Client story: Waterous Energy Fund

The challenge: understanding where Waterous Energy Fund stands against direct competitors

Waterous Energy Fund was established in 2017 on the premise that the North American oil & gas industry was undergoing a massive paradigm shift and that a differentiated investment strategy was imperative.

While a fantastic macroeconomic story, the ‘shale revolution’ in North America – where the US and Canada have significantly increased oil & gas production volumes through hydraulic fracturing and horizontal drilling – was largely fueled by easy access to private capital. Private equity sponsors provided growth capital to back start-up management teams to build junior companies in order to de-risk emerging resource plays. This growth equity model is challenged today due to the lack of liquidity.

Furthermore, the natural resources asset class has been struggling to generate returns for nearly a decade now compared to other asset classes. As performance is lacklustre, investor sentiment is negative making it difficult for many managers in the space to attract capital.

In this tough environment, Waterous Energy Fund managed to successfully raise over $1bn in record time, validating its strategy to restructure, reposition and recapitalize established businesses with top decile oil-weighted assets.

Following investments in Strath Resources and Cona Resources, Waterous Energy Fund needed to understand its relative position in an asset class that continues to underperform in private markets to this day.

Therefore, analyzing the performance of its fund against its competitors and understanding the competitive set were critical to continued success.

The requirements: the ability to benchmark against the different definitions of an energy GP

The lack of private market data makes benchmarking a private equity fund challenging. Because Waterous Energy Fund I is neither a growth equity fund nor a resource fund, benchmarking is even more difficult because there are few direct competitors.

In this context, Waterous Energy Fund needed access to a reliable source of private capital fund performance data with enough granularity for them to:

1. Differentiate between distinct energy strategies.

2. Exclude infrastructure funds that overlapped with certain energy strategies like renewable energy.

3. Capture the nuances of natural resources investment, covering granular asset preferences such as midstream vs. upstream.

The solution: comprehensive natural resources performance data with personalized and customizable benchmarks

With access to net-to-LP performance data on 10,000+ private capital funds, including 680+ distinct natural resources vehicles, Waterous Energy Fund found a solution to properly benchmark themselves against the broader oil & gas market in Preqin Pro.

With Preqin Pro’s custom benchmark functionality, the firm can go even deeper by isolating its direct competitors in North American upstream oil & gas.

Using fully customizable tables, Waterous Energy Fund can isolate peers on a range of criteria – including investment strategy, energy preferences and vintage – and build relevant custom benchmarks.

With its own performance data loaded in Preqin, Waterous Energy Fund can also take advantage of advanced personalization features, which have streamlined the firm’s reporting and marketing by creating readily exportable, visual performance charts.

Finally, the platform makes it easy for Waterous Energy Fund to keep on top of investor and competitor activity with customizable news alerts and target list notifications delivering key, real-time information directly to inboxes. This includes changing allocations, activated fund searches or RFPs, and much more.

The result: top-quartile ranking in Preqin's vintage 2017 North America-focused Energy Benchmark

By contributing performance data to a reliable data provider like Preqin which then independently generates market benchmarks, Waterous Energy Fund allows its Fund I to be listed in a private market benchmarking tool used and relied upon by over 3,800 limited partners and consultants globally.

As a result, the firm found that its first fund ranks in the top quartile of the 2017 North America-focused energy benchmark (as of March 31st, 2019).

This allows Waterous Energy Fund to stand out from the competition in an overcrowded fundraising market and demonstrate the success of its novel strategy to the LP community globally.

Why Waterous Energy Fund chose Preqin

• Access to customizable tools with Preqin Pro is a competitive advantage

• Helps monitor fundraising, competitor and investor activity across private markets

• Gives access to performance and track records of direct competitors in natural resources

• Allows Waterous Energy Fund I to be listed in Preqin's market benchmarks used by 3,800+ LPs globally

• Provides great customer support via the 24 hour-a-day, Monday-to-Friday Customer Service team

About Waterous Energy Fund

Established in 2017, Waterous Energy Fund is a North American private equity firm investing in established oil & gas businesses with top-decile assets requiring recapitalizing, restructuring or repositioning.

To respond to new industry dynamics in the North American upstream oil & gas sector, the firm has a differentiated investment strategy targeting businesses in complex special situations with low technical risks and a path to sustainable free-cash-flow.

Rather than a growth equity strategy and large portfolio of smaller companies, the fund seeks to build a concentrated portfolio of businesses with scale and asset quality to maximize liquidity options and earn premium valuations.