FS Investments powers new energy fund

The Philadelphia-based firm already manages $5bn of energy-related assets.

FS Investments has launched a fund to invest in energy and infrastructure companies, the company said on Monday.

FS Energy Total Return Fund will invest in both equity and debt and is the asset manager’s first closed-end interval fund. The firm plans to draw down some $20 million in the vehicle’s initial closing, according to US Securities and Exchange regulatory documents.

The firm intends to invest at least 80 percent of the fund’s capital in the “natural resource industry”, or businesses the development of energy infrastructure related to crude oil, petrochemicals, natural gas, natural gas liquids, coal and renewable energy sources, according to the SEC filing. These investments may include non-investment grade securities.

The fund will have a management fee of 1.75 percent gross assets and can lever up to an amount of up to 50 percent of its net assets.

With a flexible investment mandate, the fund will have the ability to invest in directly originated loans, however it will not be the fund’s primary emphasis, a company spokesperson told sister publication Private Debt Investor.

Mike Kelly, chief investment officer at FS Investments, said in a statement that the fund will primarily focus in liquid equity securities, but it “will invest in less liquid securities that have the potential for outperformance”.

The FS Energy Total Return Fund has a “flexible investment mandate across all energy sub-sectors and capital structures” with a long-term investment process that aims to “manage macroeconomic and commodity price risk”, according to the statement.

FS Investments added that the firm hopes to capitalise on the “changing sources of energy supply, ageing energy infrastructure, merger and acquisition activity in the sector, and commodity price volatility”.

The investment sub-advisor for the fund will be Magnetar Asset Management, an Illinois-based alternative asset management group with prior experience in energy. That advisory firm manages approximately $4.3 billion of investor capital in private funds and institutional accounts.

At the time of the interval fund’s launch, FS Investments managed more than $5 billion of energy and power assets, with a focus on directly originated private debt investments, the company said.

The firm’s other energy-focused fund, the FS Energy and Power Fund, manages $4.3 billion, as of November, according to its website.

FS Investments is headquartered in Philadelphia and currently manages seven funds worth more than $19 billion as of 31 December, the firm said. Founded in 2007, the firm rebranded itself from Franklin Square Capital Partners to FS Investments last August.