The big drop in oil prices has private equity and real asset investors on the edge of their seats, not knowing whether to sell limited partnership interests in funds investing in the ultra-hot energy sector or to view this as a buying opportunity.
Oregon Investment Council, which manages the $70 billion Oregon Public Employees Retirement Fund, Salem, has a target of more than $1 billion to invest in energy through its real asset allocations alone. Right now, it has $330 million in its energy portfolio.
However, Ben Mahon, the council's alternatives investment officer, said at a Dec. 3 meeting that the crude oil commodity exposure in the pension fund's alternatives portfolio is hedged.
Laurence G. Allen, managing member and CEO of NYPPEX LLC, a global securities firm specializing in the private equity secondary market, said limited partnership clients are starting to ask about prices of their energy fund holdings on the private equity secondary market.
“The severity of the decline in oil prices has caught many investors off-guard,” Mr. Allen said. “Some LP clients have begun to re-evaluate the energy sector. We believe some (limited partners) will decide to reduce their allocations to energy and alternative energy funds, while others will use this as a buying opportunity and increase allocations through the secondary market.”
Andrea Kramer, managing director and head of Bala Cynwyd, Pa.-based alternative investment consulting and money management firm Hamilton Lane Advisors LLC, thinks energy will remain an investment theme for asset owners, but “it is possible that we see a slight uptick in sales from LPs who have a different view on how the energy sector plays out.”