Firms & Funds

Thoma Bravo cuts Fund XII management fee

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Norinchukin Bank, Japan, Asia, private equity
Japanese ancient-martial-arts master Yoshinori Kouno demonstrates his skills in Tokyo on Feb. 14, 2008. Reuters/Yuriko Nakao
  • Firm offers LACERS 1.5 pct management fee after charging 2 pct on Fund XI
  • Thoma Bravo targeting $7 bln for Fund XII
  • New fund could be roughly twice the size of Fund XI

Thoma Bravo slashed its management fee for Thoma Bravo Fund XII by half a percentage point from the prior fund, according to Los Angeles City Employees’ Retirement System documents.

The firm will charge Lacers a 1.5 percent management fee on committed capital during Thoma Bravo Fund XII’s six-year investment period, according to an investment memo.

The management fee dips to 1.5 percent of net invested capital thereafter. Lacers committed as much as $25 million to Fund XII, according to its April 12 meeting materials.

For Fund XI, Thoma Bravo charged Lacers a 2 percent management fee on committed capital during the vehicle’s investment period. The fee fell to 2 percent of the fund’s net invested capital afterward. The $14.1 billion retirement system committed $15 million to Fund XI in 2014.

Thoma Bravo began raising Fund XII in 2015, a little more than a year after holding Fund XI’s final close in May 2014. At its $7 billion target, Fund XII would be almost double the size of its $3.65 billion predecessor.

Fund XI has yet to deliver meaningful returns, but several sources said Thoma Bravo will encounter strong demand for Fund XII.

Thoma Bravo XII LPs include Massachusetts Pension Reserves Investment Management Board, San Francisco Employees Retirement System and New Hampshire Retirement System. Fund XII’s final close will also include at least $300 million from the general partner, according to a Lacers memo.

The firm’s 10th fund, a $1.25 billion 2012 vintage fund, netted a 34.2 percent internal rate of return through Sept. 30, according to a Portfolio Advisors memo included in Lacers’s meeting materials. Thoma Bravo Funds VII, VIII, IX and X delivered top-quartile returns to-date.

Fund XII will acquire 10 to 12 software and technology-enabled services companies, typically investing $200 million to $1 billion per investment, according to the Lacers memo. No individual investment will exceed 20 percent of Fund XII’s aggregate commitments.

Thoma Bravo is led by the managing partners Seth Boro, Orlando Bravo, Scott Crabill, Lee Mitchell, Holden Spaht and Carl Thoma. The firm has offices in San Francisco and Chicago.

Thoma Bravo could not be reached for comment.

Action Item: To read LACERS’ report on Thoma Bravo, visit http://bit.ly/1Nlcn01

Photo courtesy Reuters/Yuriko Nakao