EnCap Investments LP, the private-equity firm that has backed about 200 energy companies since 1988, raised $5 billion for its latest fund, exceeding its target of $4.25 billion.
EnCap Energy Capital Fund IX LP started marketing in September and has committed $350 million to three companies, said David Miller, a managing partner and co-founder at the firm. The fund will invest in so-called upstream companies, or those focusing on oil and gas exploration and production.
“There’s growing institutional interest in energy and specifically in oil and gas,” Miller said in a telephone interview. “This fundraise was certainly shorter than prior funds. That’s largely driven by the performance in this space.”
Private-equity firms are amassing cash to take advantage of investment opportunities arising from strong energy demand. Riverstone Holdings LLC and First Reserve Corp. are both seeking $6 billion for new funds, and Riverstone has increased the amount it can gather to $7.5 billion. Blackstone Group LP, the largest manager of alternative assets such as private equity and credit, raised $2.5 billion for its debut energy fund in September.
EnCap, which has offices in Houston and Dallas, gathered $3.5 billion in January 2011 for its previous fund. The pool was generating an internal rate of return of 79 percent as of March 31, 2012, according to data from the California State Teachers’ Retirement System, an investor in the fund.
“Energy, and particularly carbon-related energy, is the single most attractive global area in which to invest today,” David Rubenstein, co-chief executive officer of Carlyle Group LP, which raised $1.4 billion last year for energy credit investments, said on a December conference call. “There is a revolution going on in the U.S. and a need for energy around the world as economies in the emerging markets grow.”