Key points
- Sean Barrett values EQT's carry business at about 10bn euros, roughly a third of its market cap, and expects carry to top a billion euros of annual net revenue.
- EQT trades at about 20 times management fee earnings versus roughly 35 times forward net income for alternative managers generally, a discount Barrett calls unwarranted.
- Christian Sinding moved from CEO to chairman after six and a half years, with Per Franzen succeeding him as CEO, a planned succession Matt Reustle contrasts with US firms that wait for a triggering event.
EQT Scales Private Markets Returns Yet Trades at a Discount
EQT is a thematic private markets manager that grew from a Swedish family mandate into a global platform while keeping a narrow focus. Management fees rise with assets, local teams and tight governance support returns, and carry is a large business the market barely prices in. Sean Barrett argues the discount to other alternative managers is unwarranted.
Takeaways
- EQT is a scaled, top-quartile thematic manager. Stockholm-based EQT manages about 270bn euros, with about 140bn fee-paying. That splits into private equity Europe and Americas at 35%, Asia at 20%, infrastructure at 30% and real estate at 15%. Flagship funds show roughly 2.5x gross multiples and 20% net IRRs.
- Local teams and governance drive value creation. EQT runs more than 30 offices on a local-with-locals model. Each company is overseen by a troika that includes an independent chair, and the AI tool Motherbrain speeds acquisition searches. Owned companies grow revenue about 12 to 15% a year.
- Narrow focus and long holds built big winners. The flagship mix has been about 40% healthcare and 60% tech-enabled services. EQT took IFS from a public company with a few hundred million of revenue to about 1.2bn euros of ARR, and held Nord Anglia 17 years, growing it tenfold.
- Acquisitions added Asia and real estate platforms. EQT Asia comes from the 2022 purchase of Baring Private Equity Asia, which Sean first doubted. India is about 40% of its private equity. Exeter, bought in 2021, forms real estate, raises a vintage yearly and is about 90% industrial and warehousing.
- Wallenberg roots shape culture and succession. Investor AB gave Conni Jonsson the mandate to create EQT in 1994. Attrition runs about 10% a year. CEO Christian Sinding became chairman after six and a half years and Per Franzen succeeds him, a planned handoff Matt contrasts with US firms.
- Large fundraising targets face rate skepticism. EQT raised 75bn euros from 2021 to 2023 and targets 100bn next cycle, which doubters question given higher rates. Retail is about 10% of the business, with a vehicle launched in 2024 and five more planned for 2025.
- Carry is undervalued against peers. Fees of about 1.5% produced roughly 2bn euros in 2024. Sean values the carry business at about 10bn euros, a third of market cap, and says EQT trades near 20 times fee earnings while alts trade at 35 times forward net income.