FORTUNE -- Four years ago, Riverstone Holdings was messier than an oil slick.
The energy-focused private equity firm's longtime partner, The Carlyle Group (cg), was pulling away in order to form its own energy investing platform. Firm co-founder David Leuschen had admitted to bankrolling a low-budget film produced by the brother of an influential public pension fund manager in New York. And there were additional pay-to-play allegations, due to Riverstone's use of a corrupt "placement agent" who would eventually find himself in state prison.
Riverstone and Leuschen ultimately paid out a combined $50 million in restitution to New York, without admitting guilt.
Yesterday, however, the firm announced that it had raised a whopping $7.7 billion for its fifth fund. That's larger than any prior Riverstone fund, and the first to not be co-branded with Carlyle. New York Common Retirement Fund didn't re-up, but Riverstone did manage to secure commitments from public pensions in states like California, Delaware, Illinois, New Mexico and Texas.
The reversal of fortune is pretty easy to explain: Riverstone has generated a ton of money for its investors.
Take a look at its general fund returns through the end of 2012, according to documents published by the California Public Employees' Retirement System (which is investing in the new fund):
- Carlyle/Riverstone Global Energy & Power II (2003)
54.1% internal rate of return
2.69x cash-on-cash multiple
- Carlyle/Riverstone Global Energy & Power III (2005)
12.3% internal rate of return
1.66x cash-on-cash multiple
- Carlyle/Riverstone Global Energy & Power IV (2008)
17% internal rate of return
1.47x cash-on-cash multiple
For an investor like CalPERS, all of that comes out to more than $1.2 billion in value (realized and unrealized) on $738 million invested (inclusive of fees).
Now compare this to returns from rival First Reserve Corp., which raised $9 billion for its last fund but recently had to cut its new target from $6 billion to $5 billion:
- First Reserve Fund X (2004)
31.6% internal rate of return
1.82x cash-on-cash multiple
- First Reserve Fund XI (2006)
3.1% internal rate of return
1.11x cash-on-cash multiple
- First Reserve Fund XII (2008)
3.3% internal rate of return
1.08x cash-on-cash multiple
Notice the difference?
For sure, there are plenty of other, large energy-focused private equity platforms within generalist private equity firms (including Carlyle). But for now Riverstone is tops. Couldn't have imagined it a few years back.
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