Apax closes impact fund at $900m

The firm has made four investments so far and tied a percentage of its carried interest to impact KPIs.

European private equity manager Apax Partners has announced the final close for its debut impact fund on circa $900 million after two years on the fundraising trail.

Apax recruited two execs to lead the strategy in 2021: New York-based David Su, who spent 12 years at Norwest Venture Partners, and Alykhan Nathoo, who joined in London from Africa specialist Helios Investment Partners.

Apax Global Impact Fund (AGI) subsequently launched in November 2021 with a target of approximately $1 billion. It pursues impact along four themes: health, environment and resources, social and economic mobility, and “impact enablers” – technologies that enable businesses in the previous three sectors. It is an Article 9 fund under the EU’s Sustainable Finance Disclosure Regulation. Rede Partners advised on fundraising.

Apax got close to its target, despite AGI being its first impact offering. Impact specialists and firms with track records in the space have had an easier time raising capital amid 2023’s slower fundraising climate, according to market sources.

“We are grateful for the confidence of AGI’s investors, all of whom share our commitment to supporting the visionary founders and management teams tackling society’s most pressing environmental and social challenges,” Nathoo and Su said in a joint statement.

Four investments have been made from the fund so far: supply chain software platform GAN Integrity; Swing Education, an online marketplace that connects schools and substitute teachers; social good software company Bonterra; and Eating Recovery Center, a provider of eating disorder treatment.

Impact incentives

The firm has created a five-person impact advisory board chaired by Apax co-founder and champion of impact investing Ronald Cohen to guide its impact strategy. The other members of the board are: Apax partner Jason Wright; Ian Davis, the former chair and managing partner of consulting firm McKinsey & Company; George Serafeim, an ESG specialist at Harvard Business School; and Laura Tyson, an economist at the University of California, Berkeley, who served as director of the White House National Economic Council during the Clinton administration.

“The world has historically operated on two parameters: risk and return. We now find ourselves shifting to three dimensions: risk, return and measurable impact,” Cohen said in Monday’s press release.

To incentive delivering impact, a slice of Apax’s carried interest has been linked to non-financial KPIs. Each portfolio company is set targets related to scale of impact, depth of impact and ESG priorities, and is assessed using Apax’s proprietary framework to determine the carried interest the firm receives. The firm declined to disclose what percentage of its carry was at stake when contacted by New Private Markets.

A number of firms have linked their carried interest to impact, though the practice is by no means mainstream and the approach varies from fund to fund. It has often been viewed as best practice among impact investors, though that view is now being challenged by some prominent figures in the market.