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Insights Blog

Understanding Private Equity Investing in Natural Resources

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1 minute read
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Understanding Private Equity Investing in Natural Resources
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Private natural resources investing can cover a range of market segments including upstream oil & gas, mining & minerals, agriculture, and timber. This investment approach can also target infrastructure, frequently with an emphasis on energy infrastructure such as midstream and downstream transportation and processing facilities along with power generation and related assets.

Often an asset-centric strategy, this area for some investors may also include private equity-style services such as oilfield services. Private investment in natural resources covers a broad ecosystem of opportunities and risk-reward considerations.

Within the various market segments comprising natural resources, investors can target a range of opportunities that may offer different risk-reward balances. Take agriculture investments as one example. Approaches targeting broad acre row crops (such as wheat or corn) versus those targeting permanent crops (such as stone fruit or citrus) can offer significantly different potential returns – and potential risks. Similarly, an upstream energy strategy targeting minerals interests (royalties on future revenues) may offer different characteristics to an operated working interest approach (operating an oil & gas drilling and production asset). There can even be differentiated risk-reward strategies within these sub-strategies, such as minerals strategies targeting operating assets versus those seeking to secure positions in advance of drilling. The bottom line is the natural resources investment landscape is a diverse one, offering a range of potential risk-reward options.

Given the complexity and variety, why do some institutions seek this exposure in their private equity or private capital portfolio? Investors often target private natural resources exposure for the potential combination of risk-adjusted returns, diversification and inflation hedging benefits. Executing this investment strategy through private markets can also potentially help dampen the volatility investors might receive from similar exposures in public markets.

Interested in learning about Private Equity in Natural Resources?

headshot of blog author, Dan Connell

Author

Dan Connell

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Dan Connell is Co-Head of Real Assets and Sustainability for CF Private Equity. His primary responsibilities include due diligence, investment selection, portfolio construction, monitoring, and fundraising for the firm’s real assets and sustainability programs, which include mandates surrounding natural resources and environmental sustainability that are constructed with co-investments, secondaries, direct operating platforms and primaries. Prior to joining CF Private Equity, he worked as a principal investor on energy infrastructure with GE Capital’s Energy Financial Services, where he focused on both project finance debt and international equity. Before his time with GE Capital, Dan worked in commercial development for Atlantic Power and served as an Intelligence Officer in the US Navy. He has a B.A. from Seton Hall University, an M.P.A. from Harvard’s Kennedy School of Government and an M.B.A. from MIT’s Sloan School of Management. 

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Managing Director, Co-Head of Real Assets and Sustainability

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Certain information contained herein has been obtained from or is based on third-party sources and, although believed to be reliable, has not been independently verified. Such information is as of the date indicated, if indicated, may not be complete, is subject to change and has not necessarily been updated. No representation or warranty, express or implied, is or will be given by The Common Fund for Nonprofit Organizations, any of its affiliates or any of its or their affiliates, trustees, directors, officers, employees or advisers (collectively referred to herein as “Commonfund”) or any other person as to the accuracy or completeness of the information in any third-party materials. Accordingly, Commonfund shall not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement in, or omission from, such third-party materials, and any such liability is expressly disclaimed.

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Disclaimer

Certain information contained herein has been obtained from or is based on third-party sources and, although believed to be reliable, has not been independently verified. Such information is as of the date indicated, if indicated, may not be complete, is subject to change and has not necessarily been updated. No representation or warranty, express or implied, is or will be given by The Common Fund for Nonprofit Organizations, any of its affiliates or any of its or their affiliates, trustees, directors, officers, employees or advisers (collectively referred to herein as “Commonfund”) or any other person as to the accuracy or completeness of the information in any third-party materials. Accordingly, Commonfund shall not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement in, or omission from, such third-party materials, and any such liability is expressly disclaimed.

All rights to the trademarks, copyrights, logos and other intellectual property listed herein belong to their respective owners and the use of such logos hereof does not imply an affiliation with, or endorsement by, the owners of such trademarks, copyrights, logos and other intellectual property.

To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated herein. Forecasts of experts inevitably differ. Views attributed to third-parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Market and investment views of third-parties presented herein do not necessarily reflect the views of Commonfund, any manager retained by Commonfund to manage any investments for Commonfund (each, a “Manager”) or any fund managed by any Commonfund entity (each, a “Fund”). Accordingly, the views presented herein may not be relied upon as an indication of trading intent on behalf of Commonfund, any Manager or any Fund.

Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Fund. Such statements are also not intended as recommendations by any Commonfund entity or any Commonfund employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information or statements. Past performance is not indicative of future results. For more information please refer to Important Disclosures.