Pearl Energy Investments Closes Fund IV with $999.9MM

Private equity firm Pearl Energy Investments closed its’ Fund IV on Jan. 31 with a company record of $999.9 million within an accelerated period beginning mid-September.

“It was quick four-month fundraise,” said Billy Quinn, managing partner of the Dallas-based private equity shop. “So, given the holidays in the middle, it was pretty speedy.”

Not bad for a fund that’s got roughly $3 billion in total capital under management.

Larger energy-focused private equity firms EnCap Investments and Quantum Capital Group announced closing large funds during the fourth quarter. Within weeks of each other in October 2024, EnCap announced the closing of Fund XII with $5.25 billion. Quantum followed up on Oct. 29 with word the firm had raised $10 billion for its private equity, structured capital and private credit platforms; $5.25 billion was raised specifically for its flagship, Quantum Energy Partners VIII.

And while the pace quickened in more recent months, both funds—significantly larger than Pearl’s Fund IV—required more than a year to wrap up.

All three managers attributed their fundraising success to a solid base of loyalists who never left the industry, plus the return of some investors that had paused their oil and gas activity in response to climate concerns and campus protests.

But as the reality of an energy transition that will take decades and generational reliance on fossil fuels seemed to sink into the public consciousness, some of those folks have reconsidered their hasty departures. Fundamentally, those investors’ first priority is a fiduciary responsibility to their constituents, and at the end of the day, oil and gas still produce solid returns.

Pearl, along with EnCap, Quantum and Carnelian Energy Capital, stuck with the industry when many others faded away.

Quinn told Hart Energy that the jaw-dropping turnaround on Pearl’s Fund IV was possible based on several factors, including best-in-class returns verified by sources such as Preqin, which closely tracks the private capital market.

“We have a great investor base that's been with us since Day 1. That is still a majority of the fund,” he said. “And I think that, combined with some shifting winds in the market, has made it a seamless fundraise.”

Some of the investors in Fund IV have participated in previous raises but sat out on those in recent years, Quinn said.

“There's nobody that, two, three years ago went hard with a ‘no fossil fuel’ [position], but there were people who came in who paused three years ago,” he said. “There are definitely pockets of capital that are looking” to invest in oil and gas again.

Harvard University was among the first to declare a hard no to fossil fuel investing, and so that endowment is likely lost. Similarly, pensions funds in New York and California remain against investing in oil and gas.

But, Quinn said, there are others that are open-minded around the country.

“There are pension funds and university endowments and foundations in parts of the country that you would think are out of oil and gas, but that’s actually not the case,” he said.

The hard cap was set from the start in September, and Quinn said his partners believed they would reach the mark.

“You never know a hundred percent, but we were really confident that we would get there because we had had conversations with people, and we'd seen interest pick up,” he said. “I think what surprised us is that we were able to get it done and closed so quickly.”

Pearl’s previous Fund III closed in 2023 at $720 million within 18 months, which is closer to recent fundraising trends.

Quinn attributes this speed to two groups: those investors who remained loyal to the industry and Pearl that were ready to re-up their commit; and a newer set that is looking to invest and can’t deny that, given industry returns, oil and gas is a good place to deploy capital through the next decade.

Kirkland & Ellis served as fund formation counsel on Fund IV. Pearl didn’t engage a placement agent in the formation of the fund.