ArcLight recovers to close on $3.3bn

After struggling to find support in the early going, ArcLight’s fifth fund has thoroughly beaten its $2bn target and closed on $3.3bn.

ArcLight Capital Partners has closed its fifth partners fund in a big way, beating its $2 billion target for a $3.3 billion final close after more than two years on the market, the firm said in a statement.

The fund, which will target energy infrastructure investments, recovered strongly after struggling to find support from limited partners when it launched in mid-2009. As of January, the firm reported only $383 million in commitments in a US Securities and Exchange Commission filing for the fund.

Sources told Private Equity International that investor reticence may have been due to two factors; one was a shift in the firm’s investment strategy. The firm’s first two funds focused on high-risk, high-reward private equity style investments. Its third and fourth funds have relied on comparatively low-risk, low-reward infrastructure investments. Sources also indicated that the rapid marketing of the firm’s prior funds had not given LPs the chance to judge performance. ArcLight raised four funds totaling $4.65 billion between 2003 and 2007.

Fund V’s predecessor, which closed on $2.1 billion in 2007, was generating a 1.3x return multiple and 9.6 percent net internal rate of return as of 31 March, according to California Public Employees’ Retirement System.

In 2010, the firm took London-based placement agent MVision off the fund and began marketing with Barclays Wealth. Barclays, which was named on ArcLight’s US SEC filings, has been directing “select” clients into the firm's fund, sources said.

After the switch, ArcLight’s fundraising effort appeared to revive – with commitments reaching at least $1.5 billion as of August, according to SEC filings. Limited partners include the Montana Board of Investment, Norfolk County Retirement System, Maine Public Employees Retirement System and the Connecticut Retirement Plans and Trust Fund, according to data provider Private Equity Connect.

The firm did not return a request for comment. Madison Williams was also listed as an associated broker/dealer on the fund.

In July, ArcLight and a co-investor group including China Investment Corporation, Government of Singapore Investment Corporation and John Hancock Financial services committed more than $1 billion to Enogex, a joint infrastructure venture between OGE Energy Corporation and ArcLight that provides natural gas gathering, processing, pipeline transportation and storage services in the US.

ArcLight was founded in 2001 by Daniel Revers and Robb Turner. With this fund closing, the firm has raised more than $10 billion from investors since its inception, according to a statement. ArcLight maintains offices in Boston, New York, Barcelona and Luxembourg.