Excess energy

Washington DC-headquartered EIG Global Energy Partners was, at press time, set to close its 15th energy and energy-related infrastructure-focused fund on just over $4 billion.

While the amount of capital raised was impressive in its own right – especially considering the fund’s $2.5 billion target and $3.5 billion hard-cap – worth noting is that Fund XV represents the first fund raised under the EIG name following the firm’s spin out from TCW in October 2009. EIG finalised its independence from the Los Angeles-based asset manager (which also gave birth to Oaktree Capital Management) and Société Générale susbsidiary on 31 December 2010, following a roughly 14-month transitional period.

Formerly the energy and infrastructure group of TCW, EIG had no repuation as an independent firm to help attract commitments from limited partners during the fundraise, a fact that weighed heavily on chief executive officer Blair Thomas’ mind before coming to market in February 2010.

“We were expecting that it would be challenging for us and in fact it ended up being the exact opposite,” Thomas says. “Being independent ended up being a big positive.”

Admittedly, Thomas says, some of EIG’s fundraising success can be attributed to coming to market at the right time. “It just so happened that energy is one of those sectors where investors are looking to increase their exposure.”

On the other hand, Thomas believes some investors are eager to commit to newly minted spin-outs whose managing partners’ personal fortunes ride on the success of the business.

“When you’re part of a big firm, your individual business may struggle but you could still do fine personally because some other part of the firm does well,” he says. “That’s not the case obviously when you’re on your own.” Though an independent firm, EIG will continue to share management fees with TCW.

When it comes to single sector investing, energy is one of the most popular strategies of late, as evidenced by the slew of firms that have recently closed energy funds or that are currently finding success raising energy-dedicated vehicles.

EnCap Investments closed its eight fund – the firm’s largest ever with $3.5 billion in commitments – in late January, and Natural Gas Partners came to market in February with its 10th fund targeting $4 billion.

“It’s nice when your sector is in fashion,” Thomas says.

Another key ingredient to EIG’s oversubscribed fund was likely the firm’s long list of foreign limited partners. “Probably the most telling [statistic] is that 50 percent of our capital is from non-US investors,” Thomas says. Many US limited partners have tightened their purse strings, making smaller commitments with fewer managers.