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Alternative Market Briefing

Unlisted natural resources funds fell 29% to $90bn in 2020

Tuesday, February 09, 2021

Laxman Pai, Opalesque Asia:

Natural resources slowed down in a challenging 2020 as poor performance and difficult fundraising shake up the industry.

Aggregate capital raised by unlisted natural resources funds fell 29% to $90bn in 2020, with pure natural resources funds raising $7.8bn, said Preqin.

Natural resources fundraising saw 106 funds closed securing $90bn in 2020, down from 191 funds closed and $126bn raised in 2019.

The performance was also affected, with the asset class producing a one-year to June 2020 IRR of -22.8%, compared with 0.7% in 2019.

"The natural resources industry has been cash-flow negative for 20 years; however, most investors cite diversification as the main reason to allocate to the asset class and expect to maintain or increase their allocation," said Preqin.

In terms of growth, energy strategies account for 85% of natural resources AUM, with renewables and ESG expected to drive investment trends in 2021.

Most investors (58%) expect to maintain their allocation to natural resources in the longer term and another 25% expect to increase their allocation, the report pointed out.

Portfolio diversification is what investors seek, with 68% saying diversification is the main reason they invest in the asset class.

Pure natural resources AUM was $215bn (as of June 2020). Preqin predicts that pure natural resources AUM will grow at a CAGR of 5.1% to reach $271bn by 2025. Pure natural resources include only Natural Resources and Ti......................

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