CVC/DIF Capital: infrastructure deal builds assets under management ahead of IPO

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Infrastructure funds live by the maxim “build it and they will come”. Private capital strategies have followed suit, with limited partners seeking to build infrastructure positions. CVC, the private equity fund group, is the latest to assemble plans. It has acquired a majority stake in Dutch infrastructure fund DIF Capital Partners for about €1bn.

There are good reasons for CVC’s decision. Infrastructure is a hotspot for deal making. Assets under management in the sector expanded at a 17.8 per cent compound annual rate in the decade to 2022, according to Preqin data. This exceeds other private investment strategies. Investors appreciate diversification in broader portfolios. Returns from infrastructure do not tend to correlate with bonds and other equities.

CVC was previously focused on more typical buyout strategies, for which it has a good record. It was able to raise €26bn this year for the largest buyout fund ever. But it is shifting towards a multi-strategy approach in a bid to increase AUM. In 2021, it acquired Glendower Capital, a specialist in trading second-hand stakes in private equity funds.

These diversification moves can all be tied to CVC’s plan to list its shares. The world’s largest private capital asset gatherers, such as Blackstone and KKR, trade publicly and offer a range of strategies and products. Buying DIF, which has €16bn of AUM, not only adds another strategy but helps to bulk up CVC’s own €140bn AUM.

Should it proceed with a listing, CVC can expect a high valuation. In 2021, it sold a minority stake to Blue Owl’s Dyal Capital group at a valuation of €15bn. Admittedly, this was in a halcyon period for private capital, but it could maintain this if it can expand its AUM.

DIF will be left to operate as independently as possible. CVC will not fully own the group until 2028. That independence, which has worked well with Glendower, is likely to help CVC maintain a good record.

That record means CVC’s fundraising success stands out. Rivals have struggled. They have increasingly been forced to offer fee discounts. In the first half of the year, fundraising was down more than a third on the year before, according to Bain.

CVC understands that organic growth of AUM has limits. Erecting the scaffolding for additional strategies makes sense.