Multi-Billion Dollar Equity Fund Now Worthless

What happens when a private equity fund that was previously worth a couple billion dollars tanks? Big banks and private equity firms try to get their hands on it, even though clients who invested in the fund are now suffering.
Keep reading to learn about a hedge fund that used to be valued at over $2 billion but is now worth pretty much nothing at all, and the players who are getting involved. And if you are thinking about investing in a fund to perhaps pay for a large expense, such as your masters in political science online or your bachelorā€™s level online degree in political science from a reputable school, you may want to think twice.

Wells Fargo and Other Lenders Want In
Several lenders and Wells Fargo are negotiating over the control of a $2+ billion hedge fund. EnerVest Ltd., a private equity firm based in Houston, is currently managing the oil investments fund.
Unfortunately, this hedge fund will end up leaving its clients, which include major charitable foundations, endowments, and investments, with very little money in the end. In fact, they will, at most, receive pennies on the dollar, according to the Wall Street Journal (WSJ).

A History of EnerVest and This Equity Fund
EnerVest began raising and investing money for this private equity fund back in 2013. That was when people were trading oil at roughly $90 per barrel. As a result, $1.3 billion of money, which had been borrowed, was added to the equity fund to increase its own buying power.

How It All Came Crashing Down
Fast forward to July 2017 and intermediate crude prices are around $46 per barrel. It is no surprise, then, that EnerVestā€™s chief executive and co-founder, John Walker, was quoted saying he is not proud of the result of this equity fund.
To put things in perspective with regards to just how bad the results are, you need to understand that seven other private equity funds worth over $1 billion ended up losing money for their investors. This is according to information from Cambridge Associates LLC. Even those that ended in the red, with losses, regardless of their size, did not get hit so hard. Losses over 25% are actually really rare, although there currently are a few funds that are focused on energy and are in real danger of failing badly.

Who Was Impacted?
So, who was impacted by this multi-billion dollar equity fund becoming virtually worthless? Well, some of the clients included the John D. and Catherine T. MacArthur Foundation, the Fletcher Jones Foundation, and the J. Paul Getty Trust. Each one of these clients invested millions of dollars into the fund. Other investors included the Orange County Employees Retirement System, Michigan State University, and a foundation which works on supporting Arizona State University.
Ultimately, this is a good lesson for investors. Just because you are investing in a private equity fund, even if it is one that is focused on the energy sector, which is not going anywhere, you could end up with dramatic losses over time if you are not careful.

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