MassPRIM bets on Providence Equity’s lower-mid-market fund

  • Assets under management: $71.6 bln
  • Actual allocation to PE: 10.5 pct
  • What’s new : MassPRIM is focused on lower-middle-market opportunities

Massachusetts Pension Reserves Investment Management Board committed $75 million to Providence Strategic Growth’s third fund, which is targeting $1.25 billion for investments in lower-middle-market tech businesses.

This is the pension fund’s first investment in Providence Strategic, an affiliate of the $57 billion asset manager Providence Equity. It has invested in five Providence Equity funds since 2001, and added Providence Equity to its co-investment manager bench.

Providence Strategic was established in 2014 to focus on lower-middle market growth-equity investments in North America and has more than $2 billion in assets under management, documents show.

Texas Municipal Retirement Fund committed $70 million and Pennsylvania State Employees’ Retirement System pledged $75 million to Providence Strategic’s third fund.

“PSG has been nimble and smart in their lower-middle-market investments. We like the team and are confident the third fund will perform as well,” an institutional investor said.

In addition, Providence Strategic benefits from Providence Equity’s sourcing team and back-office resources, investors said.

Providence Strategic’s third fund may close higher than $1.25 billion, said an investment manager who has committed to the third fund. It’s targeting a 20 percent to 25 percent internal rate of return, MassPRIM documents say.

Its second fund closed at its hard cap of $640 million in December 2016.

MassPRIM has been steadily increasing investments in the lower-middle markets. The investment in Providence Strategic will give it access to software and technology-enabled-services companies in the markets.

Providence Strategic will make majority and significant minority investments of $5 million to $50 million in companies with revenue of $5 million to $75 million, documents show.

Providence Strategic’s portfolio companies include Pineapple Payments, DoubleVerify, Patron Technology, Conversica, SignUpGenius, LogicMonitor and Skybox Security.

Mark Hastings and Peter Wilde lead Providence Strategic’s Fund III, MassPRIM documents show.

Wilde leads Providence’s PE investments in education and information and is chairman of Providence Strategic Growth. Hastings is CEO of Providence Strategic and joined the Providence team in 2013.