Welsh Carson inches closer to $4bn for Fund XIII

US mid-market focused private equity firm Welsh, Carson, Anderson & Stowe is closing in on its $4 billion hard-cap for its 13th fund.

As of March, WCAS Fund XIII had raised $3.6 billion relative to its target size of $3.5 billion, according to a StepStone Group memorandum presented on 10 April to Connecticut Retirement Plans and Trust Funds’ investment advisory committee. The document was an update to its July 2018 memorandum.

The vehicle held a first close on $2.8 billion in August. The firm activated fees on Fund XIII in January 2019 and a final close is expected in the second quarter or early in the third, according to the StepStone memorandum.

Connecticut is mulling a $125 million commitment to the vehicle.

Fund XIII had a re-up rate of 98 percent and six LPs increased their commitments by 25 percent compared with the last fund. International representation in the LP base increased to 40 percent, according to a WCAS presentation to Connecticut Funds’ investment advisory council on 11 April.

Investors in Fund XIII include GIC, the California Public Employees’ Retirement System, the California State Teachers’ Retirement System, Minnesota State Board of Investment, New York City Employees’ Retirement System, AP3, HarbourVest Partners, Partners Group, Pantheon and Lexington Partners, according to the WCAS presentation.

GP commitment increased to $261 million in Fund XIII, and no investments have yet been made through the vehicle, the WCAS presentation said.

WCAS has been steadily increasing its focus on healthcare and technology and has kept its fund sizes consistent.

Fund XII, which closed on $3.3 billion in 2015, is almost 90 percent invested across 16 investments. Forty-six percent of Fund XII was invested in healthcare and 54 percent in technology as of Q4. Gains for that vehicle were driven by the sale of QuickBase, sold to Vista Equity Partners for $974 million in April at a multiple of 7x.

The fund was generating a net internal rate of return of 27 percent and a net total value-to-paid-in multiple of 1.5x as of 31 December, according to the WCAS presentation.

Last year, WCAS sold Asuron for $879 million to Equity Recap at a multiple of 3.2x; United Surgical Partners for $978 million to Tenet at a multiple of 3.2x; Getwell Network for $191 million to Pamplona Capital at a multiple of 1.6x; and it exited Concentra in a merger and partial sale for $246 million at a multiple of 3.3x.

At the Connecticut meeting, StepStone provided an update on the Securities and Exchange Commission investigation into WCAS last year. Between 2012 to 2016, WCAS received fee payments of almost $600,000 by an organisation that provided services to its portfolio companies. It failed to disclose to investors the conflict of interest created by these fees.

WCAS agreed to resolve the matter by paying the US Treasury $600,000 of total fees and a civil penalty of $90,000, StepStone’s presentation noted.

Welsh, Carson, Anderson & Stowe declined to comment on fundraising.