According to Preqin’s Investor Intelligence online service, a substantial proportion (32%) of private equity investors allocate capital to energy funds. In the past year, 22% of future fund commitments included energy funds as a preference. As the chart below shows, the proportion of investors seeking energy funds over 2014 has been between 14% and 28%, indicating a consistent appetite for these types of vehicles. Though the proportion of mandates seeking energy funds had been decreasing since Q2 2014, this figure increased to 21% in Q1 2015, suggesting that energy investments will remain part of investors’ diversified private equity portfolios.
Asset managers represent the largest proportion of investors targeting energy funds in the next 12 months, accounting for 13%. Endowment plans and public pension funds are also seeking energy funds, representing 11% of future fund searches each. The highest proportion of searches come from North America-based investors (50%), followed by 21% from Europe-based investors and 19% from Asia-based LPs.
The institutional investors that seek energy funds in the next 12 months have an average of $51.1bn in assets under management, which is greater than the average private equity investor, which manages $21.3bn. This could suggest that larger firms are more willing to invest in energy funds as they have more capital to utilize and are more experienced in investing in different industries.
An investor planning commitments to energy vehicles in the next 12 months is Baltimore-based Brown Advisory, which manages $40bn in assets. The asset manager aims to invest in eight new funds, committing approximately $25mn per fund. It is looking to maintain a diverse portfolio targeting a wide variety of fund types globally, including energy, buyout and venture capital vehicles, working with both new and existing managers. When committing to new funds, the firm will consider first-time funds, funds that have not held a first close and co-investment opportunities.