Meet The Only Private Equity Fund In History To Raise $2 Billion From Investors And Return $0

Tyler Durden's picture

Sir Richard Branson once said that the quickest way to become a millionaire was to take a billion dollars and buy an airline. But, as EnerVest Ltd, a Houston-based private equity firm that focuses on energy investments, recently found out, there's more than one way to go broke investing in extremely volatile sectors. 

As the Wall Street Journal points out today, EnerVest is a $2 billion private-equity fund that borrowed heavily at the height of the oil boom to scoop up oil and gas wells.  Unfortunately, shortly after those purchases were made, energy prices plunged leaving the fund's equity, supplied primarily by pensions, endowments and charitable foundations, worth essentially nothing. 

The outcome will leave investors in the 2013 fund with, at most, pennies for every dollar they invested, the people said. At least one investor, the Orange County Employees Retirement System, already has marked its investment down to zero, according to a pension document.

 

Though private-equity investments regularly flop, industry consultants and fund investors say this situation could mark the first time that a fund larger than $1 billion has lost essentially all of its value.

 

EnerVest’s collapse shows how debt taken on during the drilling boom continues to haunt energy investors three years after a glut of fuel sent prices spiraling down.

But, at least John Walker, EnerVest’s co-founder and chief executive, expressed some remorse for investors by confirming to the WSJ that they “are not proud of the result.”

Enervest

 

All of which leaves EnerVest with the rather unflattering honor of being perhaps the only private equity fund in history to ever raise over $1 billion in capital from investors and subsequently lose pretty much 100% of it. 

Only seven private-equity funds larger than $1 billion have ever lost money for investors, according to investment firm Cambridge Associates LLC. Among those of any size to end in the red, losses greater than 25% or so are almost unheard of, though there are several energy-focused funds in danger of doing so, according to public pension records.

 

EnerVest has attempted to restructure the fund, as well as another raised in 2010 that has struggled with losses, to meet repayment demands from lenders who were themselves writing down the value of assets used as collateral, according to public pension documents and people familiar with the efforts.

So, who's getting wiped out?  Oh, the usual list of pension funds, charities and university endowments.

A number of prominent institutional investors are at risk of having their investments wiped out, including Caisse de dépôt et placement du Québec, Canada’s second-largest pension, which invested more than $100 million. Florida’s largest pension fund manager and the Western Conference of Teamsters Pension Plan, a manager of retirement savings for union members in nearly 30 states, each invested $100 million, according to public records.

 

The fund was popular among charitable organizations as well. The J. Paul Getty Trust, John D. and Catherine T. MacArthur and Fletcher Jones foundations each invested millions in the fund, according to their tax filings.

 

Michigan State University and a foundation that supports Arizona State University also have disclosed investments in the fund.

Luckily, we're somewhat confident that at least the losses accrued by U.S.-based pension funds will be ultimately be backstopped by taxpayers...so no harm no foul.

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HRClinton's picture

Well, well, well.

That went fast.

blueyefinity@yahoo.com's picture

Those j00s gave the investors a nothing burger.

The KOSHER type.

Meanwhile in DC,

Washington DC Restaurant is Giving Out Free ‘Nothing Burgers’


Occident Mortal's picture

Only 7 P/E funds over $1bn ever lost money?

I call bullshit on this "fact".

Did these guys miss the 2000 dot com bust?

Creepy_Azz_Crackaah's picture

Hillary(!) took in close to that with her State Department pay-for-play scheme that was supposed to pay off BIG for the "investors" after she was elected president.

 

Oops.

Sanity Bear's picture

"this situation could mark the first time that a fund larger than $1 billion has lost essentially all of its value."

Actually, that would be the second time.

The first was called the Hillary Victory Fund.

rado_watching's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.jobproplan.com

evoila's picture

yeah... "Only seven private-equity funds larger than $1 billion have ever lost money for investors"

 

That is nonsense. Go look at the real estate funds that returned pennies on the dollar after the commercial market collapsed. And these were funds investing in "core" real estate -- you know the "bi-coastal" cities that are less-risky than anything else out there.

William Finn's picture

Well, the ones.that did not lose money are still marking.pets.com and the Enron partnerships at all time highs.

jcaz's picture

Impressive list of investors-  NONE of which should have ventured anywhere near this thing-

I'd get my ass fired if I guilded funds into this turd and rode it to zero- let's see what happens to the principals involved in these pensions who made the call.

WTF- so you were down 90% and thought "they're  gonna turn this around any minute....."?    Fucktards......

hedgeless_horseman's picture

 

"If you liked it at $10.00 you'll fucking love it at $0.05!"

Government needs you to pay taxes's picture

That 2-and-20 sure does add up.

Walter White's picture

you are confusing P-E and VC funds....quite different animals, dope

nmewn's picture

How much ya wanna bet they also went on a listening tour amongst gullible investors in a Scooby Van ;-)

booboo's picture

Never invest in a company that is co owned by a guy named after a whiskey.. never. *burp*

Hopeless for Change's picture

Redefining "Johnny Walker Judgement"

tiger uppercut's picture

When you test messages to see what drives more traffic to your click-bait, do you find more success with racial epithets or less? Valuable marketing knowledge.

AlaricBalth's picture

Nice South Park reference. Here's the video.
https://youtu.be/_nVk25ZvTkU

SgtSchultz's picture

Here is the acid test question:  Who were the consulting firms to those plans?  Did they recommend the fund?  Curious minds would like to know.

zjxn06's picture

Shale drilling = Massive destruction of capital

Too-Big-to-Bail's picture

I just hope and pray that the fund managers will still get their bonus

Yen Cross's picture

  lol-- " Fun With Dick And Jane", comes to mind. I wonder if that blowhard Alec Baldwin was vested?

 

  I'll gladly pay you next Tuesday with Nigerian $'s,  personally delivered to your private e-mail account.

RozKo's picture

John Walker: “are not proud of the result.” 

How much does ole' Johhny get to walk away with?

techpriest's picture

What Johnny really should be saying:

https://www.youtube.com/watch?v=JTF2j0OWUi8

"You fucked up! You trusted us!"

Rick Cerone's picture

I thought it was the company that made the penis looking robot that took a bath in the Georgetown Mall fountain.

Anon2017's picture

Next private equity investment to cost investors billions of dollars in losses:

https://www.nytimes.com/2017/07/17/business/dealbook/student-loan-debt-c...

Poorly documented private student loans are going bellyup. 

 

booboo's picture

Let me guess..Linda Green is involved somehow?

Yen Cross's picture

  NO SHIT, I've heard of these guys.  They specialize in volcano crater eco tours<

nmewn's picture

Liquid-Hot-MAG-Maw...I dunno, I just like saying it ;-)

Yen Cross's picture

 lol - Sounds like you're having a good Summer  nmewn.  You deserve it :-D

Mrcool's picture

Texas seems to have a very special seat on the money train???? Live in iowa, pay utility bill to texas company? The state college pays a accounting firm to do all there accountaing , recievables, payables , in texas ? A dam college mind you!Me thinks there is some kind of hand twisting going on with anything that is semi public money?

Kidbuck's picture

DHS trusts all their computerized/internet stored vehicle maintenance and vehicle operational records to prisoners on Texas. What could go wrong?

khakuda's picture

They are the first one.  There will be more.  Central banks have underwritten speculation and leverage in the extreme since 2008.  Just surprised it took this long.

GRDguy's picture

Follow the losses.

Someone got the investors' money.

Just like banking.  Physically deposit your money;

and poof; it's gone before you reach the door.

All you've got is a promise that may or may not be kept.

Pumpkin's picture

Go on and take the money and run...

touchdown's picture

who were the sellers of properties to the fund?

oobilly's picture

The other half of th story...

azusgm's picture

Well okay. I'll bite. Here's what I see in a very cursory looksee in the Harrison County, Texas records, augmented by a web search.

It appears that Enervest in its various iterations engaged in oil and gas leasing, formed gas units, and acquired easements for pipelines.

They sold pipeline easements and leases and meter runs to Prism Gas Systems 1 LP.

They sold their other assets (units/leases) to QRE Operating LLC.

QRE entered Chapter 11 in May 2016, as did Breitburn, as did Transpetco Pipeline. They seem to all be associated with the assets in those gas units formed by Enervest. I'm not going to bother to look to establish chain of title.

US Bank NA was the creditor but transferred its associated "assets" to Delaware Trust Company (the old CSC Trust Company of Delaware), the "bad bank" in this bankruptcy saga.

adr's picture

Well Cryptocoin ICOs have made creators billions and left investors with only the promise of future value. At some point that bill comes due. 

Yes we want $13 million to make some sort of Cryptocoin portfolio managing software. It doesn't exist yet, and we don't know what it will actually do, but give us $13 million anyway. We promise it will be awesome. 

And Kickstarter looked like a den of fraud. 

JailBanksters's picture

So where's the money gone Mr Corzine ?, I dunno, it vaporuzed !

I can see a lot funds in the near future where the money is just going to Vaporize.

 

navy62802's picture

Some go boom. Some go bust. That's the way it is with capitalism.