Pension funds and FoFs continue to wade into cleantech funds

Cleantech investments is one area in the private equity and venture capital space which is continuing to show strong growth, according to a report by London-based alternatives research house Prequin.

A total of 29 funds globally raised an aggregate of $6 billion in 2008 despite the deepening financial crisis, while the same number of funds raised only slightly more ($6.3 billion) in 2007.

The fastest-growing area for new funding for cleantech among private equity managers was the funds-of-funds, which raised $630 million compared with $70 million the year before.

Funds-of-funds (FoFs) accounted for 19 per cent of the number of investors in the space, compared with 15 per cent for pension funds, but several of the most significant investors by size are pension funds.

The report looked at 380 cleantech-focused private equity firms in Europe, North America and Asia. Europe, including the UK, accounts for 48 per cent of LPs (limited partners – investors), while North America accounts for 34 per cent and Asia and the rest of the world 18 per cent. However, 45 per cent of the GPs (general partners – managers) are based in the US, against 36 per cent in Europe and 19 per cent in Asia and the rest of the world.

“As well as being the most significant world hub for venture capital in general, Silicon Valley (in California) is also known as a major base for the cleantech industry specifically,” the Prequin report said.

The research covered both private equity and venture funds which have invested in cleantech as part of a broader mandate and those which invest specifically in cleantech. The growth trends are for both type of fund.

The report noted that the number of firms which commenced making cleantech investments as part of a broader mandate more than quadrupled between 2004 and 2008. The number of firms with specifically cleantech funds rose from nine to 41 between 2004 and 2007, slipping back to 39 last year.

The amount of money raised for cleantech looks like it may soar this year. The report said total funds being sought currently by North American funds alone, for 2009, is $9 billion and European funds are seeking a further $7.2 billion.

The full report is available for sale from Prequin – www.prequin.com