Ara Fund III closes on $2.8bn amid ‘continued demand’ for decarbonisation

Firm announces the largest fund close by a specialist impact manager, significantly surpassing its $2bn target.

Ara Partners, a Texas-based private equity and infrastructure manager focused on industrial decarbonisation, has closed its third fund on its $2.8 billion hard-cap, according to a statement.

Ara Fund III was launched last year, alongside an infrastructure fund targeting $300 million, New Private Markets exclusively reported. The flagship fund follows a global strategy investing in decarbonisation solutions for industries such as manufacturing, materials and chemicals, energy, and food and agriculture.

The fund was oversubscribed, having initially targeted $2 billion. It is the fourth largest impact fund close since 2018, according to the NPM database, and the only one in the top five not to be managed by a longstanding private markets brand; Ara was founded in 2017 as a specialist decarbonisation impact manager. The firm has also agreed co-investment vehicles with some LPs, tipping the total capital commitment over the $3 billion mark. Rede Partners acted as placement agent.

“The growing, global presence of Ara’s platform and portfolio directly reflects the industrial economy’s continued demand for the technological innovation and infrastructure needed to decarbonise,” said managing partner Troy Thacker.

Ara has so far made four investments from the fund. Vacuumschmelze, a magnetic materials and rare earth permanent magnets producer, was acquired from Apollo in October. The firm’s products will “drive the decarbonisation of transportation”, Tuan Tran, who led the deal, told NPM at the time.

“[Its] permanent magnets are used to make electric motors more powerful and more energy-efficient than conventional induction motors,” Tran added.

The three other investments are: pulp and packaging producer Genera; CFP Energy, which provides environmental and green energy products; and biomethane developer Cycle0.

Ara Partners closed its first fund in 2020 on $400 million – $100 million shy of its target – but has since been scaling rapidly. Fund II closed in 2021 on $1.1 billion, having targeted $600 million. Among the LPs in Fund II are Texas Municipal Retirement System, which committed $75 million; Alaska Permanent Fund, which committed $40 million; and the Denver Foundation (undisclosed commitment amount), according to New Private Markets‘ database.

The firm has been on a hiring spree over the past year, with its latest addition being Kaitlin Fronczek, a former vice-president at Apax Partners, as an investor relations director.