Ares EIF V misses $2bn target, closes at $800m

The close comes as its two predecessor funds posted single-digit net returns well below the firm's 15%-17% net IRR target for its power and energy infrastructure strategy.

Ares Management’s fifth power and energy infrastructure fund has reached a final close at just over $800 million, missing its $2 billion target.

“We held a final closing of more than $280 million for our fifth power and energy infrastructure fund, bringing EIF V to just over $800 million,” Michael Arougheti, president of the $104 billion asset manager, said on a conference call last week.

EIF V’s target had already been reduced from $3 billion to $2 billion, according to documents filed with the Securities and Exchange Commission last November.

The firm declined to comment further.

But Ares Q2 earnings documents show its US power and energy infrastructure funds are not hitting the firm's desired 15-17 percent net return targets. EIF V’s predecessor, the $1.7 billion EIF United States Power Fund IV, posted a 9.5 percent net IRR and a 1.3x net money multiple as of 30 June, with the $1.35 billion United States Power Fund III recording a 5.9 percent net IRR and a 1.4x net money multiple.

EIF V launched in 2015, months after Ares completed its acquisition of NY-based Energy Investors Funds, a deal that added around $4 billion in assets under management to the company’s portfolio. It is the first power and energy infrastructure fund to be raised post acquisition. 

Ares manages five funds investing in power and energy infrastructure, focusing on electric generation, transmission facilities and midstream assets. “Since acquiring EIF in 2015, we've raised more than $1 billion in that strategy including associated funds and co investments,” Arougheti said.

He added there is a chance Ares could expand its focus from investing in mainly energy and energy infrastructure assets. He said there was an opportunity to “extend the borders and boundaries” of its current strategy into other infrastructure-related assets.

“Whether or not we push fully into what folks would call core infrastructure I think is TBD [to be decided],” Arougheti said.