ANNUAL REPORT
eQ in 2023 3
Key Figures 4
eQ in Brief 5
CEO’s Review 6
Business Areas 9
Asset Management 10
Corporate Finance 13
Investments 14
Sustainability 15
Report by the Board of Directors 33
Consolidated Key Ratios 41
Contents
Financial Statements 2023 44
Auditor’s Report 75
Corporate Governance 78
Corporate Governance Statement 79
Remuneration Report 84
Board of Directors 87
Management Team 89
Performace Fees of Private Equity Funds 90
Information about Capital Adequancy 92
Information to the Shareholders 95
2eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
Key Figures
NET REVENUE
.
MEUR
: . MEUR
EARNINGS PER SHARE
.
EUR
. EUR
COST/INCOME RATIO
.%
.%
DIVIDEND PER SHARE
.
. EUR
MARKET CAP
.
MEUR
,. MEUR
NUMBER OF SHAREHOLDERS
,
,
NUMBER OF PERSONNEL
ASSETS UNDER MANAGEMENT
WITHOUT REPORTING SERVICES
.
EUR BILLION
. EUR BN
OPERATING PROFIT
.
MEUR
. MEUR
AND IN TOTAL
.
EUR BILLION
. EUR BN
4
eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
eQ in Brief
eQ is a Finnish group of companies that
concentrates on asset management and corporate
finance operations. The share of the parent
company eQ Plc is listed on Nasdaq Helsinki.
The Group offers its clients services related to
mutual-, real estate- and private equity funds,
discretionary asset management, investment
insurance policies, and a large range of mutual
funds offered by international partners. The asset
management clients are institutional investors and
private individuals. In addition, Advium Corporate
Finance Ltd, which is part of the Group, offers
services related to mergers and acquisitions, real
estate transactions and equity capital markets.
80
70
60
50
40
30
20
10
0
2023202220212020201920182017201620152014
NET REVENUE DEVELOPMENT,
MEUR
Asset Management Corporate Finance
Investments Group Administration Group
24.4
30.5
35.4
40.7
45.4
50.6
56.7
78.9
77.8
70.9
60
50
40
30
20
10
0
2023202220212020201920182017201620152014
OPERATING PROFIT DEVELOPMENT,
MEUR
Asset Management Corporate Finance
Investments Group Administration Group
9.0
13.2
16.2
20.1
22.4
26.3
30.8
47.7
45.7
39.7
5eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
CEO’S REVIEW
eQ’s result for the financial period fell in the partially challenging operating
environment. The net revenue of the Group during the financial period
was EUR 70.9 million and the operating profit EUR 39.7 million. Operating
profit fell by 13 per cent from the previous year. The profit for the year was
EUR 31.5 million and the earnings per share were 78 cents. The Group’s cost/
income ratio was at an excellent level of 43.8 per cent.
Last year, eQ Asset Management’s net revenue decreased by 7 per cent and
operating profit by 10 per cent to EUR 41.4 million. eQ Asset Management’s
management fees grew but performance fees fell by 50 per cent. The cost/
income ratio of the Asset Management segment continued stood at
37.9 per cent. The net revenue of Advium fell by 27 per cent from the year
before to EUR 3.9 million. Operating profit was EUR 0.7 million, compared with
the previous year’s EUR 1.7 million. The business operations of the Investments
segment consist of private equity and real estate fund investments made from
eQ Group’s own balance sheet. The result of the Investments segment fell
from the year 2021. The operating profit of the segment was EUR -0.6 million,
compared with previous year’s EUR 0.7 million.
eQ Asset Management is the leading institutional asset manager
in Finland
According to a survey conducted by SFR last year, eQ is the second most used
institutional asset manager in Finland. 64 per cent of the respondents say
they use eQ’s services. Best of all, investors assessed the quality of eQ Asset
Management to be the best in the market for already the fifth time in a row.
The overall assessment of quality consists of several different criteria, and
clients interviewed find the return of investments to be the most important
among these. In the 2023 study, eQ Asset Management was ranked number
one in no fewer than 7 categories of 9. SFR interviews the approximately 100
largest Finnish institutional investors annually.
As for traditional interest and equity investments, the returns of client
portfolios in 2023 were excellent. Of the funds that eQ manages itself, 69 per
cent gave a better return that its benchmark index, and during a three-year
period the corresponding figure was also 69. The returns of Private Equity funds
were slightly positive as well. The returns of the real estate funds were negative
eQ Group’s result fell in
the partially challenging
operating environment
Investors assessed the quality
of eQ Asset Management to be
the best in the market for
already the fifth time in a row.
6eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
for the first time, on the other hand, due to an increase of the yields resulting
from the strong rise in interest rates.
Interest in alternative investment products has grown for several years both
in Finland and globally. Investors aim to raise anticipated returns and diversify
their investment portfolios. eQ Asset Management is a clear market leader as
a provider of alternative investment products in Finland.
In eQ’s Private Equity asset management, we raised a total of more than
300 million dollars in private equity and VC funds in 2023. We raise assets
in funds investing in Europe and the United States in alternating years, and
2023 was a year for the US. The first closing of the new eQ PE XV US private
equity fund was held at the end of January 2023 at USD 177 million. The final
closing of the fund was made in December at USD 283 million. The eQ PE XV
US Fund makes investments in private equity funds that invest in unlisted
small and mid-sized companies in Northern America. The eQ PE XV US Fund
is already the fifth fund that makes investments in private equity funds in
Northern America, and altogether we have raised investment commitments
of about one billion dollars to the US funds. In October we also made the first
closing in the eQ VC II Fund, which makes Venture Capital investments and is
the second fund in size at USD 20 million. At the turn of the year, the assets
managed by Private Equity funds and asset management programmes totalled
EUR 4.0 billion.
The eQ Care Fund was the first Finnish open real estate fund. It was established
in 2012, and in 2021 its name was changed to eQ Community Properties
Fund. The eQ Commercial Properties Fund was founded in 2014. In 2020 we
expanded real estate investing to housing by establishing the eQ Residential
Fund, and in 2022 we founded the second residential fund – eQ Residential II.
At the turn of the year, eQ’s real estate funds managed EUR 2.3 billion in assets
and the combined real estate assets of the funds totalled EUR 3.4 billion.
We invest in sustainability
Sustainability has for years been one of the cornerstones of our operations and
part of all our business operations. We act in a responsible and sustainable
manner as eQ Group and integrate sustainability systematically and in practice
to eQ Asset Management’s investment operations and Advium’s Corporate
Finance operations.
Even though eQ Group, based on its size and operations, is not obliged to draw
up a sustainability report required by the Finnish Accounting Act, we have
decided to voluntarily report on sustainability to investors and other major
stakeholders, now already for the seventh time. The sustainability report is part
of our Annual Report.
Responsible investment is not a separate consideration for eQ, as ESG is part
of all investment operations. In practice this means that sustainability is
continuously and systematically integrated in the selection, monitoring and
reporting of investees in all investment areas of eQ. Every portfolio manager and
analyst must know how to analyse and take responsibility and sustainability
into account in their investment decisions. eQ’s Director for Responsible
Investment is responsible for the co-ordination and development.
We draw up an ESG report on all equity, fixed-income and real estate
investments twice a year and on Private Equity investments once a year.
We regularly report to PRI (UN’s Principles for Responsible Investment) on
sustainability in our investment processes, our concrete engagement activities
in the investees and our development initiatives regarding the responsible
investment approach. The ratings we have received are excellent.
Sustainability has for years been
one of the cornerstones of our
operations and part of all our
business operations.
Mikko Koskimies
CEO
7eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders
We are committed to continuously developing sustainability in co-operation
with our clients. We wish to offer our clients concrete solutions that support
their needs even with regard to sustainability, now and in future.
Advium’s operating environment slowed down
In 2023, the value of corporate acquisitions fell world-wide from the previous
year, but a small pickup could be observed at the end of the quarter. This
was affected by the rise in share prices late in the year and expectations of
a lowering of the interest rate level in 2024. Activity in Finnish real estate
transactions slowed down considerably in 2023, leading to a decline of more
than 60 per cent in overall transaction volume compared with the previous
year. The most significant factor contributing to a slowdown in activity is
the rapid rise in interest rate levels and weaker availability of financing.
In 2023, Advium acted as advisor in four M&A acquisitions completed:
a Fairness Opinion to Musti Group, advising Aspo Plc regarding a minority
investment by OP Suomi Infra, sale of shares in Caverion, and advising Otava
on a mandatory public offer. In real estate transactions, Advium also acted as
advisor for the global fund manager Schroders which sold an office building
in central Turku.
Group balance sheet and dividend proposal
The Group has no interest-bearing loans, and its balance sheet is very strong.
The profit of the Group was 78 cents per share in 2023. Due to the strong
balance sheet and capital adequacy, the Board of Directors have decided to
propose to the Annual General Meeting that EUR 0.80 per share be paid as
a dividend. It is proposed that the dividend be paid in two instalments.
Thanks to our clients, personnel and partners
I wish to thank all our clients for excellent co-operation and the trust you have
shown in our services.
High-quality customer service requires extremely professional, committed and
motivated personnel. The results of the biannual survey on well-being at work
were excellent in 2023 as well. The survey deals with employees’ commitment,
well-being at work, satisfaction with the work community and the work of
the supervisor. On a scale from 1 to 5, employees assessed job satisfaction and
well-being at work at 4.4, which is an excellent level. According to the survey,
employees are happy to recommend eQ Group as an employer. The eNPS value
that describes this was very high at 44 (on a scale from -100 to +100, where
0 to +20 is good, over 20 excellent and over 40 a top result). I want to thank
the entire personnel for their excellent achievements in 2023.
In addition to the clients and personnel, my warm thanks go to all our partners
for good co-operation.
Outlook for 2024
The asset management market in Finland has grown strongly, and eQ’s growth
has outpaced the market. We estimate that the long-term outlook for growth
in the asset management market and for eQ in Finland is still good.
For eQ’s real estate funds, 2023 was a difficult year due to an increase of
the yields resulting from a strong rise in the interest rate level. As yields rose,
values of properties clearly declined. Also, net subscriptions in funds were
negative. The limited availability of real estate financing also contributed
to a significant decrease in real estate transactions. With regard to the real
estate funds, we expect 2024 to be a challenging year, although the long-
term outlook for growth is good. Sales of eQ’s Private Equity products has
continued to be strong, and the desire of Finnish asset management clients to
increase Private Equity allocations in their portfolios will continue to support
the growth of eQ’s Private Equity products. We also anticipate a growth in
performance fees from 2025 onwards, due to the transfer of several Private
Equity products to a performance fee stage. eQ’s competitive position in
traditional asset management products and discretionary asset management
is good thanks to excellent returns on investments. We believe that traditional
asset management has great potential for growth in future years, considering
however its characteristic short-term variation according to market conditions.
Mikko Koskimies
CEO
8
eQ in 2023 Business Areas Sustainability Report by the Board of Directors Financial Statement Corporate Governance To the Shareholders