Vista considers launching fund for micro-cap investments

Vista Equity Partners has been in quiet discussions with some limited partners about launching a micro-cap fund that would target the small end of the market, according to three people with knowledge of the discussions.

Nothing is set in stone and it’s unclear whether or when such a fund would be launched. The firm would likely hire someone to run the strategy, one of the sources said.

The fund would start out small, probably around $400 million, one of the people said. It would take the place of Vista’s Foundation Fund series, which started out small but because of limited-partner demand has outgrown the smallest side of the market, the source said.

It’s not exactly clear what size companies the micro-fund would target. Vista’s third Foundation fund, which is in market targeting $2 billion with a $2.5 billion cap, targets companies with enterprise values of as much as $400 million, according to New Jersey Division of Investment documents. Fund II, a 2013 vintage, pursued companies with enterprise values of as much as $200 million.

Vista’s first Foundation fund closed on $400 million in 2010. It grew quickly, with Fund II closing on $1.1 billion in 2013.

The Foundation fund family is a strong performer. Since 2009, the firm has invested $900 million in 15 small-cap deals, which have generated a gross internal rate of return of 51 percent and a multiple of 2.3x as of Sept. 30, 2015, documents from Arkansas Teachers’ Retirement System show.

Fund II was producing a 1.05 total value multiple as of April 30, 2016, according to New Jersey Division of Investment.

Vista’s Foundation Fund is led by Vince Burkett, Alan Cline, Rob Rogers and Patrick Severson, according to Arkansas documents.

Vista specializes in enterprise software. It is in the market raising its sixth flagship fund, targeting as much as $10 billion.

Action Item: Reach Robert Smith’s assistant, Maria Nicolas, at +1 512-730-2480.

Robert Smith, founder, chairman and CEO of Vista Equity Partners, speaks at the Milken Institute Global Conference in Beverly Hills, California, on May 2, 2016. Photo courtesy REUTERS/Lucy Nicholson