ARC Closes Fund 8 in Hot Canadian Energy Market

The first PE manager to focus exclusively on Canada’s oil and gas sector recently closed its eighth fund. ARC’s Nancy Smith explains why this fundraise was its fastest yet.

After its eighth fund closed at the beginning of June, Canada’s leading energy-focused private equity manager, ARC Financial Corp., found the fundraising process very efficient. The firm raised C$1.5B of institutional capital for ARC Energy Fund 8 in the shortest amount of time yet.

“We were fundraising for only a few months,” says Calgary-based ARC’s managing director, Nancy Smith. “This one was faster [than ARC’s previous fundraises]. The interest in Canadian energy has grown, and we had a lot of repeat investors.”

The investment strategy for the latest fund is the same as for those that came before—collectively, ARC’s eight funds have raised more than C$5B—with an exclusive focus on Canadian growth energy companies, exploration and production, and oilfield services.

Investors increasingly want energy exposure, and Canada is considered a “safe country” for them to get it, Smith says. The majority of capital ARC has raised comes from the U.S. and internationally, with some from Canadian pensions and endowments, she adds.

ARC boasts of having the largest and most technically experienced PE energy team in Canada. Smith says that this expertise gives the firm a better understanding of the industry and potential investments, regardless of commodity prices or other volatility that can come into play.

“We have a number of engineers and geologists, and a network of relationships in Canadian energy,” Smith says. “We’re finding assets, finding teams, and working with portfolio companies.”

ARC has an executive-in-residence program for CEOs of prospective portfolio companies. Those executives will come into ARC’s offices, where people at the firm will work with them “for a number of months” as they put together a business plan, with the firm providing analytical, technical, and administrative support, she explains. “It’s a good way for people to get to know us and for our due-diligence process.” The program was happening casually for a number of years and more actively in the past two to three years.

While interest in Canada’s energy sector has expanded, ARC will stay the course with the capital raised in Fund 8, continuing to focus on investments of C$50M to C$200M.