CapMan: Growth is built with familiar steps

Automatic translation: Originally published in Finnish on March 12th, 2025 at 9:20 AM EET. Please note that the automatic translation currently only covers the text visible here and may contain errors. You can provide feedback on the translations here.

There were no changes to CapMan's financial targets or the timeline for achieving them at the Capital Markets Day, and the company is still aiming for EUR 10 billion in AUM by the end of 2027 (Q4'24: 6.1 BEUR). Otherwise, the event was very unsurprising, which, of course, is not a bad thing in the long-term asset management business. Thus, the strategy will continue to focus on the profitable scaling of the asset management business in the coming years. Scalability is particularly sought from personnel expenses, which should grow more slowly than business income as CapMan's investment areas are in a more mature phase. As there were no significant changes to the strategy, we encourage investors to continue to familiarize themselves with our current extensive report. 

Growth is mainly sought through new, larger funds

The growth during the target period is mainly intended to be achieved through new fund launches, the most significant of which are Nordic Real Estate IV (target size 750 MEUR), which is in the fundraising phase, the new European Forest Fund IV, and the third infrastructure fund, Nordic Infrastructure III. A new buyout fund, on the other hand, is not planned. Nor is the Private Equity investment area expected to grow significantly in other respects. This is a clear change from the previous strategy update, in which private equity investment programs were seen as a clear growth area. However, several funds in the Private Equity investment area are reaching the end of their life cycle in the coming years, so this outgoing capital must be compensated with fixed income funds (Nest Capital), Special Situations funds investing in special situations, and CapMan Wealth's capital investment programs. Also, acquisitions are, as usual, on the agenda, although their significance is quite modest in the company's outlines.

All in all, the company's management still seemed very confident about the long-term demand outlook for key asset classes (real estate, infra, forest). In recent years, fundraising has been challenging, and based on the comments, an improvement is expected from the end of the year. We note that over 60% of CapMan's assets under management come from outside the Nordic countries (as much as 80% in real estate), so the company is not dependent on, for example, Finnish real estate demand. 

However, we think that the growth target for the strategy period is very ambitious, especially when considering that the weight of acquisitions is not particularly high in the company's plans. For this reason, our own estimates are somewhat below the company's growth targets. We have also not included any potential acquisitions in our estimates. 

CapMan's other financial targets are:

• Combined growth of the management and service business, excluding carried interest income, averaging over 15% per annum
• Return on equity of over 20% 
• Equity ratio of over 50 percent
• Sustainable and growing distribution of assets over time

Thus, there was no clarification on the dividend outlook either, but CapMan still aims for a dividend that increases over time, however incorporating business needs and liquidity. The previously announced allocation of excess capital on the balance sheet between growth investments, dividend distribution and debt reduction was reiterated. On the other hand, there is no reason to expect a significant release of capital from the company's large investment portfolio, as the implementation of the strategy requires investments in CapMan's own funds also in the future. The CEO elaborated on this further in our interview. However, the importance of the investment portfolio will gradually decrease as the scale of the business grows. 

The Capital Markets Day offered a look behind the earnings figures

Although there were no significant changes to the strategy, CapMan released several interesting data points on the development of its business. Firstly, the returns on CapMan's own funds have remained strong, as 90% of the closed-end funds in the value creation phase are currently above the hurdle rate set for the funds. In addition, all of the company's real estate, infra and forest funds have performed better than the median of the peer funds. Based on these data points, CapMan's funds have thus remained competitive, although the performance has not been exceptionally strong in peer comparison. Of course, it should be noted that the peer group of funds is partly incomplete, as reporting is voluntary. Thus, companies can only report the returns of the funds they want, which may raise the median return higher than the actual one. Ultimately, CapMan's competitiveness will be seen in the success of fundraising in the coming years, as several significant fund launches fall within the target period. 

However, the outlook for performance fees has declined along with the real estate market. This was also indicated by the growth target for performance fees presented at the CMD, which set the average of the last two years at 6 MEUR as the starting level. However, it would be important to record substantial carried interest income in the coming years, as the company has stated its ability to generate good returns with its value creation-focused funds even in a weaker cycle. In addition, several significant funds are moving into the profit-sharing phase. In recent years, carried interest income has not materialized on the expected schedule due to the gloomy exit market. 

In addition to fund returns, special attention should be paid to personnel. Employees are at the core of the asset management business, as ultimately the investment teams determine the fund management company's competitiveness through returns. CapMan's eNPS figure, which measures employee satisfaction, has been at a good level in recent years (2023–2024 average of 50), which should strengthen employee retention. All in all, the company's strategy is thus progressing in line with the guidelines drawn up in 2022, although the challenges in the fundraising market have slowed growth.