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Investors in Private Equity Natural Resources Vehicles – November 2014

by Lisa Parker

  • 26 Nov 2014
  • PE
  • NR

With the ever-increasing global demand for natural resources, private equity natural resources funds have been attracting significant investor attention recently. Preqin's Investor Intelligence database currently tracks 851 investors that have an appetite for such vehicles. Natural resources funds have attracted attention from North America-based LPs, which account for 81% of the total number of LPs with a preference for this fund type, with Europe-based investors accounting for a further 11%. 

As illustrated in the above chart, foundations make up the largest proportion of investors in natural resources funds, accounting for 21% of investors that have an appetite for this fund type. Following closely are endowment plans (19%), public pension funds (16%) and private sector pension funds (12%). Collectively, these investors have combined assets under management of $24.1tn. 

On average, the current allocation to private equity of these investors in natural resources funds (excluding fund of funds managers) is 11.6%, below the target allocation of 12.8%, suggestive of further private equity activity in the future. Interestingly, on average, investors in natural resources funds have higher allocations to private equity than all investors in the private equity asset class, where the average current allocation stands at 9.7% of total assets, and the average target allocation stands at 10.8%. Additionally, in terms of commitment sizes, LPs with a preference for natural resources funds commit  between $14mn and $51.2mn on average per private equity vehicle, whereas all investors in private equity commit, on average, between $12.3mn and $34.4mn.

An example of a US-based public pension fund actively investing in natural resources funds is California Public Employees' Retirement System (CalPERS), having recently committed $40mn to First Reserve Fund XIII. The fund recently held a final close at $3.4bn and seeks to make equity investments in well-positioned energy and natural resources companies globally. 

Boettcher Foundation is another active US-based LP that invests in natural resources vehicles. The foundation recently committed to NGP Natural Resources XI, a vehicle that will focus on investing in North America-based businesses in oil and natural gas production, energy midstream and oilfield services industries. As LPs look to diversify their private equity portfolios, it is clear that natural resources funds will be one to watch over the next few years.

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