Providence collects close to $8bn in double fundraise

Providence Equity Partners has raked in nearly $8 billion for two investment vehicles, Private Equity International has learned.

The Rhode Island-based manager raised $5.69 billion, beating the $5 billion target, for its flagship fund Providence Equity Partners VIII as of 2 July, according to a filing with the US Securities and Exchange Commission.

The firm has also just hit the $2 billion hard-cap for Providence Strategic Growth IV, a US-focused vehicle launched at the beginning of the year, a source with knowledge of the fundraise told PEI.

Fund VIII and Strategic Growth IV have seen a high re-up rate from LPs, the source added.

It is understood both vehicles have yet to hold a formal final close, as some LPs are in the process of completing regulatory requirements.

Providence declined to comment on fundraising.

Fund VIII and Strategic Growth IV are significantly larger than their predecessors, the $5 billion 2011-vintage Fund VII and the $1.3 billion 2017-vintage Strategic Growth III.

The funds follow the same strategy as previous vehicles. Fund VIII will make control equity investments in the firm’s core sectors: media, communications, education and information services. Strategic Growth IV will back software companies in the US.

New York State Common Retirement Fund, Massachusetts Pension Reserves Investment Management Board and Los Angeles Water & Power Employees Retirement Plan committed $100 million each to Strategic Growth IV, according to PEI data.

Washington State Investment Board, Canada Pension Plan Investment Board and New York State Common Retirement Fund made commitments of $400 million, $220 million and $250 million, respectively, to Fund VIII.

Shortly after wrapping up fundraising for its fourth strategic growth fund, the firm launched a Europe-focused growth fund seeking €750 million, the source said.

It is unclear how much the firm has raised for that vehicle so far or when it expects to hold a final close.

Capital raised for Strategic Growth Europe will have the same strategy as Providence’s growth vehicles series, picking up control stakes in software and technology-enabled services companies in the lower end of the market. The firm expects to write equity cheques of roughly €25 million each for up to 15 deals, with roll-ups and add-on acquisitions a key strategy, the source added. France, Germany and the Nordics are target markets. It is understood the firm has already made two investments from the fund.

Capital raising for growth funds has risen in recent years. Fundraising for growth equity-focused vehicles grew more than 50 percent to $50.8 billion in the first half of 2019, from $33.3 billion in the first half of 2018, according to PEI data. Growth funds that have hit final close this year include the $8.5 billion TA Associates XIII and the $4.9 billion Summit Partners Growth Equity Fund X.

Providence has raised more than $40 billion in capital commitments across private equity and credit funds, according to its website.

Fund VII was delivering a 21.25 percent net internal rate of return and a 1.6x multiple as of end-December 2018, according to fund performance data from WSIB.