How EQT’s €20bn Fund X target stacks up

The Swedish giant’s latest vehicle will add to the roughly $150bn being sought by firms including Carlyle, Thoma Bravo and Advent.

EQT is returning to the fundraising circuit with its largest-ever fund: it is seeking €20 billion for its 10th flagship vehicle in what’s expected to be another massive year of capital raising.

The firm’s latest fundraising target is roughly 35 percent larger than what it sought for its predecessor. EQT IX held a final close on €15.6 billion in April last year – surpassing its €15 billion hard-cap – and is already between 75-80 percent deployed as of mid-January, according to a statement.

The firm is in fundraising mode for EQT X and – depending on investment pace – expects a first close in the first half of the year and a final close in 2023, chief executive Christian Sinding said on a call accompanying the firm’s year-end 2021 report on Wednesday.

Sinding noted he is confident that the trend of companies staying private longer will continue. “Looking overall at private markets, we expect the market to continue to grow at 10 percent annually until 2030. This means more than $10 trillion of capital coming into our industry.”

He added that the trend is driven by investors ramping up their allocations to private markets, as well as increased appetite from retail investors and the private wealth channel.

There are at least five other firms each looking to raise upwards of $20 billion for their latest vehicles, including CarlyleThoma Bravo and Advent International. Vista Equity Partners is seeking up to $24 billion for its eighth vehicle, which will target 18 to 25 investments with an average cheque size of $750 million, The Wall Street Journal reported. Blackstone, which raised the largest fund in PE history with its $26 billion Blackstone Capital Partners VIII in 2019, could target as much as $30 billion this year for its successor, according to Bloomberg.

If these funds materialise as planned, that would add at least $150 billion to the fundraising total in 2022. Preliminary data from PEI’s Fundraising Report 2021 shows that some 3,394 funds are targeting at least $930 billion as of mid-January.

Investments by EQT funds reached €20.6 billion as of end-2021, a 72 percent increase on the €12 billion in 2020, according to the firm’s year-end report. More than €9 billion-worth of co-investments were recorded last year, up from €2 billion to €3 billion the year before. Exits stood at €30.7 billion, nearly 10 times bigger than the €3.2 billion recorded in the prior year.

These include: Igenomix, a diagnostics company, which generated a return of 3.7x MOIC and a 70 percent IRR on its sale to Vitrolife; and Adamo, a Spanish broadband services company, which generated a return of 9.2x MOIC and a 75 percent IRR on exit, according to a source familiar with the deals.

EQT’s AUM rose to €73.4 billion as of end-December 2021, from €52.5 billion in 2020, driven primarily by its acquisition of Exeter Property Group and commitments in its €15.7 billion EQT Infrastructure V fund. Private capital assets, including the firm’s venture, growth, private equity, public value and future business lines, stood at €33.9 billion.

Along with EQT X, the firm is in the market with its Growth, Future and Ventures III funds with targets of €2 billion, €4 billion and €900 million, respectively.

Private wealth and Asia build-out

EQT expects the private wealth channel to account for a larger share of its capital-raising efforts than in prior years, growing from under 10 percent in the last five-year period to the mid-teens in the coming years, Caspar Callerström, COO at EQT, told PEI.

“It’s still a small portion versus institutional capital, but private equity in general is a very long-term game. We won’t see quick changes from one year to another in this area. This will be a long-term shift for our industry which will continue into decades,” he said.

“In the end, you want to have a customer base that is diversified and robust.”

Per Franzen, global head of private capital’s advisory teams at EQT, added that broadening its private wealth channel access is “critical for the firm to continue to grow and develop new products”. Its most recent acquisition is that of Amsterdam-based venture firm Life Sciences Partners in November.

Sinding also noted during the results call that the firm is looking at a number of smaller specialty investors, either in certain geographies or themes, as the firm continues to look at filling the white space over time in its business lines.

EQT has strengthened in position in Asia in the last two years with offices and new hires in Tokyo, Seoul and Sydney, yet it has decided to put its next Asia-dedicated fundraise on hold.

Callerström said: “Given that it’s a super busy fundraising year, we’ve said that we will have to put that decision a bit on hold and raise the other products.

“We continue to invest in our APAC platform – because we are going to be there – exactly what shape or form, we do not know exactly.”

The firm is investing its 2016-vintage, $737 million EQT Mid Market Asia III. It revealed in July last year that it anticipates a larger regional fund for Asia that could contribute about €2 billion to its AUM, PEI previously reported.

Callerström also noted that with the firm’s increased focus on staffing up in Japan and South Korea, China would over time account for a smaller share of total deals in Asia-Pacific.

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