Investors in a private equity energy fund can expect to earn an annualized net internal rate of return of 10.3%, according to a forthcoming Preqin report.
To show the typical returns an investor might expect from an energy fund, Preqin executives pooled the IRRs of all energy funds, grouped into their energy type, and then looked at the median and quartile IRRs of each pool, explained William Clarke, spokesman, in an email. Preqin executives used fund performance of energy funds of all different vintages as of Sept. 30.
Fundraising for conventional energy alternative investment funds — those investing in oil, natural gas, coal, oil field services or a combination, declined by 41% from record high levels in 2015 to April 30, according to the upcoming Preqin report.
Funds investing in fossil fuels accounted for 46% of the energy capital raised between 2008 and April 30. Some 33% of the capital raised during the same time period was for renewable energy funds — those focused on biomass, geothermal, hydroelectric, solar or wind power or a combination. The remainder of capital raised in the time period, 21%, was for funds that invest in both fossil fuels and renewable energy, Preqin's report notes.
Mixed funds have had the most growth, raising $19.3 billion by three funds so far this year through April 30 and $23.5 billion by eight funds in all of 2016, up from $13.8 billion raised by 12 funds in 2015. By comparison, six conventional fossil-fuel energy funds raised $1.9 billion this year through April 30, compared to $22.3 billion raised by 27 funds in 2016 and $38.1 billion raised by 39 funds in 2015. Nine renewable energy funds raised $4.8 billion the first four months of this year, compared to $12.6 billion last year by 26 funds and $13.8 billion raised by 22 funds in 2015, according to Preqin.