Riverstone Energy raises £760m

Shares of Riverstone’s first listed vehicle, which had an initial target of £1.5bn, dropped 5% in the grey market yesterday.

Riverstone Holdings has raised £760.3 million (€892 million; $1.2 billion) for Riverstone Energy, its new London-listed, closed-end fund.

The amount is well below the fund’s original target, which stood at £1.5 billion. Shares in the vehicle – which will be officially admitted to trading on 29 October but started selling on the grey market yesterday – closed at 949p, or 5 percent below their £10.00 value at issuance.

Contributions by cornerstone investors accounted for £500 million of the total. These include AKRC, an affiliate of the Alaska Permanent Fund Corporation; KFI, a private investment vehicle of Moore Capital Management founder Louis Bacon; Hunt Oil Company, a private company controlled by energy executive Ray Hunt; Casita LP, a European family office; and the McNair Group, a consultancy and investment firm owned by American businessman Robert McNair. Riverstone’s management committed an additional £50 million.

Riverstone Energy will focus primarily on exploration and production in the energy sector as well as midstream opportunities. The fund “will fill an important space in the London market, enabling investors to access the investment gap between the mature majors and the smaller E&P players,” Riverstone commented earlier this year.

It will invest alongside Riverstone’s Fund V, the first buyout vehicle raised by Riverstone since it ended its tie-up with The Carlyle Group. The fund reached a final closed on $7.7 billion last June.

Riverstone Energy has a mandate to invest globally, although Riverstone’s history suggests it will be more strongly weighted towards North America. The firm expects to be deploying the fund’s capital within the next 24 to 36 months, with no single investment making up for more than 25 percent of the portfolio.

Management fees will amount to 1.5 percent of net assets. The firm will also charge a performance fee equal to 20 percent of gross realised profits.

In addition to Pierre Lapeyre and David Leuschen, Riverstone’s founders, the fund’s board include Lord Browne, the former chief executive of oil major BP. It is chaired by Robert Wilson, a former chairman of UK energy group BG.

Founded in 2000, Riverstone has raised $25 billion across seven private investment and co-investment funds to date. Its investments have generated a net overall IRR of 20 percent since inception, according to broker Numis Securities.