Equitix, the UK-based social infrastructure manager, has just held a first close for its second infrastructure fund – Equitix Fund II – after three months on the fundraising trail.
The fund reached a first close on £70 million (€82 million, $111 million), putting it close to the halfway mark on the way to its intended target size of £150 million. Like Equitix’s first, £104 million fund the new vehicle will target UK public-private partnership (PPP) projects, known locally as private finance initiatives (PFI), backed by stable government revenues. It has already deployed around £25 million for its first investment, acquiring a stake in Birmingham Highways PFI.
Richard Anthony, the chief executive of Evercore Partners' Private Funds Group, the advisor and placement agent for Equitix Fund II, believes the fund’s relatively speedy fundraising is testament not only to an improved fundraising market, but also to Equitix’s conservative investment strategy, which he claims investors find particularly appealing in the current market.
“Equitix is focusing primarily on social infrastructure projects with a conservative risk-profile,” Anthony says. Furthermore, Equitix targets projects “that are under the radar of bigger developers and funds”, allowing the infrastructure investor to carve its own niche: “Many of these projects are between £50 million and £200 million and as such require smaller equity cheques. In the primary market, Equitix has little competition for the projects it targets,” he adds.
The local nature of many of these projects also explains why Equitix has received most of its commitments for its second infrastructure fund from local pension funds. But at a time when limited partners (LPs) are becoming ever pickier with the vehicles they invest in, Anthony also believes Equitix Fund II has positioned itself well:
“A lot of other funds tie management fees to inflation but Equitix is charging a flat 1.25 percent management fee not linked to inflation. In addition, carry is charged against yield, as opposed to rate of return, with a hurdle rate of 7.5 percent. Equitix also capped carry at 20 percent, so even though PFI projects, toward the end of their lifecycles, tend to produce very high yields, carried interest stops once the yield gets to 20 percent.”
Equitix Fund II is on track to hold a second close in March with fundraising to be wrapped up in autumn.