Washington State continues to add to private markets

This week the $117 billion Washington State Investment Board’s private markets committee considered a recommendation to invest in Luminate Capital Partners III, which is part of fund series focused on software and software-enabled middle market businesses. The amount under consideration has not been announced, but Luminate raised $425 million for its second fund in 2018. In November, the private market committee reviewed PSG Europe, L.P. An affiliate of Providence Equity Partners, the Boston-based firm focuses on growth equity investments in lower middle market software and technology-enabled service companies. These potential moves follow Washington State Investment Board members approval of awarding Albourne America the private equity consulting contract that begins in January. Trustees also approved to invest up to $200 million in the Thoma Bravo Discover Fund III, which was set up by the firm to pursue control buyouts of mid-market business to business software and SaaS businesses mostly in North America. The Thoma Bravo fund has a $3 billion target fundraise and has already raised assets among other institutional investors, including: Merced County Employees’ Retirement Association ($8 million) and Pennsylvania State Employees’ Retirement System ($25 million). At Washington, the investment gained anonymous approval and the recommendation was based in part on Thoma Bravo’s experienced and cohesive leadership team, consistent and differentiated strategy and strong historical performance, according to meeting minutes. Discover funds employ a value creation framework that seek to optimize free cash flow then develop in-house merger and acquisition capabilities to pursue add-on acquisitions. Specifically, Fund III will seek to invest $200 million to $400 million in 12 to 15 portfolio companies with entry enterprise values between $300 million and $800 million. A second approved investment in September was in Searchlight Capital III, which will receive up to an additional $100 million. Searchlight Capital III is a multi-strategy private equity fund that closed at $3.4 billion. The proposed additional commitment is a 50% increase from the original $200 million commitment approved by the board in April 2019. The Searchlight fund targets investments in North America and Europe and leverages the $8 billion firm’s teams in both geographies to pursue opportunities in a range of sectors that include communications, media and financial and business services.

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