First State, the international arm of Australia’s Colonial First State Global Asset Management, has closed its European Diversified Infrastructure Fund (EDIF) on its hard cap of €2 billion.
The overall amount was reached by the firm through raising €721 million of additional commitments for the Series Five of the vehicle over a period of six months.
Launched in 2007 as an open-ended vehicle, EDIF then shifted to a hybrid structure in 2009, raising capital from institutional investors in successive “series”. The penultimate of them, closed in September 2013, contributed an extra kitty of more than €600 million to EDIF. This brought the fund’s overall size to €1.3 billion.
EDIF’s limited partner (LP) base, primarily composed of pension funds and life insurance companies from Europe, Asia, Australia, Middle East and North America, counts 49 institutions.
Philippe Taillardat, co-head of infrastructure investment management at First State, told Infrastructure Investor that 26 LPs committed capital to Series Five. Twelve of them were institutions already invested in EDIF’s previous series, while 14 were investors new to the fund.
More than half of the vehicle’s LPs are European, Taillardat said, with a large contingent based in either Germany or the UK. He added that EDIF’s investor base includes six pension funds from infrastructure-related companies.
Series Five has about €600 million left to invest, which Taillardat reckons will be achieved with the next 12 to 18 months. He expects First State to launch a successor to EDIF – the exact structure and target size of which have yet to be determined – during the first quarter of 2016.
Taillardat said the fund would stick to its current strategy of investing in diversified sectors of the mid-market, a segment he saw as less prone to competitive pressures than large-scale, core infrastructure. He noted EDIF was not part of the consortia in the race to acquire the Swedish grid of power company Fortum, a deal he reckoned would see fierce competition.
First State, along with Canada’s Borealis and two Finnish pension funds, was part of the consortium that bought Fortum’s Finnish electricity distribution business for €2.55 billion in December 2013. Observing that discussions between involved parties had started as early as in 2011, Taillardat said the Swedish deal was both much larger and seeing more potential contenders than this previous transaction.
He attributed the success of EDIF’s fundraising to the vehicle’s sequential structure and governance, which he said allowed prospective investors to take a view on the fund’s strategy, existing assets and performance prior to parting with their money – something LPs don’t have the opportunity to do before committing to a typical blind-pool, private equity-style vehicle.
“Investors can assess how we work, what investment we make and how we structure them. In addition, this sequential structure means we have to remain true to our initial strategy series after series, as otherwise we would probably struggle to raise money for the next one. As such there is a natural alignment of interest.”
He argued investors had also been convinced by EDIF’s performance, which he said was in the “double digits” and comprised more than 50 percent of recurrent yield.
With Series Four fully invested, he said, more than 70 percent of the fund has now been deployed – pending the financial close of the Helsingør-Helsingborg ferry route acquisition, announced earlier this month and due to complete on 28 January.
EDIF’s portfolio also includes Anglian Water and Electricity North West in the UK, Digita in Finland, Ferngas and EVG in Germany and Reganosa in Spain.