Newly public EQT readies for next mega-fund

Less than two years after closing its eighth flagship fund with more than €10 billion in commitments and barely a month after going public, European private equity power EQT is already preparing to launch a new flagship vehicle in the coming months, the firm announced on Tuesday.

The news came as part of the Swedish investor's first financial update since conducting its IPO in Stockholm near the end of September, a well-received debut followed by a first-day pop that valued EQT at about 85.7 billion Swedish kronor (around $8.9 billion at today's conversion rate). In the weeks since, the firm's shares have gained further ground, ending Tuesday up nearly 3% to result in a market cap of more than 92 billion kronor.

EQT closed its current flagship private equity fund in February 2018 with total commitments of nearly €10.8 billion (about $11.9 billion at today's conversion rate). Traditionally, it might have taken the firm four to five years to spend all that cash. But today, that timeline has been chopped nearly in half. EQT's Fund VIII is already between 65% and 70% invested, which means the firm will launch its ninth fund in 2020.

If a recession comes, the pace of deploying capital could slow down. In the current economic environment, though, CFO Kim Henriksson said in a call with analysts that the firm's rapid spending has resulted in an acceleration of the rate of fundraising.

"We feel that the two-to-three year [timeline] is in line with what we're currently doing," he said.

EQT won't release its full financials until the end of the year, but the firm did offer several other glimpses into post-IPO life. EQT has invested €10.1 billion so far this year, a major increase from the €5.5 billion it deployed in the first nine months of 2018—an example of the sort of spending that's leading the firm back onto the fundraising trail so quickly. Exit value, meanwhile, has stayed steadier, rising from €4.6 billion in the first nine months of 2018 to €5.6 billion so far this year.

The firm said that its three latest flagship private equity funds are all performing as planned. EQT VI, which launched in 2011, has a current gross MOIC of 2.4x, while 2015's EQT VII is at 1.7x and 2018's EQT VIII is at 1.1x. Henriksson said that EQT targets a 2.3x gross MOIC for its private equity funds by the time their investments are fully realized.

Both the firm's assets under management and its head count have been increasing rapidly in recent years, with AUM hitting €40.5 billion as of the end of 3Q (up 74% since the end of 2016) and the number of total EQT employees reaching 675 (up 48% over the same span).

EQT may be hastening the pace of its investing, fundraising and growth, but Henriksson didn't attribute any of those shifts directly to the firm's recent IPO. Instead, he indicated that, other than helping the firm raise new capital, being publicly traded should have little impact at all on EQT's operations.

"This is merely a watering station for us," Henriksson said. "It's business as usual, but now with a balance sheet."

Featured image via Wara1982/iStock/Getty Images Plus

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