University of Michigan bets on natural resources fund

Two-year-old Blue Water Capital closed its debut fund on its hard-cap of $861m last month for energy-services related businesses.

The University of Michigan Board of Regents authorised the commitment of $20 million from its $8.4 billion endowment last month to Blue Water Capital’s debut fund, according to university documents.

The firm closed Fund I last month on its hard-cap of $861 million. Its target was $750 million and after a $300 million first close last October, the firm spent less than a year in the market, according to Private Equity International’s Research and Analytics division.

“An investment with Blue Water Energy is an opportunity to increase the global exposure in our existing currently US-centric natural resources private equity portfolio,” said Timothy Slottow, executive vice president and chief financial officer of the University of Michigan in a university document.

The endowment has allocated about $1.2 billion—14.9 percent of its assets— to private equity, as of March 31. In 2012, the University committed $1.3 billion to private equity and saw a 14.4 percent return for the calendar year.

In February, the board reported a $30 million re-up to Silver Lake Partners IV. Previously the endowment committed $80 million across three Silver Lake funds, including $30 million to the firm’s third fund. Late last year, the board committed $15 million to Detroit-based Huron Capital Partners. Huron sought $350 million for its fourth vehicle, according to a Bloomberg report. Smaller commitments recently made include $12 million to Battery Ventures X and $4 million to the firm’s side fund, both of which invest in software, e-commerce, and digital media.

Blue Water Energy was founded in 2011 by Jerker Johansson, former chief executive at UBS Investment Bank, Thomas Sikorski, former head of First Reserve Corporation’s London Office and Graeme Sword, a former partner and head of oil and gas at 3i Group.

Based in London, Blue Water’s strategy is to buy and build global companies that focus primarily on oilfield equipment and services, as well as oil and gas reserves. The fund will focus on mid-market investments, requiring equity of $50 million to $100 million. The European firm expects most of its portfolio companies to be based in Europe but plans to have other international customers.