Bain Capital targets $1.5bn for second tech opportunities fund

Nov 24, 2021 | News

Bain Capital is pitching investors on its second technology-focused fund with a goal of raising $1.5bn barely a year after wrapping up the strategy’s debut fund with $1.25bn.

The New Mexico State Investment Council committed up to $60 million to the vehicle, Bain Capital Tech Opportunities Fund II LP, according to David Lee, the director of private equity for the council, which manages $34 billion of assets for four permanent funds. Bain Capital is committing $150 million to the fund, Mr. Lee said.

The new Bain Capital vehicle will focus on buyouts and late-stage growth investments in midsize North American companies, involving control and minority investments, Mr. Lee said at a public meeting of the council.

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Technology businesses have been the most popular private-equity investments this year, data from Refinitiv show. The research provider said on Monday that 27% of the roughly $1 trillion in announced private-equity deals so far this year involved technology companies.

Bain Capital will invest from the fund in technology and technology-enabled businesses in areas such as application software, infrastructure and security, financial technology and payments, healthcare information, and digital media, according to Mr. Lee. The firm expects to invest $50 million to $250 million in 10 to 15 companies, Mr. Lee said.

Even though the firm’s first Tech Opportunities Fund is still young, it has shown signs of success, with a net internal rate of return of 74% as of June 30, according to Richard Pugmire, principal, alternatives at Mercer LLC, the council’s investment adviser.

Bain Capital “generated a favorable return” from the debut tech-opportunities fund’s first exit, Mr. Pugmire said. The firm sold online-training company A Cloud Guru Ltd. to technology workforce-development company Pluralsight LLC, which is backed by Vista Equity Partners.

Bain Capital offered two choices to investors on fund terms, including one calling for a higher management fee and a lower share of investment profits, or carried interest, for the firm, Mr. Pugmire said. The council preferred that option.

“If the fund performs how we hope it does, you’d want a lower profit sharing because that’s likely going to lead to higher net returns at the end,” Mr. Pugmire said.

Bain Capital Managing Directors Darren Abrahamson and Dewey Awad created the firm’s tech-opportunities strategy in 2019. At the time, Mr. Abrahamson led technology investing for Bain Capital’s private-equity team while Mr. Awad focused on public and private technology-company deals in the firm’s public-equity group.

The tech-opportunities team has expanded “quite significantly” since then and now consists of 25 people across investing, portfolio operations and value creation, Mr. Abrahamson told the council.

Source: PE News

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