INVESTMENT STRATEGY Natural next step

Barclays Capital, the investment banking division of the UK's Barclays Bank, is taking steps towards launching a natural resources-focused private equity division. Barclays Natural Resources Investors (BNRI), which has now invested around $1 billion from Barclays' balance sheet into 10 deals, is extending its funding base to include third-party capital in response to increased investor demand for direct exposure to natural resources assets.

The team is now working on co-investment opportunities with certain Barclays Capital clients – mostly sovereign wealth funds and ultra-high-net-worth individuals. At the same time the group is in talks with the South Korean government to launch and co-manage a $400 million natural resources fund.

“There is a real gap in the market, especially outside North America,” says Meb Somani, a partner at BNRI, who adds that the decision to open deals to co-investment was driven more by client demand, rather than BNRI actively courting co-investors. “It was always the aim to raise external capital for investment, but not within so fast a timeframe. Clients want increasing exposure to commodities as an inflation hedge, especially in emerging markets.”

Before joining BNRI in 2008, Somani was head of oil and gas investments at emerging markets private equity investor Actis.

Other private equity veterans drafted into the BNRI team include: Mark Bailie, former head of large cap buyouts at Barclays Capital; Tom Cairnes, a large cap veteran from Barclays Capital and former principal investor at Cazenove and Nomura; and Freddie Lee, also from Barclays' large cap buyout division and formerly of RBS Equity Finance.