Natural Resources 'Funds to Watch'

by Darren Fernandes

  • 09 Nov 2016
  • NR

In line with struggling commodity prices, the performance of natural resources funds has continued to fall during 2016. The PrEQIn Natural Resources Index – a measure of the average returns earned by investors in their natural resources portfolios – shows that returns have decreased each quarter since Q2 2015, furthering the spread from the PrEQIn All Private Equity Index, which has seen an overall increase in returns over the same period. In light of this, the ability to identify funds that may potentially generate high returns within this challenging environment has become of increasing significance to investors.

Preqin’s Natural Resources Online service currently holds net-to-LP performance data for more than 400 individual unlisted natural resources funds. When determining which funds to watch, we take the returns generated by vintage 2014-2016 funds that have at least 20% of their committed capital called up. As these funds are in the early part of their investment cycles, the IRR becomes less relevant; therefore, the net multiple is used as the key measure of performance. The multiple provides a good indication of the value added to the unrealized investments within the fund portfolio, as well as taking into account any early distributions. The table below shows the five funds that have returned the highest net multiple.

Japan Solar Fund has generated the highest net multiple at 1.90x, overtaking Post Oak Energy Partners II Co-Investment which was the top ‘fund to watch’ when the same study was carried out in July for the 2016 Preqin Alternative Assets Performance Monitor. Unsurprisingly, the table consists mostly of North America-focused funds; however, one Africa-focused fund also features: Acorn Agri Investment Company is one of just 14 primarily Africa-focused vehicles tracked by Preqin’s Natural Resources Online.

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