NGP Energy Capital Management, which has pursued oil and gas industry investments since 1988, now finds itself an exceptionally hot commodity.
The Irving, Texas firm, led by chief executive Kenneth Hersh, has grown thanks in part to increasing LP allocations to private equity generally. But with energy now a must-have investment play, the firm is about to double in size.
Having raised a total of roughly $3 billion since inception for its main private equity platform, Natural Gas Partners, the firm is about to launch fundraising for a new vehicle that will target at least another $3 billion.
The firm's previous fund – Fund VIII – closed in 2005 on $1.3 billion.
Natural Gas Partners, so named because Hersh launched the firm initially focused on the price of natural gas (the firm has since abandoned trying to predict commodity prices), invests in companies that service the oil and gas industry. While the firm has primarily focused on US deals, it will soon launch an office in London, possibly to scout European opportunities and definitely to use as a vantage point from which to better monitor global energy trends.
Hersh, whose firm is profiled this month in sister publication PEI Manager, is a former Morgan Stanley energy investment banker. In addition to growing the firm's core private equity division, he has also created a venture arm, a publicly traded business development company, a co-investment platform and an infrastructure platform.
The rapid growth of NGP bodes well for Barclays Capital, the private equity arm of the global bank which last year purchased a 40 percent stake in NGP's management company. This was not a strategic investment – Barclays Capital expects to exit its position at some point, either through a strategic sale or IPO.
NGP's explosive growth is part of a broader trend for experienced energy specialists to have capital thrown their way by the billions. Firms such as First Reserve and Riverstone Holdings (which raises funds jointly with The Carlyle Group) are now among the largest private equity groups in the world. This makes sense – the energy industry, the world's largest, is hungry for capital and change, two things that private equity firms specialise in. Hersh and company are clearly gearing up to manage a great deal more capital as these trends continue.
GOLDMAN CLOSES $20BN BUYOUT FUND
The principal investment division of Goldman Sachs has raised $20 billion (€14.7 billion), for its sixth buyout fund, the first firm ever to reach this mark – although rival private equity groups are reportedly closing in on even larger totals. GS Capital Partners VI closed is double its original $10 billion target. The total includes $11 billion from institutional investors and high net worth individuals, as well as a massive $9 billion from the firm and its employees. Goldman's last similar fund, GS Capital Partners V, closed in 2005 on $8.5 billion. Goldman's private equity arm is led by Richard Friedman.
PENSION FUND UPS PE WAR CHEST TO $7.5BN
The Minnesota State Board of Investments is planning to increase its private equity investments by $1.5 billion (€1.1 billion). Pensions & Investments magazine reported Howard Bicker, executive director of the Minnesota State Board of Investments, as saying the fund would increase its private equity allocation from 10 percent to 12.5 percent of its $60 billion pension assets. Bicker also told the magazine the board is considering investing in more funds in Europe, which would be the board's first allocation specifically focused on funds outside the US. The pension fund has made commitments to funds managed by US buyout firms Blackstone and Wayzata.
IVP CLOSES 12TH FUND ON $600M
The Menlo Park, California-based Institutional Venture Partners has closed a $600 million fund – twice the size of its previous fund. IVP will use the fund to invest in laterstage US technology companies. Its previous fund closed in 2004 on $300 million. IVP XII will target companies in the communications and wireless, internet and digital media and IT sectors, making investments ranging from $10 million to $30 million. IVP manages more than $2.2 billion in capital and has offices in Menlo Park and San Francisco. Since its 1980 founding, the firm says it has delivered a 43.2 percent internal rate of return to investors.
SUMMER STREET CLOSES $187M FUND
Summer Street Capital Partners has closed its second, small-market dedicated fund on $187 million (€138 million). SSCII's target was $150 million. Greenwich, Connecticut-based Champlain Advisors was the fund's placement agent. The fundraising took less than five months, said Terence Crikelair, managing partner at Champlain. “It was a terrific fundraising, very well received, almost surprisingly so given the smaller fund size – which is a pretty interesting indicator of where LPs are looking for value these days,” Crikelair said. Summer Street focuses on companies with revenues of $20 million to $100 million, but does not target specific sectors. Its previous investments include North American companies in the healthcare services, food services, and waste management sectors.
FORTRESS HALFWAY TO $5BN TARGET
New York-based Fortress Investment Group last month said it has obtained $2.84 billion (€2.1 billion) in third party commitments for its latest fund, which it expects to close on $5 billion. The publicly traded private equity and hedge fund manager is capping third party commitments at $4 billion, while an additional $1 billion will be contributed by Fortress employees and Fortress-affiliated funds. Interests in the new fund are not being offered in the US, Fortress said. Fortress also announced it has agreed to acquire Florida East Coast Industries in an all-cash $3.5 billion deal. Fortress became the first firm with a significant private equity business to go public in the US, when it sold a 10 percent stake in its management company earlier this year.
VENROCK CLOSES $600M FUND
Venrock, the venture capital firm originally established by the Rockefeller family, has closed a new fund on $600 million. The 38-year old venture firm has also hired a new general partner, David Siminoff, who founded and later sold EastNet, a company that enabled television stations in Eastern Europe to trade American TV programs for advertising time from major brands. Originally founded in 1969 as the venture capital arm of the Rockefeller family, Venrock has since invested $1.8 billion in 400 companies resulting in more than 120 initial public offerings. Its portfolio companies have included Apple Computer, DoubleClick, and Gilead Sciences.
DE SHAW CREATES PRIVATE EQUITY FUND
DE Shaw, a US hedge fund, is looking to create a private equity fund into which some of its existing private equity investments, like New York toy store FAO Schwartz, would be moved, according to the Financial Times. Lehman Brothers is reported to have bought a 20 percent stake in the firm. The overlap between the hedge fund and private equity markets has been increasing. Founded in 1988, DE Shaw manages about $29 billion and has offices in the US, the UK and India.