The worst-performing asset class in alternative investments is natural resources — but some energy funds have managed to deliver outsize returns, according to new data from Preqin.
The investment data firm reported that natural resources funds on average returned 1.5 percent over the 12-month period ending in June 2019, underperforming every other asset class. Natural resources funds also had lower median net internal rates of return (IRRs) than other alternatives over the past ten vintage years.
“More investors feels underwhelmed by performance than feel it has exceeded expectations,” Preqin said in a statement Tuesday.
At the same time, natural resources funds launched over the past decade have had the highest variance in returns, meaning that some managers have performed significantly better than others. This is made apparent by Preqin’s ranking of the top-performing energy funds, with energy strategies overall accounting for about 72 percent of active natural resources funds.
The top energy fund launched between 2008 and 2017, according to Preqin, is Kimmeridge Energy’s third vehicle, which has delivered 587 percent annualized net IRR since its inception in 2016. Kimmeridge Energy Fund III, which targets energy investments in North America, has $200 million in assets under management, per the report.
The next-highest-performing fund, Carnelian Energy Capital’s $400 million debut fund, has gained an annualized net return of 216.7 percent since it launched in 2015.
[II Deep Dive: These Are the Best Performing Funds of Funds in Private Equity]
Both funds are what Preqin described as “conventional” energy investors. Their returns have far surpassed any other energy fund, with the rest of the top-five conventional energy funds delivering annualized net IRRs between 41 percent and 50 percent.
Meanwhile, the highest-performing renewable energy fund — and third best energy fund overall — is Kobus Renewable Energy I. The first renewable energy fund from Spanish private equity firm Kobus Partners, it has delivered an annualized net return of 63.1 percent since its 2016 vintage year.
According to Preqin, renewable energy funds have been taking market share from conventional funds in recent years. Renewable energy funds accounted for more than two-thirds of funds closed in 2019, up from 46 percent in 2018.
However, fundraising for “pure” energy funds — excluding private equity and infrastructure funds that invest in natural resources — was down overall. Just 13 such funds closed in 2019, a fraction of the 32 vehicles that closed in 2018.