in wise meter solutions to a single asset continuation fund to be managed by OnCap. This is OnCap's first continuation vehicle, and follows Onyx partner's successful continuation fund for Ryan LLC last fall. These funds will continue to play an important role in our realization strategies, providing valuable, ongoing fee and carry generation opportunities for audits.

Speaker Change: With deals priced or closed through July , we have well exceeded the growth we had targeted for all of 2024.

Speaker Change: The team is continuing to take advantage of opportunities to further grow the platform backed by strong investor demand for allocations across the entire capital structure.

Speaker Change: Moreover, this growth has been very capital-efficient from a Non-Expansion perspective.

Speaker Change: You have heard me say this before, but as we look to the future, we will continue to prioritize areas where we have a right to compete and win.

Speaker Change: Our teams in private equity have proven that they can persevere through industry cycles and continue to provide strong performance for investors.

Robert Blanc: Through July, ONCAP was returned approximately $390 million to investors, or 15% of the value of ONCAP investments at the start of the year. Giannex Partners team was also active in Q2. ONX Partners IV entered into an agreement to sell approximately half of its shares in power school, as part of a take private transaction, which is expected to close in the third quarter. I am also pleased to report that the sale of ASM has met all required conditions and is expected to close this body into this month.

Speaker Change: Recently, we made the decision to separate Falcon from Onyx.

Speaker Change: to operate as an independent entity from now on.

Speaker Change: while we believe in the team's ability to deliver investing success.

Speaker Change: The synergies across the remainder of our platforms did not materialize to the extent that the Onex resources needed to support the business outweighed the benefits.

Robert Blanc: Combined, the two transactions represent an expected return of capital of approximately $1.6 billion to ONX Partners, and approximately $530 million to ONX. Turning to credit, our COLO platform has had a stellar year so far, raising or extending a total of $7 billion of fee generating AUM through new issuances and resets of prior COLOs. In July, the team price is 34th US COLO, which was a third-largest, probably-sendicated COLO this year, and its 10th European COLO, matching its largest COLO, since inception.

Speaker Change: We will continue to maintain a minority interest in Falcon, along with future carrier interest participation.

Speaker Change: Chris will provide more details in his remarks.

Chris: One of my commitments to Shareholders and Investors Day was to ensure we are disciplined in the use of our resources, particularly our balance sheet.

Chris: Our balance sheet is a key differentiator, and we must use it wisely to drive increased shareholder value.

Speaker Change: Strategic alignment of our businesses and our balance sheet to our long-term objectives is my top priority, and you can expect to hear more from me on our plans in the coming quarters.

Robert Blanc: With deals priced or closed through July, we have well exceeded the growth we had targeted for all of 2024. The team has continued to take advantage of opportunities to further grow the platform back by strong investor demand for allocations across the entire capital structure. Moreover, this growth has been very capital efficient from a non-exbalance view perspective.

Chris: Thank you for your continued support as we work towards building a stronger Onyx for all stakeholders. With that I'll now turn it over to Chris.

Chris: Thanks, Bobby, and good morning, everyone.

Chris: Onex ended Q2 with investment capital per share of $110.35, reflecting a return of 3% in the quarter.

Chris: Investing capital per share has returned 11% over the last 12 months and 13% annually over the last 5 years.

Robert Blanc: You have heard me say this before, but as we look to the future, we will continue to prioritize areas where we have a right to compete and win. Our teams and private equity have proven that they can persevere through industry cycles and continue to provide strong performance for investors. Running our credit team are showing what can be achieved when you build long-standing investor relationships based on proactive management, innovative client solutions, and high-performing portfolios that protect investor capital.

Chris: To put that five-year return in context, the $110 of investing capital per share today compares to just $67 per share five years ago.

Speaker Change: meaningful growth in the underlying value of our shares.

Speaker Change: Onex repurchased approximately 880,000 shares in Q2, the second most active quarter since 2022.

Chris: Over the last 12 months, repurchases totaled 3.9 million shares, or almost 5% of outstanding shares, allowing us to capture $175 million of hard NAV for continuing shareholders.

Speaker Change: It was a solid quarter from an investment and realization perspective.

Speaker Change: As Bobby mentioned, Onex Partners closed out OP5 with the acquisition of Accredited in late June .

Speaker Change: On the realization front, we progressed and completed several transactions that crystallized attractive returns for our investors and will provide meaningful DPI.

Robert Blanc: One of my commitments to shareholders in an investor day was to ensure we are disciplined in the use of our resources, particularly our balance sheet. Our balance sheet is a key differentiator, and we must use it wisely to drive increased shareholder value. Strategy, strategic alignment of our businesses and our balance sheet to our long-term objectives is my top priority, and do expect to hear more from me on our plans in the coming quarters.

Speaker Change: ONCAP recently completed the sale of Englobe and the sale of WiseMeter Solutions to a continuation fund that will continue to provide management fees and carried interest going forward.

Speaker Change: At Onex Partners, we announced an agreement to sell approximately half of the PowerSchool investment.

Speaker Change: as part of a take-private transaction expected to close later in Q3.

Christopher Govan: Thank you for your continued support as we work towards building a stronger ionic for all stakeholders, with that I'll now turn it over to Chris. Thanks, Bobby, and good morning everyone. Onix ended Q2 with investing capital per share of $110.35, reflecting the return of 3% in the quarter. Investing capital per share has returned 11% over the last 12 months and 13% annually over the last 5 years. To put that 5-year returning context, the $110 of investing capital per share today compares to just $67 per share 5 years ago, meaningful growth and the underlying value of our shares.

Speaker Change: Looking at private equity, our PE portfolio produced a $121 million net gain or a 2% return in Q2.

Speaker Change: The returns were fairly broad-based across our financial services, business services, and industrial businesses.

Speaker Change: all offset slightly by health care investments.

Chris: In credit investing, our credit strategies delivered a $17 million net gain or a 1% return in Q2.

Chris: The gain here was also broad-based across our credit portfolio and generally consistent with the returns for the credit market at large.

Christopher Govan: Onix repurchased approximately 880,000 shares in Q2, the second most active quarter since 2022. Over the last 12 months, repurchases total 3.9 million shares were almost 5% about standing shares, allowing us to capture $175 million of hard NAV for continuing shareholders. It was a solid quarter from an investment and realization perspective. As Bobby mentioned, Onix partners closed out OP5 with the acquisition of accredited in late June. On the realization front, we progressed and completed several transactions that crystallized attractive returns for our investors and will provide meaningful DPI.

Chris: Now let's turn to the asset management side of the business.

Chris: Onex ended the quarter with nearly $33 billion of fee-generating AUM.

Chris: This reflects the removal of FGAUM, associated with Falcon, substantially offset by $2.2 billion of new FGAUM raised across the Credit and PE platforms in Q2.

Chris: However, recent changes in Firmwide AUM may be masking the strong growth in our structured credit business.

Chris: FGAUM and that business has grown 22% in the last 12 months, and more importantly, has been growing at an annual rate of 16% over the last four years.

Christopher Govan: OnCAP recently completed the sale of N-Globe and the sale of Y's meter solutions to a continuation fund that will continue to provide management fees and carried interest going forward. At Onix partners, we announced an agreement to sell approximately half of the power school investment as part of a trade-kate private transaction expected to close later in Q3. We ended the second quarter with cash and near cash of $1.4 billion or 16% of industrial capital with liquidity expected to increase in the near term in light of the realizations I just mentioned.

Chris: And a reminder, this growth has occurred while consistently requiring less and less of Onex's balance sheet capital.

Speaker Change: In the first half of 2024, our balance sheet exposure was reduced by $93 million, driven by recurring distributions and the partial sale of equity interests more than offsetting new investments.

Speaker Change: And over the last four years, Onex's ownership of the platform CLO Equity has decreased from 87% to 46%.

Speaker Change: With about $75 million of run rate management fees and a much less capital-intensive business model, the Structured Credit Team has done a great job building a valuable asset management franchise over the last four years.

Christopher Govan: Looking at private equity, our PE portfolio produced a $121 million net gain or a 2% return in Q2. The returns were fairly broad-based across our financial services, business services and industrial businesses, while offset slightly by healthcare investments. In credit investing, our credit strategies delivered a $17 million net gain or a 1% return in Q2. The gain here was also broad-based across our credit portfolio and generally consistent with the returns for the credit market at large.

Chris: Turning to fee-related and distributive warnings.

Chris: Second quarter total FRE was a loss of $8 million, with a $2 million loss from the asset management platform.

Speaker Change: These results improve slightly from Q1 and reflect the continued impact of cost-saving opportunities, as well as lower compensation in the quarter.

Speaker Change: As we've communicated previously, the end of OP5's commitment period in late 2023, together with the change in our private wealth business model, are FRE headwinds in 2024.

Christopher Govan: Now let's turn to the asset management side of the business. Onix ended the quarter with nearly $33 billion of fee generating AUM. This reflects the removal of FGE AUM associated with Falcon, which thankfully offset by $2.2 billion of new FGE AUM raised across the credit and PE platforms into Q2. 2. Over recent changes in firm-wide AUM, Bates may be masking the strong growth in our structured credit businesses. FGAUM in that business has grown 22% in the last 12 months and more importantly has been growing at an annual rate of 16% over the last four years.

Speaker Change: These will be partially offset as new fees come online from ONCAP5, the Onyx Partners Opportunities Fund, continuation vehicles, and the growth in structured credit.

Chris: Run rate management fees were $179 million a quarter end, down $18 million, primarily due to the Falcon separation.

Speaker Change: As Bobby mentioned, the decision to have Falcon operate independently was in the best interest of both businesses.

Bobby LeBlanc: given the prospects for synergies with the rest of the ONIX platform.

Christopher Govan: And a reminder, this growth has occurred while consistently requiring less and less of Onyx's balance sheet capital. In the first half of 2024, our balance sheet exposure was reduced by $93 million, driven by recurring distributions and the partial sale of equity interests more than offsetting new investments. And over the last four years, Onyx's ownership of the platform CLO equity has decreased from 87% to 46%. With about $75 million of run rate management and a much less capital intensive business model, the structured credit team has done a great job building a valuable asset management franchise over the last four years.

Speaker Change: In terms of F.R.E.

Bobby LeBlanc: The platform was essentially neutral to FRE over the last 12 months.

Speaker Change: The new arrangement will allow Onex to share in potential future upside through its 20% ownership of the manager.

Speaker Change: and to carry interest in the next few funds.

Speaker Change: Additionally, all contingent consideration from the acquisition of Falcon in 2020 has been waived and Onex's commitment to Falcon Fund 7 was reduced to $40 million from $80 million previously.

Chris: Looking at distributable earnings, we generated $74 million of DE in Q2.

Chris: driven by the recurring CLO distributions.

Chris: and the sale of Onex's interest in WISE as part of the ONCAP Continuation Con transaction.

Christopher Govan: Turning to fee related and distributed learnings, second quarter total FRE was a loss of $8 million with a $2 million loss from the asset management platform. These results improved slightly from Q1 and reflect the continued impact of cost saving opportunities as well as lower compensation in the quarter. As we've communicated previously, the end of OP5's commitment period in late 2023, together with the change in our private wealth business model, our FRE headwind in 2024.

Chris: Finally, an update on Onex's incentive and carry interest opportunity.

Chris: We ended Q2 with $258 million of accrued carry, which reflects $14 million generated in the quarter, primarily from Onex Partners 5 and OnCap 4.

Chris: As a reminder, Onex has over $30 billion of private equity and credit AUMs subject to carry or incentive fees.

Chris: which provides a meaningful opportunity for value creation going forward.

Chris: In summary, we had a solid quarter with momentum building across the businesses.

Christopher Govan: These will be partially offset as new fees come online from Oncap 5, the Onyx partner's opportunity fund, continuation vehicles, and the growth and structured credit. Run rate management fees were $179 million at quarter end, down 18 million, primarily due to the Falcon separation. As Bobby mentioned, the decision to have Falcon operate independently within the best interests of both businesses, given the prospects for synergies with the rest of the Onyx platform. In terms of FRE, the platform was essentially neutral to FRE over the last 12 months.

Chris: We will continue to prioritize decisions that allocate our resources where we have a right to compete and drive long-term value for our shareholders.

Speaker Change: That concludes the prepared remarks and we'll now be happy to take any questions.

Speaker Change: As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.

Speaker Change: Our first question comes from the line of Nik Priebe with CIBC Capital Markets.

Christopher Govan: The new arrangement will allow Onyx to share an potential future upside through its 20% ownership of the manager and a carried interest in the next few funds. Additionally, all contingent consideration from the acquisition of Falcon in 2020 has been waived. An Onyx's commitment to Falcon fund 7 was reduced to $40 million from $80 million previously. Looking at distributable earnings, we generated 74 million of DE in Q2, driven by the recurring CLO distributions, and the sale of Onyx's interest in Y as part of the Oncap continuation fund transaction.

Nik Priebe: Okay, thanks. So you're building a substantial amount of balance sheet liquidity here, and I'm just wondering what your priorities might look like from a capital allocation.

Speaker Change: standpoint. Does the experience with Falcon and Gluskin Chef reduce appetite for M&A at the Onex Corp level? And I also noticed that Buyback stepped up in the quarter and I'm just wondering if the intent would be to keep that going.

Speaker Change: Yeah. Hi, Nick. It's Bobby.

Bobby LeBlanc: capital allocation and how to use our wonderful balance sheet. Believe me, it's top of mind in my thinking, and I hope to be able to come back to

Speaker Change: All shareholders in the coming quarters to better articulate the plans around that obviously share buybacks

Christopher Govan: Finally, an update on Onyx's incentive and carried interest opportunity. We ended Q2 with $258 million of the crude carry, which reflects $14 million generated in the quarter. Primarily from Onyx Partners 5 and Oncap 4. As a reminder, Onyx has over 30 billion dollars of private equity and credit AUM's subject to carry on incentives, which provides a meaningful opportunity for value creation going forward.

Speaker Change: will continue to be a top priority for us. I don't think you'll see us slowing those down anytime soon.

Speaker Change: And on your question about Falcon...

Chris: are important. I don't I don't I don't see us prioritizing buying other asset managers in the near term. I think about capital allocation like that much I can tell you but as for the other plans we're working on I think I just I need a bit of time to be able to come back to shareholders.

Speaker Change: Understood. Okay, that's helpful. And then this question is a bit premature, and I'm aware of that, but wondering what you might need to see in order to consider reinitiating fundraising for your larger cap buyout strategy. Is that a decision that's made in consultation with some of your larger LPs that you would expect to re-up? Or do you simply have more work to do regarding

Speaker Change: Return of capital first.

Speaker Change: Yeah, so I think there's a couple of things. Firstly, you know, that opportunities fund should allow us to do, you know, four or five deals or so.

Nikolaus Priebe: Our first question comes in line of Nick Preet with CIBC Capital Markets. Okay, thanks. So you're building a substantial amount of balance sheet liquidity here and just wondering what your priorities might look like from a capital allocation standpoint. Does the experience with Falcon and Gillespie and Chef reduce appetite for M&A at the Onyx Corp level? And I also notice a buyback stepped up in the quarter and I'm just wondering if the intent would be to keep that going.

Speaker Change: depending on the use of CoInvest. And importantly, Nick, the performance of Onyx Partners 5, right? And that's from an IRR and a return of capital perspective.

Speaker Change: will be an important milestone to go into Fund 6, and it's one where our LPs are obviously rooting for us. Everybody at OP5 wants that to be a good fund. But I do think we're going to need some more DPI.

Nikolaus Priebe: Hi Nick, it's Bobby. Like, capital allocation and how to use our wonderful balance sheet, believe me, is top of mine in my thinking and I hope to be able to come back to all shareholders in the coming quarters to better articulate the plans around that. Obviously, share buybacks will continue to be a top priority for us so I don't, you'll see us slowing those down anytime soon. And on your question about Falcon, look, M&A on the asset management side is, you know, is more difficult, um, M&A than we're kind of used to, we're in our PE funds, like, they're, they're people businesses, they're culture fit and things like that are important.

Speaker Change: Got it, okay. And then last one for me, you've got a few relatively mature investments in the PNC insurance space.

Speaker Change: Just wondering what your read or your internal thinking is around where we're at in that.

Speaker Change: cycle. It just kind of feels like the hard market cycle is pretty long in the tooth, you know, new money rates are dropping, which has been a tailwind for the carriers anyway. What's your view on that sector? And I'm just wondering how that might inform, you know, a hold or sell decision on some of those investments.

Speaker Change: Yeah, so what I'm seeing, I'm on the boards of those particular companies, Russ, so what I'm seeing is rates are still increasing.

Nikolaus Priebe: I don't, I don't, I don't see us prioritizing buying other asset managers in the near term when I think about capital allocation, I, how much I can tell you, but as for the other plans for working on, I think I just, I need a bit of time to be able to come back to to shareholders. Understood. Okay, that's helpful.

Speaker Change: They're increasing at a decreasing rate, and it really varies by reinsurance or insurance, and it's even, you know, subsectors underneath of those two things, right?

Robert Blanc: Um, and then this question is a bit premature and I'm aware of that, but I'm wondering what you might need to see in order to consider, uh, reinitiating fundraising for your larger cap, biode strategy. Is that a decision that's made in consultation with some of your larger LPs that you would expect to re-up or do you simply have more work to do regarding, um, return of capital first? Yeah, so I think there's a, there's a couple of things.

Speaker Change: You know, on the balance sheet side of that industry, where you're able to invest assets alongside your liabilities.

Speaker Change: There's still a tailwind there, Nik, because, you know, given that the duration of liability for a company like Combex, for example, is, you know, three to four years, dollars that were in the ground to support liabilities, even though rates are ticking down a little bit right now, are still materially higher than when those dollars got put to work.

Robert Blanc: Firstly, you know, we, that opportunity fund should allow us to do, you know, four or five deals or so, um, depending on the use of co-invest. And importantly, the, the performance of onex partners five, right? And that's from a, uh, an IRR and a return of capital perspective will be an important milestone to go into fund six and that's one where our LPs are obviously rooting for us. I don't think I want that to be a good fund, but I do think we're going to need some more DPI and a bit more seasoning, which is the whole point of the out fund is to, to have the next 18 months or so to do that, um, show those results and then, and then begin fundraising again on, uh, an unnormal kind of fund structure for OPs. I got it. Okay.

Nik Priebe: But you're right, the rate increase is beginning to slow, but it's still growing, it's just slowing a bit across the board.

Speaker Change: and look at rate as the easiest form of revenue you can get, but what I really focus on, because you can't control rate, is are we winning, you know, new volume that we like the risk pricing on, and there I think we're doing a nice job.

Speaker Change: Okay, that's a great color. I'll pass the line for now. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question will come from the line of Geoffrey Kwan with RBC Capital Markets.

Geoffrey Kwan: Hi, good morning. I just wanted to go back to the Falcon transaction.

Robert Blanc: And then last one for me, you've got a few relatively mature investments in the P&C insurance space. Just wondering what your read or your internal thinking is around where we're at in that cycle. I just kind of feel like the hard market cycle is pretty long in the tooth. You know, new money rates are dropping, which has been a tailwind for the carriers anyway. What's your view in that sector? And I'm just wondering how that might inform a holder cell decision on some of those investments?

Geoffrey Kwan: Can you elaborate on, you know, what drove it where you had the comment that the synergies were maybe not as much as you initially thought it and why the costs were outweighing the benefits?

Speaker Change: Yes, so again

Speaker Change: I'm rooting for them. I believe John and that team, they were a good part of it. We own a piece of the business.

Speaker Change: are going to participate in the carry, but.

Speaker Change: But it turned out for us Mez was really more of a PE product than a credit product, right? So it didn't

Robert Blanc: Yeah, so what I'm seeing on the boards of those particular companies, Russell, what I'm seeing is rates are still increasing. They're increasing at a decreasing rate. And it really varies by read insurance or insurance. And it's even, you know, subsectors underneath of those two things, right? You know, on the balance sheet side of that industry, where you're able to invest assets alongside your liabilities, there's still a tailwind there, Nick, because, you know, given that the duration of liabilities for a company like Convex, for example, is, you know, three to four years.

Speaker Change: really fit in well with the credit platform and the fundraising around the credit platform. We actually had products that were competing with each other.

Speaker Change: you know, on a return profile that were different parts.

Speaker Change: When we looked at that and the priorities that we wanted for our distribution team,

Mez: We decided that Mez, as a PE business, and that's a specific thing, Mez.

Speaker Change: would be a tougher thing to scale over time. And that's where the sort of the limited energies we saw coming in came into play.

Speaker Change: I do like the junior capital business and I think I've been pretty, you know, outspoken about that. But when I think about...

Robert Blanc: Dollars that were in the ground to support liabilities, even though rates are ticking down a little bit right now, are still materially higher than when those dollars got put to work, right? So, but you're right, that the rate increase is beginning to slow, but it's still growing, it's just slowing a bit across the board. And looking at rate is the easiest form of revenue you can get. But I really focus on it because you can't control. Rate is, are we winning new volume that we like the risk pricing on in there? I think we're doing a nice job. Okay, that's a great color.

Speaker Change: where we could create shareholder value in junior capital. I don't think it's really on the asset management side in traditional sense of the word. I think it'll be, you know, ONCAP or OP looking at a deal that is more appropriate for a junior capital type return versus a PE return.

Speaker Change: and trying to use our balance sheet to lean in on places where we really know the industry.

Speaker Change: Well, so I could see us.

Speaker Change: still wanting to participate in Junior Capital, I do think there's going to be an opportunity.

Robert Blanc: I'll pass the line for now. Thank you.

Speaker Change: from a lot of PE balance sheets that were issued in 2000, 2021, 22, where junior capital will look attractive.

Robert Blanc: Our next question will come from the line of Jeffrey Kwan with RBC Capital Markets. Hi, good morning. I just wanted to go back to the LeFolk and Transliction. Can you elaborate on, you know, what drove it where he had the comment that the synergies were maybe not as much as initially thought it and why the costs were outweighing the benefits? Yeah, so again, I'm rooting for them. I said, deep job and that team there, they were they were good part of stuff.

Speaker Change: Like Chris said, we've been pretty clear that we're looking at things and making sure we're prioritizing our resources, and this is one of the decisions coming out of that.

Chris: Okay, no thanks for expanding on it.

Speaker Change: That's my other question was, I think it was yesterday you talked about

Speaker Change: ways to kind of reduce, let's call it the vulnerability to times when the fundraising environment is not good. And I think there were things like, you know, maybe having more funds or strategies and kind of diversifying the fundraising cycle to kind of spread it out from a time perspective.

Robert Blanc: We're going to we own a piece of the business and are going to participate in the carry. But look, it turned out for us, Mez was really more of a PE product than a credit product rate. So it didn't really fit in well with the credit platform and the fundraising around the credit platform. We actually had products that were competing with each other, you know, on a return profile that were different parts of the balancing.

Speaker Change: I know that the fundraising environment, you know, kind of a bit mixed at this point, but just wondering if there's kind of an updated on your thoughts on on, you know, how you think about the fundraising and the strategies that you've got in place and ones you may look to launch at some point.

Robert Blanc: We looked at that and the priorities that we wanted for our distribution team, we decided that Mez as a PE business and the specific thing Mez would be a tougher thing to scale over time. And that's where the sort of the limited energies we saw coming in came into play. Like, I do like the junior capital business and I think I've been pretty, you know, outspoken about that. But when I think about where we could create shareholder value in junior capital, I don't think it's really on the asset management side in traditional sense of the word.

Speaker Change: Yes, look, I like...

Speaker Change: Fundraising will always be an important aspect for OP and ONCAP and credit.

Speaker Change: But you can't time a fundraising market and where LPs sit within a cycle of wanting to deploy capital to PE. I think it's getting better.

Chris: The market, I wouldn't say it's good, right? I think it's getting better and there's certain LPs that were over allocated that are becoming more balanced over time and once that balance happens

Robert Blanc: I think it'll be, you know, on cap or OP, looking at a deal that is more appropriate for a junior capital type return versus a PE return and trying to use our balance sheet to lean in on places where we really know the industry well. So I could see us still wanting to put district junior capital. I do think they're going to be an opportunity from a lot of PE balance sheets that were issued in 2021-22.

Chris: I think you'll see the fundraising market become normalized again.

Chris: P.E. market, right, might be 70% of what it was in 2021 or 22.

Chris: But once the LPs get the DPI back that they need, right,

Chris: And I still think PE is going to be an asset class people want to allocate to. It's just been slow as that imbalance has persisted for probably longer than people thought. But you really can't time...

Robert Blanc: We're junior capital will look attractive. But I think the way to play that will be these are the balance sheet again in industries where we know we have a right to compete rather than trying to scale an asset manager. And that's how we came into this session. And we, like, Chris, we've been pretty clear that we're, you know, we're looking at things and making sure we're prioritizing our resources. And this is one of the decisions coming out of that.

Speaker Change: You know, the fundraising, you deploy the fund at a different pace and you begin to fundraise. But I think what we need to do as an organization for the places where we do want to emphasize our CAHPS team in the raising of third-party capital is being more consistent.

Chris: consistently in the marketplace where we're fundraising every day, even days when we're not asking for money for a new fund.

Robert Blanc: Okay, no thanks for expanding on it. Just my other question was, I think with that investor day, you talked about ways to kind of reduce what's called the vulnerability to times when the fundraising environment is not good. And I think there were things like maybe having more funds or strategies and kind of diversifying the fundraising cycle to kind of spread it out from a time perspective. I know that the fundraising environment, you know, kind of a bit mixed at this point, but just wondering if there's kind of an updated on your thoughts on, you know, how you think about the fundraising and the strategies that you've got in place and wanting to be able to launch at some point.

Speaker Change: Okay, thank you.

Chris: Our next question will come from the line of Graham Ryding with TD Securities.

Graham Ryding: Oh, good morning. Just on the fundraising theme, so it sounds like Momentum is intact on the CLO front.

Graham Ryding: What's the status on, and apologies if I missed it, but just the bridging fund and the ONCAP fundraising, where are you at in that process?

Speaker Change: Yeah, so on the Ops Fund, Chris, correct me if I'm wrong, I think we're at $810 or $820 million. At ONCAP, we're at about $1 billion, with, you know, three months or so left in their fundraising. So ONCAP's...

Robert Blanc: Yeah, so like fundraising will, you know, always be an important aspect for O.D, and on-cap and credit. But I think you can't time like a fundraising market and where LPE sit within a cycle of wanting to deploy capital to P.E. I think it's getting better. The market, I wouldn't say it's good, right? I think it's getting better. And there's certain LPEs that were overallocated that are becoming more balanced over time. And once that balance happens, I think you'll see the fundraising market become normalized again.

Speaker Change: actually has a good pipeline of people working towards last close. So, I believe that's in the earnings release as well, those numbers.

Chris: Okay, so you're in the last close stages for both of those funds? Yeah. Yep. Okay.

Robert Blanc: A normal P.E, market, right, might be 70% of what it was in 2021 or 22. But once the LPEs get the DPI back that they need, right? And I still think P.E.s can be an asset class people want to allocate to. It's just been slow as that imbalance has persisted for probably longer than people thought. But you really can't time, you know, the fundraising, you're deploying the fund to different pays and you begin to fundraise.

Speaker Change: And then with the $2.2 billion, I think you flagged it, you raised in the quarter, how much of that was from credit and how much was from equity?

Chris: Oh, I don't have that breakdown right at my fingertips, Graham. We can reach out. I know it's in the SIP somewhere, but we'll identify it and get back to you.

Speaker Change: Okay, and then with the Falken.

Speaker Change: divestment. Can you just flush out what sort of capital you think this is going to free up? You mentioned a little bit, but I think you've got contingent payments that no longer do commitments maybe that are freeing up and then

Robert Blanc: But I think what we need to do is an organization for the places where we do want to emphasize our capacity in the raising of third-party capital is being more consistent, consistently in the marketplace where we're fundraising every day, even days when we're not asking for money for a new fund.

Speaker Change: You know, it sounds like you expect the impact on FRE to be minimal, despite, I'm estimating you're losing about $28 million in run rate fees.

Operator: Okay, thank you.

Graham Ryding: Our next question will come from the line of Graham writing with PD Securities. Oh, I good morning. Just on the fundraising themes, what sounds like momentum is intact on the CLO fund. What's the status on and polishing if I missed it, but just the the bridging fund and the on-cap fundraising where you had an instrument in that process? Yeah, so on the ops fund, Chris, correct me if I'm wrong, I think we're 810 or 820 million.

Speaker Change: Maybe just elaborate on that, please.

Speaker Change: Sure, yeah, yeah, I think you kind of hit all the high points there with the removal of the potential contingent.

Graham Ryding: And on-cap, we're at about a billion, with three months or so left in their fund raising. So on-caps actually has a good pipeline of people working towards last close. So I believe that's in the in the earnings release as well, those numbers. Okay, so you're in the last close stages for both those funds? Yeah, yeah. Okay, and then with the 2.2 billion, I think you flag it, you raised in the quarter.

Speaker Change: Our earn out payments for the 2020 acquisition, we had 15 million on our balance sheet, but the maximum amount was quite a bit more than that, that they could have earned into. And then as part of the transaction as well, we took our commitment to their new fund.

Speaker Change: Down from $80 million to $40 million, so you can sort of think about that as $55 million of capital we don't need to reserve, if you will, for that business.

Speaker Change: a fully loaded perspective for Onyx from an FRE perspective. So there's really no change there. I'll say in our run rate, FRE is a result of the transaction. But as Bobby said, what we want to do is really get focused on places where we think we can grow FRE meaningfully and take action on those ones.

Speaker Change: Okay, and how much AUM actually left your platform from the Falken divestment?

Speaker Change: around $3 billion.

Speaker Change: Okay.

Speaker Change: Okay, that's it for me. Thank you.

Speaker Change: Thank you.

Christopher Govan: Okay, and then with the Falcon divest, can you just flush out what sort of capital you think this is going to free up? You mentioned a little bit, but I think you've got contingent payments that no longer do commitments, maybe that are freeing up, and then, you know, it sounds like we expect the impact on FRE to be minimal despite the, like, illustrating and missing about 20 million and run rate fees, maybe just elaborate on that, please.

Speaker Change: Our last question today will come from the line of Nik Priebe with CIBC Capital Markets.

Nik Priebe: Yeah, thanks. I thought I'd just sneak in another question or two.

Nik Priebe: I don't know a lot about the Wealth Enhancement Group, but I just, I wanted to ask whether cash sweep income might represent any share of the economics of that platform like it does for...

Speaker Change: the U.S. broker-dealers, and it doesn't sound like it would, but I just want to confirm because of the heightened focus on that revenue stream.

Speaker Change: I don't believe it does, and I'll confirm that with Adam Coburn, but I'm pretty close to that one. I'm pretty sure it does not, but if that's the wrong answer, I'll call you back.

Christopher Govan: Sure, yeah, I think you kind of hit all the high points there. With the removal of the potential contingent earn out payments for the 2020 acquisition, we had 15 million on our balance sheet, but the maximum amount was quite a bit more than that that they could have earned into. And then as part of the transaction as well, we took our commitment to their new fund down from 80 million to 40 million.

Speaker Change: Okay. No, very good. I think that's good for me. I'll leave it there. Thanks very much.

Speaker Change: Thank you.

Speaker Change: That concludes our question and answer session. I'll now turn the conference back to Bobby LeBlanc for closing remarks.

Christopher Govan: So you can sort of think about that as 55 million of capital we don't need to reserve, if you will, for that business. Yeah, and then, you know, going back to Bobby Synergy point, you know, that business had not had scale, but had not raised a fund of sufficient scale. And so we really was operating at a great even, you know, fully loaded perspective for onexperiment FRE perspective. So there's really no change there.

Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.

Christopher Govan: I'll say in our run rate FRE is also the transaction, but as Bobby said, what we want to do is really get focused on places where we think we can grow FRE, meaningfully, and take action on those ones. Okay, and how much, how much AUM actually left your platform from the Falcon? Around 3 billion. Okay.

Graham Ryding: Okay, that's it for me. Thank you.

Nikolaus Priebe: Our last question today will come from the line of Nick Briep with CIBC capital markets. Yeah, thanks. I thought I'd just sneak in another question or two. I don't know a lot about the wealth enhancement group, but I just wanted to ask whether cash sweep income might represent any share of the economics that platform, like it does for the US broker dealers, and it doesn't sound like it would, but I just want to confirm because of the heightened focus on that revenue stream. I don't believe it does. I'll confirm that with Adam Coburn, but I'm pretty close to that one. I'm pretty sure it doesn't happen if that's the wrong answer. I'll call you back. Okay. No, very good.

Nikolaus Priebe: I think that's good for me. I'll leave it there. Thanks very much.

Operator: Thank you.

Robert Blanc: That includes our question and answer session. I'll now turn the conference back to Bobby LeBlanc for closing remarks. Thank you for your time today. Thank you for your support. We will continue to be transparent and up to hit your progress and we're working hard towards thinking about future capital allocation.

Robert Blanc: Enjoy the rest of your summer. Thank you.

Q2 2024 Onex Corp Earnings Call

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