In a time of consolidating private-equity firms, and in a volatile economic climate, Warburg Pincus LLC recently closed the10th fund, Warburg Pincus Private Equity VIII LP, in its 30-year history with $5.3 billion from institutional investors. The New York-based private-equity fund has some $10 billion under management already, but it has reloaded to make additional investments in companies in the U.S. and abroad. It targets 12 key industries, including real estate, industrial, biotech, pharmaceuticals, financial services, telecom and energy. It plans to dedicate 7% to 12% of the new fund to energy-related investments. "We don't allocate a specific amount of capital to each area, but rather, we believe in 'dynamic capital allocation,' which means we invest where there is an opportunity, and where other people don't invest," explains Howard H. Newman, vice chairman of Warburg Pincus and the overseer of the firm's energy investments. Newman was in Houston to attend board meetings of portfolio energy companies. Like most private-equity providers, whenever Warburg Pincus makes an investment, one of its partners takes a seat on the board and helps guide the company with its financial expertise and industry contacts. "With companies such as Newfield Exploration Co., Spinnaker Exploration Co. and Encore Acquisition Co., we've built a nice franchise in this sector." Most recently, Warbug Pincus invested $35 million in Bill Barrett Corp., a private exploration firm just launched in Denver by the same executive team that so successfully built Barrett Resources Corp., which was acquired by The Williams Cos. last summer. Warburg senior managing director Jeffrey Harris has joined the new Barrett board. (For more on Bill Barrett Corp., see "Starting Over, Aiming Higher" in this issue.) Warburg has also invested in the past year in Carneros Energy, which drills deep gas wells in California, and Gryphon Exploration, a Houston start-up that operations in the Gulf of Mexico. Since the late 1980s it has invested more than $700 million in energy companies. "We are unusual in that we are willing to take drillbit exposure. Most investors prefer acquisition companies, although we are in that in Encore Acquisition. To make a dollar in this business, you need volume expansion and to do that you've got to drill. But this is not a romance business-this is a nuts-and-bolts business," Newman maintains. "The return on equity is more important than the number of barrels you find."