Dear Shareholders,
Firstly, allow me to extend my best wishes, on behalf of the Wendel team, to you, your families and all those close to you for a happy and prosperous new year.
As you have seen, and despite a very uncertain economic and financial context, 2023 was a significant, very active year for Wendel in many ways.
In a year’s time, through fundamental changes in our model, we created and defined the basis for a business development strategy focused on value creation and on our intention to provide an attractive and recurrent return to shareholders. We have also created the conditions necessary to implement that strategy, thanks to a highly-talented team, a very sound financial structure, as well as your support and the trust you have placed in us.
Wendel has significant advantages for growing and strengthening its new asset management platform. We know how to grant managers the autonomy they need, and we have a long-term outlook combined with strong financial capacity. For that matter, we believe that the time is right to enter this new business, which is undergoing a transformation. Fundraising has become more difficult, a new generation of managers is taking the reins, and general partners want the support of long-term investors. Of course, we will do so in a highly disciplined manner, by seeking out the best managers in the asset classes we have chosen, while paying close attention to the caliber of LPs and the quality of the portfolio. We aim to reach €150 million in FRE between now and 2027. In the medium term, this business will constitute a base of sound, recurrent income and a very significant new source of value creation.
In permanent capital, meanwhile, where Wendel has a high-quality portfolio, our objective is to generate double-digit IRR. By gradually redeploying the portfolio, we should be able to concentrate in the future on majority shareholdings in unlisted companies, with a long-term investment horizon, and to focus on assets generating an IRR of 15%.
We are confident that this new business model, based on two sources of value creation and disciplined cost management, will enable us to offer our shareholders a stream of more predictable, more recurrent and increasing dividends. Accordingly, we will distribute most of the income stream generated by our asset management activity and around 20% of the expected value creation from our investment activity.
By 2024, your dividend will have risen by around 20%, representing an implicit yield of around 4.8% on the year-end share price. Our ambition is to further increase our dividend in the medium term, thanks to the growing strength of our third-party asset management business.
Over the next few months, we will implement this strategy in our disciplined fashion. We will start by integrating IK Partners into Wendel. We will meanwhile focus on creating value by working on our portfolio and by ramping up our second line of business so as to rapidly achieve our performance objectives.
In conclusion, let me thank you once again for the long-standing confidence and trust you have placed in Wendel and reiterate our commitment to successfully pursue our objectives.
Our model is now based on two distinct and complementary lines of business. The first of these is permanent capital, the historical expertise that has made Wendel a key market participant, committed to the companies in its portfolio. The second is a new, thirdparty, private asset management business that Wendel inaugurated with the acquisition of IK Partners. We detailed this strategy to investors and to the financial markets during our Investor Day last December 12.
Laurent Mignon, Group CEO of Wendel