Private capital tracker Preqin says in an update that contrary to expectations, 2018 was another bumper year for the metals and minerals industry, particularly for natural resources investments.
Fundraising by unlisted funds for investment in natural resources – oil and gas, timberland, farmland, water and mines – set a fresh record in 2018 and is likely to top $100 billion for the first time.
Although significantly fewer funds closed in 2018 compared to the previous year, $93 billion in total capital was secured for investment in the sector. Preqin expects this to rise by up to 10% as more data come in.
After a dismal 2017, capital raised for investment in mining and metals was also up significantly compared to last year, but still makes up only a small percentage of natural resources private capital.
Preqin’s analysis show energy-focused funds – only oil and gas as investments in coal have dried up – accounted for almost all of the year’s activity as 77 funds raised $89 billion. The vast majority of these funds target North American oil and gas plays.
By comparison, just four metals and mining funds closed and raised $2.5 billion. Encouraging for the sector is that over half (57%) of natural resources funds exceeded their targets in 2018, “indicating that investor appetite outstripped fundraising capacity,” says Preqin.
The sharp pullback in metal prices in the second half of the year over uncertainty of the strength of the Chinese economy, which consumes half the world’s metals and minerals, and trade relations with the US, made it difficult for the funds in the market in 2018 to come near the $4.9 billion sought.
The global private capital space has experienced rapid growth over the last decade and last year 1,733 private capital funds raised an aggregate of $757 billion, down from the record $925 billion raised in 2017.