New York City commits $225m to Vista Equity

Vista has been attracting commitments from numerous public institutions in the US, attracted to the firm’s solid returns and LP friendly terms.

The New York City pension system recently committed $225 million to Vista Equity Partners, which has been raising its fourth fund targeting $2.5 billion.

The city system has prior commitments with Vista; the total amount committed is unclear, but the New York City Employees’ Retirement System pledged $30 million to Vista’s third fund in 2007, and has been reaping a 29.4 percent rate of return, according to city Comptroller John Liu, who heads the city pension system.

Vista has been garnering a lot of support from public institutions in the US, who have been attracted to the firm’s solid performance since its founding in 2000. Vista focuses on a niche strategy of companies that operate in specialty software products.

As an example, the firm last year returned all the capital that had been called from its third fund at the time – about $700 million – from its partial exit of Sunquest Information Systems to Huntsman Gay Global Capital, Credit Suisse and Neuberger Berman. Vista has called roughly $1 billion from Fund III. The Sunquest investment, once fully exited, is expected to return more than the entire amount of Vista’s second fund. Fund III has been active with more than 25 acquisitions in the last four years, according to a person with knowledge of the fund.

One limited partner said the firm’s performance has been impressive, especially as other managers in the portfolio struggled through the downturn. The LP said other institutions were calling to ask for an introduction to Vista.

Vista has also added some LP-friendly terms to Fund IV, including a “European-style” waterfall distribution plan in which LPs must be paid back all contributed capital plus a preferred return before the GP starts to collect any carried interest.

New York’s $120 billion city system is made up of five separate pension funds – the employees’ fund; the city teachers, police officers, firefighters and the city’s board of education pension funds. Each fund has its own board and makes its own investment decisions, though the system overall is headed by Liu and city chief investment officer Lawrence Schloss.

Barry Miller heads private equity investments for the city system, which intends to invest $2.5 billion annually on commitments for the next several years, allocating more capital to fewer managers and boosting its exposure to Western Europe.