Fund Falls Short of Target Amid Challenging Market Conditions
EQT has successfully closed its first Active Core Infrastructure fund with €2.9 billion in commitments, falling short of its initial target of €5 billion. The Stockholm-based investment group launched this fund in March 2022, aiming to acquire assets that offer stable cash yields, inflation protection, and low volatility while pursuing long-term value creation opportunities.
Market Challenges Impact Fundraising
Alex Greenbaum, EQT partner and head of Active Core Infrastructure, noted that the missed target was partly due to the timing of the fund’s launch, coinciding with the US Federal Reserve’s decision to raise interest rates. He acknowledged that the broader fundraising environment in 2023 posed additional challenges.
“Given the fundraising climate, we are excited to have raised over €3 billion. This gives us significant firepower in the current market,” Greenbaum told Infrastructure Investor. He also pointed out that many peers with open-end funds have struggled to raise capital during this period. “The amount we’ve raised is among the largest in the market right now,” he added.
Co-Investment Capital and Changing Investor Sentiment
The 25-year fund also secured €300 million in co-investment capital. Greenbaum believes that as interest rates reach their peak or begin to decline in some regions, investor sentiment may shift back towards core investments.
“There is a pivot for many investors back towards core strategies,” he explained. “As the rate environment changes, investors see it as an excellent opportunity to invest and capture these higher rates before the cycle turns again.” He contrasted this with the previous period of rising rates when investors required more certainty about future rates.
Greenbaum emphasized that “core” should be viewed as a risk profile rather than a specific internal rate of return (IRR). “Core does not imply a specific IRR; it’s primarily about the risk profile,” he stated. “As investors gain more clarity on long-term interest rates, they will price core, core-plus, and value-add investments accordingly.”
While Greenbaum did not disclose the targeted IRR for the fund, he expressed confidence that “double-digit equity returns are definitely achievable” within the core risk profile.
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