EQT expects its long-duration strategies for private equity and infrastructure and its larger regional fund for Asia to contribute another €12 billion to its AUM.
Speaking on the firm’s first-half update call on Thursday, chief executive Christian Sinding noted that the firm’s longer-hold strategies will “constitute about €10 billion in AUM over time”, while its Asia strategy will seek around €2 billion, in line with its growth strategy.
“This is early days but we currently expect that the longer-hold strategy in private capital and the potential infrastructure core strategy over time will constitute about €10 billion of AUM in total.”
Initial plans about the firm’s long-term strategy were revealed in October last year, with more information disclosed during the call on Thursday. Target businesses will be in sectors suited to long-term ownership such as essential services and will focus on the same geographies as the firm’s existing strategies. These are also expected to generate “slightly lower returns with lower risk, with strong value creation over the long term”. Both in private capital and core infrastructure, the vehicles “will have a longer holding period with impact at the core and a focus on generating on social and environmental impact at scale”, Sinding said.
The Asia-Pacific strategy meanwhile has been “slower than anticipated partly due to the pandemic”, Sinding noted. The firm opened an office in Tokyo early this year and teamed up with Japan Industrial Partners to help source investment opportunities. It launched its Sydney outpost early last year.
“Growing from $800 million to [the] $2 billion range is actually quite a significant step,” Sinding said. “We’re building stone upon stone and investing to really build the platform in a high-quality way; would rather spend a bit of time doing that than take a giant leap.”
The Scandinavian firm saw strong investment and exit activity in the first six months of the year, with new deals totalling €7.7 billion, up from €1.9 billion in H1 2020. Exit values reached €9.9 billion, from a mere €200 million in the equivalent period last year.
While it’s a “particularly strong time for private equity”, the firm does not expect favourable market conditions to continue, Sinding said.
“The combination of very strong dealflow, of exit possibilities through all channels – IPO, strategic sales, family offices, long-term funds…and stock markets that are highly valued. I don’t think these kinds of market conditions will continue, and therefore you also see us doing a number of deals, a number of exits and investing our funds at the more rapid end of the spectrum.”
EQT’s AUM in the first-half stood at €71.3 billion, almost twice its AUM last year. This was mainly driven by the firm’s combination with Exeter Property Group with AUM of €10.4 billion, as well as capital raised for EQT IX (€15.6 billion) and EQT Infrastructure V (€15.1 billion).