AXA closes its biggest ever secondaries fund

European investment group AXA Private Equity has closed a $2.9 billion global secondaries fund. The fund is almost three times bigger than its previous offering, and will look to complete up to 18 deals over the next three years.

AXA Private Equity, a division of the French insurer’s investment management arm, has closed its biggest ever secondaries fund with $2.9 billion (€2.2 billion) of commitments, as it looks to capitalise on the growing demand created by the global private equity boom.

AXA Secondary Fund IV was able to hit its hard cap of $2.9 billion within just four months due to strong investor demand, well above its original target of $2.2 billion to $2.5 billion.

Vincent Gombault, head of fund of funds at AXA, told PEO that the firm’s existing limited partners had been keen for AXA to “increase drastically” the size of the new fund. He said the firm had taken advantage of strong demand to bring in a small number of new LPs.

For its latest fund, AXA’s parent company is contributing just 19 percent, down from 25 percent last time. 54 percent of the capital came from pension funds and 20 percent from government agencies, with the rest from banks and other financial institutions. Geographically, just over half of the LP base is European, with 34 percent from North America. About 13 percent of the fund came from Asia and Middle Eastern investors – substantially more than for the previous fund.

The fund has already deployed 10 percent of its capital in two deals: a €134 million acquisition of two stakes in Italian mid-market private equity funds, Sofipa Equity Fund and Sofipa Equity Fund II, and a $132.5 million commitment to an unnamed US buyout firm.

AXA will continue to focus mainly on Europe and North America – the third fund was split equally between the two – but Gombault said Fund IV would also do more deals in the nascent Asian market. “The primary market in Asia is still developing, so the secondary market will come later. But we’re totally ready to take advantage when it does.” AXA has a team of six in Singapore looking at opportunities.

AXA will target between 12 and 18 deals over the next three years, with deal sizes typically between $100 and $300 million. Gombault said the firm would continue to steer clear of auctions. “We’ll try to be creative and avoid auctions. We prefer to do a deal with the seller and with the team, so we can avoid the competition and the cost of intermediation, which can be between 3 and 5 percent. That’s good for the seller and good for us.”

Pricing remains competitive, Gombault said. “We need to very cautious because deals are quite expensive. But we never think about buying at a discount – we focus on high quality assets, because even if we end up paying a premium for those assets, we’ll still get our money back even in the event of a downturn in the market. Our strategy is to avoid all bad assets, regardless of pricing.”

This could mean avoiding deals for some time if necessary. “I’ve been very clear to my investors: if we need to wait a year or eighteen months because there are no good opportunities or because prices are too high, then we will do so and won’t spend a single dollar during that time,” Gombault said.

The new fund is a massive boost to the funds under management at AXA Private Equity. The group, which is run by chief executive Donique Senequier, is now one of Europe’s biggest private equity investors, managing funds with assets of more than €11 billion. It operates through a range of strategies, from fund of funds to secondaries to principal investment.

AXA’s record fund is nonetheless smaller than the biggest secondaries funds in the market. In April Coller Capital closed a $4.5 billion global secondaries fund, while Goldman Sachs’ asset management division closed a $3 billion fund in March. Today rival Greenpark Capital closed a €730 million ($983 million) fund, which is dedicated purely to investments in Europe.