Italian manager raising third, €500m renewable fund

Solar Investment Group has recently started raising the Real Asset Energy Fund, targeting investments in mature renewable sectors mainly across Europe and North America. The 25-year vehicle aims to pay an annual dividend of between 8% and 10% per year.

Italian fund manager Solar Investment Group is raising its third renewable vehicle, targeting a €500 million final close by the first quarter of 2013, the firm has announced.

Real Asset Energy Fund (RAEF), as the 25-year vehicle is known, is targeting investments in mature renewable technologies like wind, solar and biomass. The fund will invest 50 percent of its capital in Europe, 35 percent in North America and the remaining 15 percent across the rest of the globe. It plans to acquire between 30 and 35 renewable plants in five or six key markets, with target countries including Germany, Italy and the US, the fund manager said in a statement.

Most of RAEF’s investments (about 80 percent) will target operational assets with no construction risk backed by long-term government commitments such as feed-in tariffs or with power purchase agreements in place with investment-grade utilities, the Italian manager pointed out.

RAEF is targeting an annual dividend of between 8 percent and 10 percent and is targeting institutional investors dissatisfied with the returns provided by their fixed income portfolios, explained Luca Concone, chief executive of Solar Investment Group:

“Most of their [institutional investors’] fixed income portfolios currently return less than 3 percent per year and many equity investments have consecutively lost money over the last three years,” Concone said, before talking up the uncorrelated nature of funds like RAEF.

“If equities double or halve in value, RAEF will still target distributions of 8 percent to 10 percent per year. If interest rates [change?] from 3 percent to 1 percent or from 3 percent to 6 percent, RAEF will still target distributions of 8 percent to 10 percent per year. If the real estate market crumbles, RAEF will still target distributions of 8 percent to 10 percent per year.”

Solar Investment Group already manages two renewable funds holding 47 assets in their portfolios, generating a net dividend return above 12 percent, according to the firm. The Italian manager employs a management team of 16 people, which has acquired over €200 million of renewable plants over the last two years.