Kayne Anderson closes $550m energy fund

Los Angeles and Houston-based private equity firm Kayne Anderson Capital Advisors announced today the final close on its third fund focused on the energy sector with total commitments of $550 million (€425 million).

Daniel Weingeist, a senior managing director at Kayne Anderson, noted that the fund’s PPM was sent to investors last August with a target between $400 million and $500 million. The fund, which closed in November 2004, received $800 million of investor interest according to Weingeist.

Weingeist added that of the $550 million in commitments, $250 million came from existing investors with the balance comprised of new limited partners.

The firm’s second energy fund, which closed in 2002 on $240 million, will be fully invested in the next few weeks. Since 1991, the firm has invested $438 million of capital with 22 energy companies. As in previous funds, Kayne Anderson will continue to make equity investments of $10 million to $75 million per transaction, focusing on North American businesses in the oil and gas industries.

The energy sector has recently received a lot of attention from private equity investors. In July 2004, a consortium of buyout firms including The Blackstone Group, Hellman & Friedman, Kohlberg Kravis Roberts and Texas Pacific Group acquired power generation company Texas Genco for $3.65 billion. And in April of last year, Carlyle Group and Riverstone Holdings closed their second energy fund on $1.1 billion.

Weingeist noted that, despite the interest in the sector, his firm continues to find attractive opportunities, but that caution is paramount given the current levels of commodity prices. “We don’t like exploration companies,” he added. “We focus more on acquisition and development and low-risk drilling. Our firm’s not going to generate a five-bagger, but we’re hoping to get two to three times our investment”.

Kayne Anderson was founded in 1984 by Richard Kayne, a former Cantor Fitzgerald principal, and John Anderson, an attorney, financial investor and philanthropist for whom the UCLA business school is named. The firm manages over $3 billion of alternative assets through four investing arms:  its three energy-focused private equity funds; a general private equity fund; a hedge fund focused on REITs, master limited partnerships (MLPs) and risk arbitrage; and a publicly-traded closed end investment fund, Kayne Anderson MLP Investment Company, which went public in a $750 million IPO in September 2004.