Side Letter: Thoma Bravo’s mega-fundraise; Paul Weiss on fund terms trends; BlackRock’s retail ambitions

Thoma Bravo hauls in more than $32 billion across three tech funds. Plus: how the SEC's proposed rules are "influencing" LP-GP negotiations; and why PE execs are moving away from New York. Here’s today's brief, for our valued subscribers only.

Just happened

Thoma Bravo’s fund close
It’s a tale of haves and have-nots in private equity fundraising this year. Software-focused Thoma Bravo appears to have landed squarely in the former camp. The firm said yesterday it had held the final close on its latest flagship, Thoma Bravo XV, on $24.3 billion. By our estimates, that makes it the sixth-largest PE fund ever raised, ahead of the $20 billion Insight Partners VII and just behind the $24.4 billion Hellman & Friedman Capital Partners X.

It’s worth noting that the bulk of the capital for Fund XV had already been raised in May, with $20 billion secured, just shy of its $22 billion target, according to regulatory filings. Also worth noting is that the firm closed its mid-market-focused Thoma Bravo Discover Fund IV on $6.2 billion and lower-mid-market-focused Thoma Bravo Explore Fund II on $1.8 billion, meaning it has more than $32 billion at its disposal for these three strategies – something a handful of other tech-focused firms, including London-headquartered Hg, are doing. Side Letter understands that Thoma Bravo has separate deal teams for all three fund strategies.

Fund terms update
GPs are considering new terms for 2023 to respond to the reality of a tougher fundraising market. That’s one of the key takeaways from a yet-to-be-published report by law firm Paul Weiss seen by Side Letter. In fact, GPs are engaging in “game theory” during the offering process given the challenging environment and bandwidth issues of LPs, according to the report. That means using e-subscription booklet platforms and investing in “intelligent trackers” to streamline and manage a diverse range of LPs. The US Securities and Exchange Commission’s proposed fund disclosure rules in February – which have yet to be published in their final form and sparked strong reactions from industry participants – have already been influencing LP-GP negotiations. While the rules haven’t been enacted yet, these are influencing the market including on fund terms around facilitating secondaries transactions and restructurings, as well as recycling proceeds beyond the investment period, Marco Masotti, a New York-based partner at Paul Weiss, said.

Look out of for the results of the survey later today on PEI.

BlackRock’s retail journey
There’s been an inequity over many years when it comes to individual investors’ access to alternatives – that’s one of the takeaways from Edwin Conway, global head of alternatives at BlackRock, at a press roundtable on Tuesday. The issue is “one of the biggest crises in the world… the inability to prepare for retirement”, he added.

“If alternatives, as we believe, is the essential ingredient for the institution, why isn’t it an essential ingredient for the retail client? It should be. Part of the problem of private markets is the illiquidity. It is the access. And what we have to do is transmit the knowledge around what liquidity you can give up to earn the premium that comes from that illiquidity, and it can’t be obviously 100 percent.”

To Conway, the answer lies in data, technology, and easy-to-understand language, so that retail clients can better learn the role that PE, infrastructure, private credit and real state can play to help for retirement. BlackRock expects to launch two PE European long-term investments funds (ELTIF) in 2023, according to a Tuesday statement. It held a final close on €415 million this week for its debut infrastructure-focused ELTIF, while its inaugural BlackRock Private Equity Opportunities ELTIF gathered more than €500 million on final close in April last year. The co-investment vehicle required a minimum investment of €125,000. “There is much more to come,” said Conway.

Essentials

A change of scenery
New York City is undergoing a considerable shift in the make-up of its PE workforce. That’s according to a recent report published by executive search firm Eastward Partners, as reported by our colleagues at Private Funds CFO (registration required).

Tax break incentives, desiring a change of lifestyle, and the pandemic-driven capacity to work from home, have all encouraged a growing number of PE professionals to move away from New York City, with many choosing to settle in Miami and Dallas-Fort Worth. According to Eastward Partners’ report, mid-market firms in Miami have gained 38 percent of their new talent from New York in the past 12 months, while Dallas-Fort Worth gained 14 percent.

Still, market participants shouldn’t lose sleep over the possibility the streets of Midtown will soon be found empty: New York has seen an influx of talent from other regions, with 11 percent of new hires coming from Boston and 9 percent from both San Francisco and Philadelphia. Further, the city remains the US’s largest hub for PE professionals, with 23 percent of the industry’s total workforce operating there. Still, the findings serve as a reminder of the pandemic’s ongoing impact on traditional working environments.

Crack down
The EU’s anti-greenwashing legislation, the Sustainable Finance Disclosure Regulation (SFDR), is beginning to bite. Four pension and insurance firms have been put on notice by the Danish Financial Supervisory Authority (DFSA) over the lack of detail regarding sustainability risks within their remuneration policies, marking the first time the regulator has issued orders related to SFDR, our colleagues at Responsible Investor report (registration required). Following an investigation into six pension and insurance firms around whether firms had included sufficient information in their remuneration policies, whether the information had been published on their websites, and whether they were able to prove that they complied with the information provided in the remuneration policy, four have received orders for “insufficient disclosures”.

Orders are a supervisory action or an enforcement tool that are issued over ongoing regulatory breaches. The firms have two months to address the DFSA’s concerns. Under the SFDR, firms must disclose how the remuneration structure of portfolio companies ensures appropriate management of sustainability risks and does not promote excessive risk taking.

Dig deeper

Institution: Massachusetts Pension Reserves Investment Management Board (MassPRIM)
Headquarters: Boston, US
AUM: $92.4 billion

Massachusetts Pension Reserves Investment Management Board committed $538 million across five private equity funds, according to its December board meeting materials.

The biggest commitment was of $150 million to Lovell Minnick Equity Partners VILovell Minnick Partners targets investments in business services, financial services and related technology companies in North America and Europe.

The US pension fund also continued its relationship with Waterland Private Equity by committing €130 million to Waterland Private Equity Fund IX and €20 million to Waterland Partnership Fund I. Other fund commitments included €100 million to Altor Fund VI and $125 million to WestView Capital Partners V.

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


Today’s letter was prepared by Adam LeCarmela MendozaHelen de Beer,  and Madeleine Farman.