Side Letter: Thoma Bravo’s growth fund; PE’s foundation fortitude; M2O’s LP boss loss

Thoma Bravo's debut growth offering is nearing a final close. Plus: foundations remain fond of private equity despite macro headwinds and boutique placement firm M2O has lost another senior secondaries executive. Here's today's brief, for our valued subscribers only.

Just happened

Orlando Bravo: gearing up for a final close (Source: Thoma Bravo)

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Thoma’s growth fund
Tech has been having a rough time in the public markets this year, and yet appetites among private markets investors appear to be ticking along. Case in point: tech specialist Thoma Bravo is set to hold the final close later this year on its debut growth fund, our colleagues at Buyouts report this week (registration required). The firm has been quietly marketing the fund, which has a target of at least $2 billion, to a select group of LPs since last year.

Non-control investments represent a new strategy for Thoma Bravo. Along with the growth vehicle, the San Francisco-based firm is also seeking $22 billion for its 15th flagship fund, $5 billion for its fourth mid-market fund and $1.75 billion for its second lower mid-market fund. Blue-chip growth funds seem to be defying some of the headwinds facing investor relations staff this year, with EQT this week holding a €2.4 billion final close on its inaugural product for this strategy. Growth equity accounted for 17 percent of the $337 billion raised in H1 2022, the same proportion as the equivalent period a year prior, per our latest fundraising report.

Solid foundations
Rising rates may one day make alternatives less popular among foundations – a time that appears some way off, our colleagues at Venture Capital Journal report (registration required). Private and community foundations anticipate bigger increases in their PE and VC allocations over the next three years than for other asset classes, according to a survey of 231 foundations conducted by Commonfund Institute. Just under one-third of respondents from institutions with more than $500 million in assets said they planned on increasing their allocations to the two asset classes, with around the same proportion of foundations under $101 million saying the same.

Out of eight alternatives strategies, venture capital was the best performer for foundations last year, the study found. Private foundations earned an average one-year return of 51.4 percent and community foundations notched an average gain of 44.8 percent. PE ranked second, with private foundations averaging one-year returns of 35.8 percent and community foundations earning 34.7 percent. Though returns are bound to decline as the drop in public stocks trickles down to the private markets, the strong performance of PE and VC, and the fact that stocks are in the doldrums, bodes well in the near term.


M2O’s boss loss
M2O Private Fund Advisors has parted ways with its head of LP secondaries, the second key departure from the firm this year, our colleagues at Secondaries Investor report this week (registration required). Jake Stuiver left the US boutique placement agent and secondaries adviser in late August. His next steps are unclear. His departure follows that in April of the founder of M2O’s secondaries business Mike Custar, who joined investment bank William Blair in April to start a GP-led advisory business. People moves have exploded in secondaries as firms seek to draw from a small pool of talent, which has not kept pace with the sector’s growth in recent years. Those with experience in secondaries have been in high demand, both on the buyside as firms look for professionals to handle the large number of deals in the pipeline, and the intermediary side as advisers try to keep up with demand.

Adamantem’s addition
Earlier this year, we noted that Australian mid-market firm Adamantem Capital was among those taking direct action to combat the climate crisis by adopting a “cradle to grave” approach to the emissions impact of its portfolio companies. Now the firm appears to have gone a step further. According to our colleagues at New Private Markets, Adamantem is targeting A$350 million ($240 million; €238 million) for an Environmental Opportunities Fund and is aiming to hold a first close by the end of the year (registration required). “It will focus on businesses within three segments: clean energy and electrification; natural capital and abatement, such as carbon farming; and the circular economy, which covers waste management and sustainable packaging,” the Australian Financial Review previously reported.

Dig deeper

Institution: California State Teachers’ Retirement SystemHeadquarters: Sacramento, USAUM: $301.6 billionAllocation to alternatives: 16%

California State Teachers’ Retirement System has confirmed $3.9 billion-worth of commitments across 23 private equity funds, following its August board meeting.

CalSTRS committed $300 million to Apollo Investment Fund X and made a further total commitment of $150 million to OrbiMed Advisors across two funds: $75 million to OrbiMed Private Investments IX and $75 million to OrbiMed Royalty & Credit Opportunities IV.

It also committed $250 million to Blackstone’s private equity secondaries fund, Strategic Partners IX, and $120 million to HgCapital Saturn 3.

Other commitments made in H1 2022 include: $300 million to AlpInvest C. Fund II, $200 million to Arsenal Capital Partners VI, $50 million to Arsenal Growth Fund I, $100 million to Advent Global Technology II, $40 million to NEA 18, $60 million to NEA Venture Growth Equity, $350 million to Permira VIII, $100 million to Thoma Discover Fund IV, $300 million to Thoma Bravo XV, $125 million to Riverwood Capital Partners IV, $200 million to WCAS XIV, $100 million to Francisco Partners Agility III, $300 million to Francisco Partners VII, $225 million to JMI Equity XI, $100 million to Rubicon Technology Partners IV, $300 million Advent International GPE X and $100 million to Oak HC/FT Partners V.

The US pension fund has a 16 percent exposure to private equity, above its 13 percent target allocation. Its recent fund commitments strategy has been predominantly focused on North American buyout vehicles.

For more information on CalSTRS, as well as more than 5,900 other institutions, check out the PEI database.

Today’s letter was prepared by Alex Lynn with Rod JamesCarmela Mendoza and Helen de Beer.