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Infrastructure funds reside by the maxim “construct it and they’re going to come”. Personal capital methods have adopted go well with, with restricted companions searching for to construct infrastructure positions. CVC, the non-public fairness fund group, is the most recent to assemble plans. It has acquired a majority stake in Dutch infrastructure fund DIF Capital Partners for about €1bn.
There are good causes for CVC’s choice. Infrastructure is a hotspot for deal making. Property beneath administration within the sector expanded at a 17.8 per cent compound annual charge within the decade to 2022, in line with Preqin information. This exceeds different non-public funding methods. Traders respect diversification in broader portfolios. Returns from infrastructure don’t are likely to correlate with bonds and different equities.
CVC was beforehand centered on extra typical buyout methods, for which it has a superb file. It was in a position to elevate €26bn this 12 months for the most important buyout fund ever. However it’s shifting in the direction of a multi-strategy strategy in a bid to extend AUM. In 2021, it acquired Glendower Capital, a specialist in buying and selling second-hand stakes in non-public fairness funds.
These diversification strikes can all be tied to CVC’s plan to listing its shares. The world’s largest non-public capital asset gatherers, akin to Blackstone and KKR, commerce publicly and provide a spread of methods and merchandise. Shopping for DIF, which has €16bn of AUM, not solely provides one other technique however helps to bulk up CVC’s personal €140bn AUM.
Ought to it proceed with an inventory, CVC can anticipate a excessive valuation. In 2021, it offered a minority stake to Blue Owl’s Dyal Capital group at a valuation of €15bn. Admittedly, this was in a halcyon interval for personal capital, however it might preserve this if it may broaden its AUM.
DIF might be left to function as independently as doable. CVC is not going to absolutely personal the group till 2028. That independence, which has labored nicely with Glendower, is probably going to assist CVC preserve a superb file.
That file means CVC’s fundraising success stands out. Rivals have struggled. They’ve more and more been pressured to supply payment reductions. Within the first half of the 12 months, fundraising was down greater than a 3rd on the 12 months earlier than, in line with Bain.
CVC understands that natural development of AUM has limits. Erecting the scaffolding for added methods is smart.