Vista Equity Partners has wrapped up fundraising for its seventh flagship fund, setting a record for the largest tech-focused fund raised by an independent firm.
The San Francisco-headquartered firm has amassed $16 billion for Vista Equity Partners VII, according to a source familiar with the matter. The fund is almost 44 percent larger than its 2016-vintage $11.1 billion predecessor. The tech-focused giant has raked in $16.85 billion this year, having closed its Vista Equity Endeavor Fund II on $850 million in July.
The Wall Street Journal reported on Thursday that Vista had raised $16 billion for Fund VII.
Here are five things to know about the fund:
The fund held its first close on $11.4 billion in September last year and that is when the $16 billion hard-cap was established, according to documents from the State of Connecticut Treasurer’s Office. The earlier hard-cap was $15 billion according to documents prepared by Summit Strategies Group for the Fire & Police Employees’ Retirement System of the City of Baltimore.
The fund could be larger still
Vista’s own commitment to Fund VII was expected to be 2 percent according to Baltimore Fire & Police pension documents. The firm is now expected to commit between 4 and 6 percent, a source familiar with the fund’s terms told Private Equity International.
Vista has been coming back to market earlier since its 2011-vintage Fund IV. Although larger fund sizes allowed more investors to invest in the vehicles, some LPs also had to pull back. New Mexico State Investment Council, which had committed $100 million each to Vista’s Funds V and VI, could not re-up the same amount to Fund VII because of concentration guidelines as per its investment policy; these prohibit the investor from holding more than 5 percent in net asset value exposure to any private equity firm, according to 25 September 2018 meeting materials from the SWF. “The 5 percent is not a specific policy restriction, but we do develop concentration concerns at that level which enter into our decision process,” spokesman Charles Wollmann told PEI.
Faster exits, higher IRRs
As of September last year, 94 percent of Fund V and 25 percent of Fund VI had been distributed to investors, according to Vista chief operating officer David Breach, speaking at a New Mexico SIC meeting on 28 August. Although earlier exits took an average 4.7 years, more recent ones had been in three years or less. The funds still aimed to generate a 3x return for investors and the IRRs had also increased because of faster exits. Breach did not clarify which funds he was referring to.
More than 31 investors, including Canada Pension Plan Investment Board, Brederode, Cathay Life Insurance and Taiwan Life Insurance, have committed to Vista’s latest fund. The largest commitments from US pension systems were $750 million from New York State Common Retirement Fund, $500 million from Oregon State Treasury and $400 million from the California Public Employees’ Retirement System, PEI data show.