Sustainable Finance And Alternative Assets Will Spur Expansion

Key Takeaways

• Structural inflows and global partnerships are expected to drive accelerated AUM growth, higher fee income, and enhanced profitability through diversified, higher-margin strategies.
  
• Strong ESG focus and balance sheet evolution position the firm to capitalize on sustainable finance trends and generate resilient, uncorrelated profits.
  
• Slower fee growth, persistent cost pressures, increased competition, and a narrowing revenue base threaten earnings stability and future profitability amidst ongoing real estate challenges.

Catalysts

An alternative asset management group with €46.1 billion of assets under management (as of 30 June 2024).

• Analyst consensus expects fundraising to continue accelerating, but this likely underestimates the scale of structural inflows from both private wealth and institutional investors globally as private markets allocations in pensions, insurance, and high-net-worth portfolios are poised to reach record highs, potentially resulting in structurally higher AUM growth and a compounding effect on management fee revenues.
  
• While consensus recognizes higher fee-related earnings from platform diversification, it is overlooking the powerful operating leverage embedded in mature flagship strategies, increasing scale in thematic funds, and a shift toward both higher-margin private equity and real asset strategies, all of which should drive disproportionately stronger net margin expansion and a step-change in long-term profitability.
  
• Tikehau's uniquely proactive stance in ESG, decarbonization, and regenerative agriculture positions it to capture outsize share of the burgeoning demand for sustainable finance across Europe and Asia; as regulation, public policy, and investor preference accelerate sustainable investing, this should fuel above-market revenue growth and recurring performance fee income.
  
• The firm's evolving use of its balance sheet-with less emphasis on seeding and more on strategic, high-velocity direct and ecosystem investments-will increase portfolio turnover and generate a much higher run-rate of realized investment income and net profits, creating a second, uncorrelated profit engine that supports EPS expansion even through market cycles.
  
• Tikehau's deep international partnerships (such as with Schroders, Amova, and regional banks) allow for early participation in emerging market wealth creation and cross-border capital flows, further accelerating global AUM growth, raising management fees, and giving access to less competitive, higher-yielding investment opportunities that boost both top-line and bottom-line growth.

Tikehau Capital Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Tikehau Capital compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Tikehau Capital's revenue will grow by 22.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 30.2% today to 44.3% in 3 years time.
• The bullish analysts expect earnings to reach €497.1 million (and earnings per share of €5.9) by about August 2028, up from €184.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 12.7x on those 2028 earnings, down from 18.1x today. This future PE is lower than the current PE for the FR Capital Markets industry at 19.9x.
• Analysts expect the number of shares outstanding to grow by 0.29% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.2%, as per the Simply Wall St company report.

Tikehau Capital Future Earnings Per Share Growth

Risks

• Tikehau's FRE (Fee Related Earnings) margin declined to 30% in the first half of 2025, falling short of internal targets and indicating cost pressures and slower operating leverage, which could negatively impact net margins and bottom-line earnings if persistent.
  
• The text highlights ongoing challenges in real estate, where weak inflows and limited recovery from a multi-year downturn suggest that Tikehau's real estate engine remains subdued, reducing overall AUM growth and constraining management fee revenue from this segment.
  
• A strategy shift away from seeding new funds with the balance sheet toward more direct and ecosystem investments may increase portfolio concentration and risk, potentially introducing volatility in net income and weakening the diversification of revenue streams.
  
• Tikehau faces increased competition in the private wealth and alternative asset space and acknowledges "pressure from our peers," especially global players and larger asset managers; this trend threatens to compress management and performance fees and puts future profitability at risk.
  
• Reliance on secular themes like decarbonization, defense, and digitalization exposes Tikehau to shifts in regulation, slower-than-expected capital inflows due to demographic headwinds, and the impacts of higher, persistent interest rates, all of which could contract fundraising, reduce fee income, and undermine earnings sustainability over the long term.

Valuation

• The assumed bullish price target for Tikehau Capital is €28.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Tikehau Capital's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €28.0, and the most bearish reporting a price target of just €19.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €1.1 billion, earnings will come to €497.1 million, and it would be trading on a PE ratio of 12.7x, assuming you use a discount rate of 9.2%.
  
• Given the current share price of €19.42, the bullish analyst price target of €28.0 is 30.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.