Post Oak Energy Capital has found a unique way to navigate the treacherous fundraising environment: get one limited partner to meet your target.
The firm, formed in 2006 by the former president of a Carlyle/Riverstone portfolio company, announced Thursday it has formed a partnership with the $27 billion University of Texas Investment Management Company in which UTIMCO will commit $200 million to the firm’s debut fund.
In this case, UTIMCO will be Post Oak’s only limited partner. The firm had hit the fundraising trail last year with a $200 million target for its debut investment vehicle after operating for several years on a deal-by-deal basis. The firm closed 14 investments during that time.
“It was attractive to us, it was sort of, one and done,” Frost Cochran, founder and chief executive officer of Post Oak, told Private Equity International in an interview. “This was an attractive way for us to get the diligence done and get on with making investments.”
This was an attractive way for us to get the diligence done and get on with making investments.
The oil and gas sector, especially the lower mid-market, is rife with opportunity, Cochran said. Post Oak focuses investments on oil and gas production, oil field services and some power and infrastructure. The firm usually doesn’t compete with larger public companies or big private equity firms.
“Most of the public companies are focused on large resource plays – multi-hundred billion dollar opportunities. $50 million, $100 million, $150 million in assets just doesn’t move the needle [for them],” Cochran said.
UTIMCO’s head of natural resources investments, Mark Warner, did not return a call for comment. LPs have in general been working to concentrate their private equity portfolios, cutting down on the number of manager relationships. Going forward, many institutions have publicly revealed plans to commit more capital to fewer managers.
It’s unclear if UTIMCO is committing more capital to fewer managers; however, Cochran said during his time on the fundraising trail last year, he “got the sense” that investors were looking for more concentrated portfolios.
“It’s less of a shotgun approach, more like, a lot of LPs are taking more of a rifle-shot approach,” Cochran said.
In another example of a unique, customised LP approach, the Teachers’ Retirement System of Texas earlier this month announced two partnerships with Kohlberg Kravis Roberts and Apollo Global Management. The pension is committing a total of $3 billion to each firm, to be invested across asset classes.