Ares Management launches energy fund despite past problems, says UNITE HERE

Ares’s energy track record includes hazards, poor performance

LOS ANGELES--(BUSINESS WIRE)-- The following was issued by UNITE HERE:

Ares Management is launching an energy infrastructure fund, Ares EIF Management V,i soon after completing the acquisition of the specialty private equity firm Energy Investors Funds in January, with $4 billion in assets under management.ii

Ares may face headwinds in a competitive market, according to a report by UNITE HERE, available here: http://www.pecloserlook.org/wp-content/uploads/Ares-Investment-Hazard-UNITE-HERE-050515.pdf

Ares joins a surge in private equity into energy-related funds. So far, 2015 is off to a frenzied start with 70 energy-focused funds in market seeking $43 billion (the previous 5 years saw an average of 46 energy related funds annually).iii

Ares inherited EIF’s track record of underperformance. Three of EIF’s four funds have lagged relative to peers.iv The most recent fund, USPF IV (2010) had a reported net IRR of -3.5% as of the 3Q 2014, below the Cambridge Associates benchmark of 17.39%.v

EIF investments encountered problems as well. A tragic accident at a Connecticut power plant resulted in the deaths of six workers with dozens more injured. In another investment, community resistance to a proposed New Jersey pipeline has slowed down plans.

Ares itself had invested in the energy sector prior to the acquisition of EIF. One example is the Plasco Energy Group, an Ares private equity portfolio company that recently declared bankruptcy after years of problems.

Full report available here: http://www.pecloserlook.org/wp-content/uploads/Ares-Investment-Hazard-UNITE-HERE-050515.pdf

Questions for Investors:

• What gives Ares confidence that it can deliver alpha for investors, given past underperformance?
• With so many energy funds on the market, why choose one with EIF’s record of underperformance relative to peers?
• How does Ares conduct due diligence? How does it ferret out potential risks in the pre-acquisition phase?
• What clawback provisions will Ares offer investors in the event the fund underperforms?

i Ares EIF Management V, L.P. registered with the Delaware Department of Corporations January 28, 2015; Ares Management Q4 2014 Results - Earnings Call Transcriptii Press Release “Ares Management, L.P. Closes Acquisition of Energy Investors Funds” January 9, 2015 http://www.ares-ir.com/file.aspx?IID=4438507&FID=26960224iii Preqin Energy-Focused Fundraising, March 2015iv CC CERA Quarterly Review and Performance Measurement Report 3Q14, Cambridge Associates U.S. Private Equity Index 3Q14v CC CERA Quarterly Review and Performance Measurement Report 3Q14, Cambridge Associates U.S. Private Equity Index 3Q14

UNITE HERE
Alyssa Giachino, 310-795-5537
[email protected]

Source: UNITE HERE

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