Blackstone Reportedly Eyes $3B Energy Fund

The Blackstone Group is reportedly seeking $3 billion for its first fund focused on investments in the energy sector, in the latest indication of the sector’s popularity with private equity firms and their investors.

The firm would be the largest diversified investment firm investing in the industry, wrote Bloomberg, which broke the story.

Besides deal opportunities, Blackstone perhaps sees a fresh source of fee income considering energy funds are among the most popular right now for pension funds and other fund investors. Through the third quarter, limited partners committed close to $8 billion to energy funds this year, roughly $2 billion more than turnaround funds, which were the second-most popular focused-fund strategy, according to data Buyouts compiled.

Sponsors, meanwhile, have been ramping up their investments in the sector following a drop in activity with the economic downturn. U.S.-based sponsors had closed 39 control-stake deals with a disclosed deal value of $5 billion in 2011 as of Sept. 30, putting them on pace to outdo last year’s results, when firms closed 44 deals with a disclosed deal value of $2.8 billion (see related feature, page XX).

Blackstone joins other large firms, such as Kohlberg Kravis Roberts & Co., that are raising funds dedicated to energy investing. KKR has raised more than $1 billion for its fund, KKR Natural Resources.

TPG Capital, meanwhile, expects to open an office in Houston next month, a source told Buyouts. It’s hardly a geographic leap, considering TPG is based in Fort Worth. But it’s indicative of the firm’s heightened interest in energy. From Oct. 1, 2009 through Sept. 30, 2011, TPG closed at least three platform acquisitions in the sector with a disclosed deal value of $4.5 billion, according to Thomson Reuters.

A spokesperson for Blackstone declined to comment.