Ardian Enters Energy

Ardian Enters Energy

With Vladimir Colas of Ardian

Interviewed by Thomas Franco of Clayton, Dubilier & Rice

Thomas Franco, Clayton, Dubilier & Rice:

You have a view of a lot of different investment models and different industry sectors you have exposure to. Talk a bit about the energy area. Do you see that as a fertile place for private capital investment?

Vlad Colas, Ardian:

Yes. It’s a very exciting space for us. We started our program two to three years ago on the energy space. Not an early mover by any means. But, since then, we’ve discovered a space that’s done very well for us. We started on the primary side committing to a few funds that had energy exposure, then increasing that exposure through secondary purchases. Now, we have a dedicated secondary-energy side-pocket to our new fund, and it’s a market that’s performed very well. Obviously, we’re very U.S.-focused on that market right now, but we’re gradually expanding outside the U.S.  And we see a lot of growth still in that market.

Franco: Are there any particular challenges in terms of evaluating managers that are pursuing an energy-related strategy?

Colas: In our view, the challenge at the beginning was the blind-pool risk that you have in general in private equity but was maybe more prevalent on the energy space because even the managers you back themselves will back the management team. So, in some cases, by the time you have a view on the assets, it’s taken a bit of time. But, we’ve gotten comfortable with that after a while by knowing the managers better and knowing the teams they back that you start to see over and over in several projects. Also, we’ve gotten comfortable with it through the secondary side because, once you enter a fund on the secondary side, you already have a view on the assets that those management teams have contracted and that eliminates some of this risk.

Franco: What about ESG or green strategies? Is that growing in importance in terms of your exposure?

Colas: Very important. On the ESG side, in particular, we’ve been asking our GPs for a while now to help us define what they do in the portfolio companies and to understand what more can be done in that space. On the green energy side, we’ve been active through our direct investment-infrastructure program investing in wind energy and solar energy, in particular. We think this market will grow, particularly in Europe. In the U.S., we haven’t done as much so far, but it’s definitely something we’re looking at.