With the news of the Warburg Pincus Energy Fund closing 33% above its target on $4bn, this blog will look at whether or not there is resurgence in natural resources fundraising. Preqin’s Funds in Market online service shows there are currently 60 funds on the road targeting investments in natural resources, seeking to raise a total of $44.8bn. Of these funds, 17 have held interim closes, raising $14.4 billion. Interestingly, this represents a significant increase in natural resources funds in market in comparison to the same time in 2013, when 29 funds were seeking to raise just under $22bn.
This increase in funds seeking capital in the natural resources sector follows strong fundraising in recent years, with $23.5bn raised in 2012 and $28.7bn collected in 2013 – the largest amount ever raised for natural resources funds. In 2014 so far, 19 natural resources funds have closed, raising $15bn. While fundraising for this year to date has not quite maintained the pace witnessed in 2012 and 2013, the large pipeline of funds raising capital in the sector is a strong indicator of continued interest in natural resources. In addition, the largest natural resources fund of the year, Warburg Pincus Energy Fund, recently closed. The fund invests in oil & gas exploration and production, midstream, power generation, oilfield technology and related services, as well as alternative energy development in North America and across the globe.
While natural resources funds have, in recent years, been targeting investments in North America, 2014 has seen more funds with a more diverse geographic focus, representing the growing reach of the sector. In previous years, the majority of fundraising within the natural resources sector was primarily focused on North America; 77% of capital raised in 2012 and 93% of capital in 2013 was focused on North America. In 2014 so far, funds with a diversified multi-regional focus represent half of the capital raised for natural resources funds.
Currently, the two largest natural resources funds in market are the Riverstone Global Energy and Power Fund VI targeting $7.5bn and Natural Gas Partners XI seeking $4.5bn. Riverstone Holdings manages the Riverstone Global Energy and Power Fund VI fund, which is seeking to make investments on a global basis in oil & gas, power and energy. The Natural Gas Partners XI fund, managed by NGP Capital Management, has raised $4.3bn to date and looks to invest in oil & gas and energy-related industries in North America.
With 61 natural resources funds currently seeking over $45bn in commitments, including 15 funds seeking $1bn or more, the pipeline for this thriving sector indicates that natural resources funds will continue the strong fundraising trend of recent years.