Make-Up of Private Equity Investors with an Appetite for Natural Resources Funds – January 2013

by Tom Carr

  • 08 Jan 2013
  • PE

Private equity natural resources funds have been attracting significant investor attention recently, as LPs look to diversify their private equity portfolios and hedge against inflation. Preqin's Investor Intelligence database currently tracks 721 investors that have an appetite for such vehicles. Natural resources funds have particularly attracted attention from North American LPs, which account for 80% of the total number of LPs with a preference for this fund type, with West Europe-based investors accounting for a further 11%.

Foundations make up the largest proportion of investors in natural resources funds, accounting for 21% of all investors with an appetite for this fund type, with public pension funds and endowments accounting for 19% and 17% respectively. Investors in natural resources (excluding fund of funds managers) are, on average, slightly above their target allocation to private equity, with the aggregate target allocation being 13.1% of total assets and the aggregate current allocation at 13.2%. It can be seen that, on average, investors in natural resources have higher allocations to private equity than all investors in the asset class, whereby the aggregate current allocation stands at 10.9% of total assets, with an average target allocation of 11.4%.

Among investors actively investing in natural resources is Worcester Retirement System, which issued an RFP for a closed-end natural resources fund in Q4 2012. It is looking to commit $10mn to an experienced manager that is raising a natural resources fund, targeting energy-focused mid-market buyout opportunities in the US. There are also currently a number of large natural resources vehicles in the market actively raising capital, including EnCap Energy Capital Fund IX, which recently secured  commitments from a number of investors, including a $15mn commitment from District of Columbia Retirement Board.

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