Private Equity Funds Focus On Energy, Co-Investment

Infrastructure and agriculture in focus

David Altshuler, a partner at StepStone Group, noted that investors are more interested in real assets. Infrastructure in the U.S. continues to garner attention, according to a recent report from Bloomberg Bries. New transmission lines are being built to transport energy generated by wind and solar energy plants to power metropolitan areas. Investors are financing these projects with private equity participation.

Investors are also funding projects to improve agricultural efficiency. Emerging markets are increasing food demand as their population becomes wealthier. Inefficiencies in agricultural production hamper supply. Investors are willing to fund projects focusing on operations, environmentally-friendly harvesting and other technology directed at making agriculture more efficient.

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David Altshuler (Source: Bloomberg Briefs)

Rise in private equity managers’ co-investing activity

Altshuler said that co-investing activity increased. Some investors are requiring that private equity managers put some “skin in the game” and some managers are participating in projects primarily for marketing.

Christopher Stringer Private Equity

Christopher Stringer (Source: Bloomberg)

Private equity funds’ co-investment offerings differ depending on project size. Christopher Stringer, a partner at Private Advisors, focuses on investing in the mid to lower market. His firm’s co-investments focus on placing funds with 15 to 25 companies that have an enterprise value of $150 million or less. Private advisors’ goal is to fill the funding gap an underlying manager may have in project financing. Private Advisors offers fund of funds and secondary funds.

Doug Kimmelman Private Equity

Doug Kimmelman (Source: Bloomberg)

Energy Capital Partners offered co-investment to select limited partners (LP) within a new fund. LPs had access to almost every transaction and there were enough opportunities within the energy sector. Energy Capital Partners used co-investments to raise $650 million to fund a portion of seven projects. Doug Kimmelman, senior partner at Energy Capital Partners, stated that only a few of his firms’ LPs voiced interest in co-investing. About 10% of the 300 current investors are consistent co-investors. The group includes small endowments and family offices as well as large investors. Kimmelman said that the regulatory approval window for a deal, which can be as long as 90 days, provides ample time to notify LPs of co-investment opportunities.