‘Co-investment critical for Fund III’

AXA PE head of infrastructure Mathias Burghardt talks about Fund III’s €300m co-investment programme.

 AXA Private Equity (AXA PE) head of infrastructure Marthias Bughardt has credited co-investment as a “critical” component of the firm’s recent fundraising, which has seen it amass a total of €1.75 billion for investments in core infrastructure. 

“Co-investment was instrumental in the fundraising” of AXA PE’s third infrastructure fund, which raised €1.45 billion, alongside €300 million for co-investing, the AXA PE infrastructure boss told Infrastructure Investor, following today’s official announcement of the fund’s close.  

“Investors want to go direct, but many have found it difficult, with the exception of large limited partners (LPs), so they are happy to team up with general partners (GPs). We want to offer co-investment to all types of investors,” Burghardt added.  

Explaining how AXA PE will manage Fund III’s co-investment element, Burghardt said: “We’ve set up an informal club of 10 plus co-investors with whom we keep in close contact. The way it works is Fund III underwrites the deals and then sells on stakes to LPs. But before doing a transaction, we can already gauge the appetite for co-investment.”  

The AXA PE infrastructure head is keen to stress, however, that the €300 million co-investment programme is very different from a managed account set-up. “It’s very important for the success of the fund that there is a full alignment of interest between all of its investors – whether or not they are doing co-investment.”  

No more than half of the €700 million committed to four deals so far has come from equity directly committed to the main fund thanks to its co-investment strategy. 

In addition to a greater emphasis on co-investment, Burghardt spoke about Fund III’s changed LP composition, which saw German investors emerge as the most numerous investor group in the French insurer’s third infrastructure effort.  

“Germany is the new giant in infrastructure investing – both on the pensions and insurance side,” Burghardt said. “The Germans want to commit the fruits of the country’s economic boom into long-term investments.” 

Asian investors are Fund III’s second most numerous group – what Burghardt called a “second good surprise” – with commitments coming not just from traditional infrastructure strongholds like Korea and Japan, but also from south-east Asia.  

AXA PE currently has more than €3 billion of infrastructure assets under management across three infrastructure funds. Since 2006, the infrastructure team has invested in 18 assets in the core infrastructure space, particularly in the energy and transportation sectors.