The vast majority of SAF Annex Fund came from existing LPs in SAF III, according to managing partner Reuben Munger, and will go towards supporting assets in the firm’s third fund, which reached its $1.25 billion close in April 2021, as well as some assets in the company’s $670 million second fund.
“As the opportunity set [of Fund III] has bigger investments, we needed to raise a fund to support the size of it,” Munger told Infrastructure Investor.
SAF III has made four investments to date, the latest of which came September in EV charging infrastructure group TeraWatt Infrastructure, which raised about $1 billion from Vision Ridge and existing investors. Munger declined to disclose the specific figure of SAF III’s deployment rate but said it “is more committed than it’s not”. The fund set out to make between eight and 12 investments at ticket sizes of between $75 million and $175 million, according to a statement at the time of its close.
“It’s really about investment sizes. Any given fund doesn’t want to be concentrated, it’s always the larger positions the annex fund would take up,” explained Munger. “If the underlying fund is at capacity, then the overflow would go to the annex. The opportunity set was big enough that this is the best way to approach what would effectively have been a series of co-investors.”
The annex vehicle was launched last year, about 12 months after SAF III’s final closing. Munger said Vision Ridge had to be precise in the amount it targeted.
“The annex fund had a first close in Q2 2022 to support a specific transaction and then we had our primary close in the summer, which was the majority of the capital”, added Munger. “We were trying to gauge the right amount of what was going to be the overflow so we set [the annex’s target] right to be fully invested in line with our investment approach to have SAF III fully invested.”
Vision Ridge typically targets investments in industries shifting to sustainability such as energy, transportation and agriculture. It targets a majority of investments in North America, but also has over a quarter of its allocation reserved for deals in Europe.
“The Inflation Reduction Act has really expanded the opportunity set within the US, so that’s really good for our existing portfolio, but there are also a number of things we’ve seen which are tied to a variety of expansion of subsidy dynamics,” Munger outlined.
In July, Vision Ridge sold renewable natural gas operator Vanguard Renewable to BlackRock, marking the final investment of BlackRock’s Global Energy & Power Infrastructure Fund III.