Milano-based Vesper Infrastructure Partners has announced an interim close for its first fund, Vesper Next Generation Infrastructure Fund I. Commitments now exceed €570 million, following launch in August 2023, with an additional €70 million sourced for co-investments.
Known LPs include the European Investment Fund, for an “initial €75m”, Generali Lion River and Mediobanca. With a target of €800 million and a hard-cap of €1 billion, the fund is expecting another interim close in Q1, before a final close in Q2, Giacomo Rossi, partner and co-founder of Vesper tells Infrastructure Investor.
These final commitments are to be sourced in what founder and CEO Livio Fenati calls “the worst fundraising environment ever.”
He is, however, optimistic about reaching the fund’s target with a solid base in place for others to follow. “I believe that our secret sauce was the team’s credibility that convinced investors to commit on day one – and to stay. We heard horror stories about a first-time fund who started at the same time as we did and, during 2023, had difficult conversations with their anchor investors who decided to withdraw commitments because they were scared of the macro environment.”
This begs the question of what distinguishes Vesper from other emerging managers. According to Fenati, it comes down to the team and the strategy. “Paola [Rastelli] and I were among the founding members of Arcus Infrastructure Partners back in 2009. So investors knew this was not the first time we had launched a new GP,” he says.
In all, the six founding team members resigned from their previous roles between February and March of 2023 and the first close – at €300 million – was only five months later.
Other than the experience from Arcus, Fenati was most recently at Partners Group Europe, while Rastelli left a position as head of M&A at Italian Snam. There are four additional co-founders: Giacomo Rossi, most recently CEO of Snam’s business in the UK, Ireland and North Sea; Olaf Nordmeyer, former global co-head of infrastructure at Goldman Sachs; Alfredo Maria De Falco, most recently head of client solutions at UniCredit; and Guillermo Royo-Villanova, most recently vice president at PSP Investments.
The fund’s AIFM is FundRock LIS.
Finding a ‘white space’
As for the strategy, it is a return to former Arcus stomping grounds for Fenati and Rastelli.
“We identified a really attractive white space in the European lower mid-market and mid-market value-add infra,” says Rossi. “It is not a very crowded market. You have Asterion, Arcus, Icon, Pioneer Point, Marguerite, Swiss Life Asset Managers, maybe. No more than six or seven players. So, a lot of investable opportunities and, relatively speaking, very few capital providers, both in terms of number and dry powder. With a fairly broad and deep experience in direct investing in the value-add segment, we thought that was a great recipe for success.”
According to Fenati, the mid-market space – by which he counts anything between €50 million and €150 million equity tickets – hosts 25-30 high quality opportunities each year in Europe. These opportunities are mostly private, CEO-owned and/or family-owned businesses with €5 million to €20 million of EBITDA, says Rossi.
“This is a structurally attractive and underserved segment, and we decided to bring the level of institutionalisation and professionalisation that we learned in big organisations to this attractive market. So, compared to other first-time funds or smaller mid-market funds, we are much more institutionalised,” Rossi says.
“Because a lot of the businesses we’re spending time with are founder-owned businesses, they like the fact that we’re entrepreneurs and nimble as well. Obviously, the dry powder is a nice conversation start, but it’s the whole package that plays out very nicely with them.”
Ambitious targets
Vesper looks for strong capital protection features with at least a 1x recovery in a downside case. So far, the fund has completed the acquisition of medical diagnostic provider RAD-x, together with Swiss Life Asset Managers, and a majority investment in UK and Ireland-focused bioenergy platform EAG Bioenergy. Rad-X took Fund I to its 15 percent concentration limit with an initial deployment of €140 million, which is why the commitment was reduced through successful syndication with co-investors.
The return targets for the 10-year fund are ambitious. “We’re targeting 15-18 percent gross IRR,” says Fenati. “We expect that average holding period is five-and-a-half years and we are looking for targets in thematic areas that can enjoy tailwinds of growth in the range of 11 percent to 12 percent per year.
“Securing that kind of growth will basically double the EBITDA over the holding period, and this is what we need to deliver with our strategy: work with mid-market companies exposed to growth macro trends and apply our industrial investment valuation playbook, increasing the organisational pace, focusing the managers on four or five key value-creation initiatives, and then monitoring and supporting the day-by-day delivery. So, there’s no magic.”