German private markets group YIELCO Investments will launch its third fund of funds this summer after the closing of its second generation on €310 million.
The firm said in a statement that YIELCO Infrastruktur II closed at the tail end of last year, with the closing figure a little above its €300 million target. The final close is the same size as its maiden infrastructure vehicle, which reached a €310 million close in January 2017, and the company envisages something similar for its third instalment of the series.
“We might go a bit up due to the appetite we see but would certainly then stop at the hard-cap of €400 million,” Uwe Fleischhauer, founding partner at YIELCO, told Infrastructure Investor. “We like to stick to our strategy focusing on mid-market managers, building up a portfolio of 10-12 funds of €20-30 million to each fund.”
YIELCO Infrastruktur II, which is predominantly supported by German and Swiss investors, has deployed about €270 million across 10 funds, the firm said. Some of the fund’s investments include the €9 billion EQT Infrastructure IV vehicle, the €6,1 billion Ardian Infrastructure Fund V, Actis’s $1.2 billion Long Life Infrastructure Fund and the recently closed €1.1 billion Asterion Industrial Infra Fund I.
It targets a net internal rate of return of 8-10 percent, although Fleischhauer said the first fund is performing above this level and is also exceeding expectations on exit multiples. He added that YIELCO’s fund of funds strategy is offering a learning curve for newer investors in the asset class.
“Infrastructure as an asset class is increasing in complexity,” Fleischhauer explained. “There are more emerging managers, spin-offs, sector or country-specific fund approaches. We are looking for smaller, mid-market managers and building up a diversified portfolio.”
In addition to renewables, he also said YIELCO is seeing increased shifts to telecoms and social infrastructure, although some managers are returning to market earlier than expected.
As well as the commitments to YIELCO Infrastruktur II, the firm also agreed two additional separate mandates, adding a further €300 million to the funds already raised for the vehicle.
It also announced the opening of a new office this week in Switzerland, which will be headed by Marc Schulz, who according to his LinkedIn profile, joined the firm in 2019.