- New docs may include GP commitment in fund size
- Management fee offsets on transaction, monitoring fees
- Consulting fees not included in the offset
New South Carolina Retirement System Investment Commission documents detail the terms of Francisco Partners’ new flagship fund, which could raise as much as $4 billion.
Buyouts previously reported the fund was capped at $3.75 billion, citing Nebraska Investment Council documents. It’s unclear whether the $4 billion cited in South Carolina’s report includes projected commitments from the fund’s general partnership group, which would total at least $100 million.
The firm declined comment.
Francisco Partners V terms are relatively standard. Limited partners will pay a 1.5 percent management fee on committed capital through the fund’s six-year investment period. That fee falls to 1.25 percent of invested capital thereafter.
The GP will collect 20 percent of the fund’s profits so long as the vehicle exceeds its 8 percent preferred return. LPs will see their management fees offset by 100 percent of any monitoring or transaction fees paid by portfolio companies over the life of the fund.
However, amounts paid by portfolio companies to FP Consulting, an operational consulting firm that services companies held by Francisco Partners funds, do not offset management fees paid by LPs. While members of the consulting team are listed on the firm’s website, both the website and SEC filings note FP Consulting is not an affiliate of Francisco Partners.
The lack of offsets extends to other outside consulting entities as well.
“From time to time, portfolio companies and the FP funds pay certain fees to other consultants introduced or arranged by FP and/or its affiliates that may regularly provide services to one or more portfolio companies, and such fees also do not offset the management fee,” according to the firm’s Form ADV.
As with previous funds, Francisco Partners will use its new vehicle to acquire 15 to 25 investments in mid-market technology companies with enterprise values of up to $1 billion.
The firm’s previous fund, which closed on $2.875 billion in 2015, was netting an 11.7 percent internal rate of return, according to South Carolina documents.
Action Item: For more on Francisco Partners, read the South Carolina documents here http://bit.ly/2ijMHNP
A bird flies above a group of people fishing on Navy Pier in the Presidio of San Francisco, part of Golden Gate National Recreation Area, on March 1, 2013. Photo courtesy Reuters/Robert Galbraith