Exclusive: First State caps Euro Fund II at €2.5bn

The vehicle will be raised in three series targeting €700m each.

First State Investments (First State), the European unit of Australia’s Colonial First State Global Asset Management (CFSGAM), is about to start raising a successor to its European Diversified Infrastructure Fund (EDIF) with a target of €2 billion.

Like EDIF1, the vehicle will be raised in successive stages, which First State refers to as ‘series’. The firm plans to launch three fundraising rounds for EDIF2, however, as opposed to five for its debut European fund. Each series will have a target of €700 million and a maximum size of €900 million.

Philippe Taillardat, a partner at First State, told Infrastructure Investor that the firm aimed to reach a first close on Series One in April and a final close in October. Based on conversations with investors held towards the end of last year, he expects existing limited partners to provide at least half of Series One’s commitments.

Launched in 2007 as an open-ended vehicle, EDIF then shifted to a hybrid structure in 2009. The fund’s Series Five, closed in January 2015 on €721 million, allowed it to reach its hard-cap of €2 billion.

Series Four and Five saw EDIF expand its investor base in Asia (including Japan, Korea and Malaysia), the Middle East and Canada. The fund was not licenced in the US at the time, but Taillardat hinted that this may change for Series Two of EDIF2 onwards.

EDIF’s LP base includes several pension funds of infrastructure companies, such as air traffic control, utility and telecom groups. A known member of this club is the Transport for London Pension Fund.

Each Series of EDIF2 has a three-year investment period, though Taillardat argued that First State has historically been able to deploy two-thirds of its capital within 10 months, and the whole of it within 12 to 18 months.

EDIF2’s prospective pipeline includes regulated utility grids, in particular gas networks, as well as storage assets and airports. The fund targets investment returns of between 8 and 15 percent, a slightly wider range than EDIF’s 10 to 15 percent.