With valuations finally coming down, LPs may want to consider if now is the right time to get back into growth funds. These vehicles raised money hand over fist during the boom times before 2022, but they have found fundraising much more difficult for the past couple of years.
Growth investing is just one of the topics we’ll be exploring at our Nexus 2024 event in Orlando on March 8. I am keen to hear the conversation between Amol Helekar, general partner at tech growth specialist TCV, and Allen Waldrop, director of PE for Alaska Permanent Fund Corporation, about how they are working together. (Check out the agenda here.)
“Given the nature of private markets, it’s a challenge to get the timing right on the market cycles, and manager selection within each space is critically important,” Waldrop told me this week. “With that said, we continue to believe that growth equity presents an interesting risk return opportunity in the current environment.”
I’ve noticed several growth funds gaining traction of late. Accolade Partners said this week that it closed on more than $1 billion for new funds of funds, with the bulk of the capital focused on VC and PE growth strategies. Accolade’s investors include endowments, foundations, family offices and high-net-worth individuals.
Just two months earlier, Morgan Stanley Investment Management announced that it beat the combined target for a new growth equity fund and credit fund by more than 40 percent. The funds closed on $1.2 billion to invest in later-stage growth equity and credit investments in technology, healthcare, consumer, digital media and other “high-growth” sectors.
Several other growth funds, both large and small, are actively fundraising. The UK’s IQ Capital closed on €166 million for its Growth Fund II. It has not disclosed the target for the fund, which has secured commitments from Al Ahram Investments, British Patient Capital, JP Morgan Asset Management and Help to Create Hope Trust, according to fundraising data
from affiliate Private Equity International. IQ previously closed on £95 million for Growth Fund I in 2020.
Also in market is TCV, which is targeting $5 billion for TCV XII. So far, the fund has held two closes totaling $2.76 billion from the likes of the Massachusetts Pension Reserves Investment Management Board ($200 million), District of Columbia Retirement Board ($75 million), Los Angeles City Employees’ Retirement System ($60 million) and Alaska Permanent Fund ($15 million), according to PEI fundraising data. TCV previously closed on $4 billion ($750 million above target) for Fund XI in 2021.
