Letter from Paris: Coming of age

 AXA Private Equity is a long-standing fixture of the European private equity scene. With $25 billion under management, the firm channels money into the asset class through both direct investments – from venture capital to leveraged buyouts – and its funds of funds platform, through which it makes primary fund commitments and acquires secondary positions.
 
Under the stewardship of chairman and chief executive officer Dominique Senequier, who founded the group in 1996, it has diversified its offering to include mezzanine and, since 2005, infrastructure investments.
 
To date, the firm has raised two infrastructure funds; its €200 million Fund I, closed in 2005, and its most recent fund closed in 2008 on €1.1 billion. AXA Insurance, the firm’s parent, invested a total of around €750 million into these two vehicles, which between them have so far deployed €900 million in 13 European infrastructure assets.
 
Now for fund III
As exclusively revealed by InfrastructureInvestor.com in March, AXA is now planning to step its infrastructure programme up a notch. Market sources say the firm is in the pre-marketing stage for a third fund, looking to raise from €1 billion to €1.5 billion. Fund III would, say sources, continue the firm’s existing strategy of investing in a number of sectors within the core infrastructure space: water – where the firm has already made a number of investments; waste; motorways; and energy. The firm invests in assets in France, Italy, Germany and the UK.
 
On a bitterly cold afternoon in March, Infrastructure Investor dropped in on the firm’s elegant Parisian offices, set back from the chic boutiques of the Place Vendôme, and found Mathias Burghardt, managing director and head of infrastructure, in buoyant mood.

AXA Private Equity’s business is arranged around four “pillars”: buyouts, funds of funds, mezzanine and infrastructure. The latter of these, says Burghardt, has grown in stature as a result of the financial crisis. “When you have a crisis of such magnitude you see the merits of pure infrastructure,” he says, adding that the group has seen a significant increase in interest from existing investors in the asset class.

The inflation-proof nature of the asset class and its stable, predictable yields make it very attractive in this environment, says Burghardt: “It has proved its resilience.”
 
Burghardt heads a team of 12 professionals across four European offices. During the course of 2009, the team deployed €250 million in three investments: Italian renewables business TRE & Partners; Italian natural gas distributer Enel Rete Gas; and French wind farm group Kallista, which it acquired from Babcock & Brown International Group. In February this year, the firm was part of a consortium that – after almost eight months of delays – closed on France’s first rail PPP: the €1 billion GSM-R rail communications project.

“During the bubble a lot of people had a lot of money to deploy,” says Burghardt. Now that a lot of the larger players have pulled in their horns, he continues, it is AXA’s time to “go strongly” into the market.

“Debt was a commodity [during the bubble]. Anyone could get the same leverage. Today is different; banks only lend to clients,” says Burghardt, who cites both the familiarity of the AXA brand and the firm’s “resilient” track record as giving banks the confidence to lend to its projects. Accessing debt was the difference between investment success and failure last year, he says: “We got the deals we did in 2009 because we were able to secure the debt.”

With AXA’s uptick in infrastructure activity – and what is hoped to be another €1 billion-plus under management – headcount will grow. Burghardt wants to add around six professionals to his team in the near future, with recruitment focusing on the Frankfurt, Milan and London offices. Watch this space.

For more on infrastructure fundraising, please turn to this month’s in-depth coverage starting on p.16