Hill: In the early days they were fewer in number and capital commitments were smaller, and to the extent that they were looking for exposure to energy, it was for income or as an inflation hedge. But in the 1990s, investors started to recognise the virtues of industry-specific funds. Since then there’s been a huge growth in the number of LPs who will look at industry-specific as opposed to generalist funds.
Second, the size of the tickets has grown. When we got a $25 million commitment from a major institutional investors in the early 1990s, we had a big party. Today we receive $250 million or $400 million tickets.
The other thing that’s become more important is co-investment. In the 1990s, nobody talked about co-investment. In the first half of the 2000s, a lot of people would talk about it but very few did it. Today, we have a lot of investors who really want to co-invest.
How has the firm developed and institutionalised over the last 30 years?
In the early days it was just five of us sitting around, doing our own diligence on legal pads and HP calculators. Today it’s vastly different: we have 75 investment professionals across four offices, plus another 90 or so doing all the related work.
We have found that technology has been enormously helpful: we have all these high-powered computers so our young whizz-kids can build models for the investments we’re looking at and every Monday morning we have a firm wide meeting via videoconference.
We’ve also really focused on human resources. We recruit every year out of business schools and investment banks to make sure we develop talent from a young age; take Alex Krueger in our London office, who’s just been made president: he’s been with us 14 years, he’s really home-grown. And we’ve been hiring an increasing number of staff from the industry itself: geologists, engineers, and people with a strong background in management.