Stockholm-based global private capital firm EQT has launched in Australia an investment vehicle that provides high net worth investors with access to its funds, primarily in private equity and infrastructure, alongside institutional investors.
EQT Nexus is available to wholesale and sophisticated investors through a local unit trust.
EQT Nexus was launched in the Nordic region in May with Australia selected as its first market outside Europe, reflecting recognition of Australia as a fast-growing sophisticated investor market. The roll-out is to continue in other markets globally.
The minimum initial investment for the fund is $500,000 but it is anticipated that wealth management firms will, at their discretion, provide access to clients for lower sums, possibly $50,000.
The fund has an open-ended structure but investors are required to provide capital up front rather than the conventional private equity procedure of making commitments that are then called as the fund makes investments. The fund is, however, relatively liquid. If investors withdraw over the first 18 months they will be charged a 5% penalty but after that they can withdraw without penalty in quarterly exit windows.
Launching EQT Nexus in Sydney on 25 September, EQT partner and global head of wealth Peter Beske Nielsen said the vehicle offered individual investors an opportunity to avoid the J-curve of conventional private equity funds. As soon as an investment was made it gained exposure to all existing Nexus investments.
Nexus was set up two years ago with EQT providing stakes in a range of its funds. Investors can therefore review current investments and performance. The fund is now controlled by two fund managers assigned exclusively to Nexus. They can choose where to invest across the EQT portfolio and can make co-investments directly in underlying investee companies.
Beske Nielsen said he believed Australian individual investors would be attracted to Nexus because it gave exposure to EQT’s Nordic values and investment style which focuses on “future proofing” investee companies.
EQT’s distinct corporate culture stems from its foundation in 1994 with backing from Investor AB, the investment company founded by Sweden’s Wallenberg family, prominent industrialists over five generations. Via Investor AB, the Wallenbergs today control large stakes in Swedish multinational companies such as ABB, AstraZeneca, Atlas Copco, Electrolux, Epiroc, Husqvarna and SAAB, as well as EQT.
Beske Nielsen said EQT’s corporate culture was unlike most private capital firms as it features internal transparency and a non-hierarchical structure. Most investment ideas, he said, came from lower down the corporate pyramid and remuneration was structured to reflect this with 10% of performance fees allocated to junior investment staff.
Each investment proposal came from a “troika” of a local adviser, corporate chief executive and EQT deal lead, all of whom were expected to invest alongside the firm.
Beske Nielsen said EQT only invested in companies that made a positive impact. After investments were made, the firm provided managements with hands-on operational support, industry expertise, sustainability and digitisation assistance and access to the firm’s global networks. Corporate development was focused on “future proofing” well beyond the usual ownership period of 3-7 years.
He said the effectiveness of this strategy had been demonstrated by returns. Since inception, 73% of all EQT fund returns could be attributed to increased sales and profit margins, 25% to strategic repositioning and just 2% to debt reduction.
Head of EQT capital raising in Australia Martin Donnelly said the firm had launched Nexus in Australia in response to growing demand for access to private markets from wholesale investors, financial advisers, private banks and family offices.
He said individual investors were targeting private markets to gain diversification and superior returns over public markets.
Nexus has exposure to two EQT Infrastructure investments in Australia, cancer care business Icon Group and retirement villages operator Levande.
EQT acquired a majority stake in Icon in late 2021 from a consortium including Goldman Sachs Asset Management, QIC Private Capital and Beijing private equity firm Pagoda Investment Advisors.
Levande was formed after EQT acquired the retirement living business of Stockland (ASX: SGP) in a carve-out transaction in 2022.
Icon chairman Paul McClintock AO said he had been instrumental in bringing EQT to Australia, advising an investment syndicate led by the firm which invested in then struggling radiology clinics business I-MED in 2014. McClintock became chairman of I-MED. The EQT-led syndicate exited I-MED to European private equity firm Permira in 2018.
McClintock said EQT had come a long way in developing its governance-based culture in Australia while following its principle of building a local team for local transactions.
EQT established a Sydney office in 2020 and today has a local team of 50 employees. The team recently moved into new offices in Quay Quarter Tower in Bridge Street.
Image: EQT partner and global head of wealth Peter Beske Nielsen.