Cube Infrastructure Managers takes pride in its a progressive approach to infrastructure investing. The firm has raised some four billion euro since 2007. Its portfolio has featured Eurotunnel and various green transition investments. Today it actively seeks out companies in order to improve their environmental footprint and sees its fundraising efforts bolstered by the Article 8 status of its Cube Infrastructure Fund III.
Renaud de Matharel, Cube’s CEO and managing partner, told Investment Officer that he sees infrastructure investing dovetailing both with institutional investors’ needs in this time of inflation and rising interest rates, and the world’s move towards sustainability. “Infrastructure is becoming more and more essential” to pension fund managers, he said. “It’s less risky, it yields less than private equity, but it doesn’t generate cyclical losses like private equity.”
The firm has heavily invested in public transport in recent years, especially in transitioning to electric buses. “Switching from diesel buses to electric buses requires significant CapEx and a complete change in the model, which entails operational change, therefore risk and massive investments,” De Matharel explained.
‘Buy and grow’
He describes Cube as a “buy and grow mid-cap European brownfield infrastructure fund” managing approximately three billion euros in assets under management through four funds. He claims his firm has “one of the strongest operational profiles in the market”, delivering year-on-year growth for the past 17 years of about 15 percent.
Under De Matharel, the company eschews traditional leveraged buy-outs. Instead, Cube enters into “proprietary transactions in the mid-market, where we believe there is a strong case in terms of operational management and the ability for us to take control of the target with the definitive objective to grow it significantly over three to four years,” he said.
Aurélien Roelens, Cube’s investment director and ESG coordinator, recounted how Cube deals with a shortage of bus drivers in Denmark. “We’re training the Syrian refugees and the training is not only driving but also language skills and if they do well, if they pass the certification, then we automatically employ them,” he said.
De Matharel said Roelens helped Cube learn about ESG.
TGV
The French entity that became Cube first came to Luxembourg around 2005. De Matharel was working for a subsidiary of France’s Caisse des Dépot. The French government had decided to sell its motorways, but was concerned they’d come under foreign control.
France invited De Matharel to create a European infrastructure fund and use it to raise enough money to ensure French control of its motorways through French firm Natixis. There were only two jurisdictions then that provided the necessary framework – Ireland and Luxembourg.
“We basically chose Luxembourg because the TGV between Paris and Luxembourg had just opened,” De Matharel said, adding that the TGV was “a complementary reason” for choosing Luxembourg over Ireland, in addition to Luxembourg’s conducive legal environment for funds as well as its “cosmopolitan” nature.
The fund had moved to Luxembourg, though it maintained its offices in Paris. It was eventually transformed into Cube in 2016 through a management buy-out from Natixis Global Asset Management. Since then, Cube is owned by its management.Today the firm has a staff of 60, with 50 in Luxembourg and the balance in Paris, and is subject to CSSF supervision as an alternative investment fund manager.
Competing with France
The grand duchy also allows Cube to leverage its structure for reserved alternative investment funds, vehicles known as Raifs.
“The Raif structure is basically the answer from the Luxembourg authorities to the changes that the French government had brought to the FCPR structure in France 12 months earlier,” said De Matharel, referring to the French fonds communs de placement a risques, a type of investment vehicle enable by France in 2002.
“The Raif model is deregulated compared to the CIF model, so it’s very much to the advantage of the GPs. Everybody knows Luxembourg, and everybody’s very familiar with the overall setup in Luxembourg and the benefits of this setup. So it’s very easy to present a Raif structure to investors and it offers a lot of liquidity for us.”
Luxembourg lists two of Cube’s Raifs: Cube Infrastructure Fund III and Connecting Europe Broadband Fund. Cube III is expected to reach its 1.5 billion euro target next year, after reaching a 1 billion “first close” in September 2021, said De Matharel.
With its first fund, Cube invested in power generation, district heating, wastewater management, transport (including Eurotunnel and public transit) and telecommunications. In July 2010, the fund reached 1.08 billion, exceeding its 1 billion initial target.
Cube’s second fund invested in public transport, fiber optic infrastructure, district heating, energy production and EV charging, reaching 1.043 billion euros in July 2019.
Exit mode
These funds are now in “exit mode”.
Cube’s Connecting Europe Broadband Fund has developed fiber networks across Europe. The fund reached 555 million euros in 2021 with €300 million currently invested.
Cube’s third fund has since invested in EV charging, small-scale hydro, waste collection and regional logistics.
Despite today’s challenging economic climate, set to continue through 2023, De Matharel points out his firm is fundraising “in a very satisfactory manner.” This is due, he said, to Cube’s ability to label its third fund Article 8 under the SFDR.
He also points out that Cube has “one of the lowest leverage ratios in the industry”, about three times the EBITDA of its portfolio, versus the “5, 6 or more in some of the more leveraged funds”. His firm benefits because investors want to reduce their leveraged exposure. “I think this is a key element that we’re offering to the market, which differentiates us quite a lot in today’s market.”