TA’s Select Opportunities fundraising pause and what it means for PE

We’ve been predicting real-life examples of fundraising processes failing to achieve their goals, or even falling apart completely. Now we're starting to see these things coming into sharper relief.

How has the fallout from SVB’s collapse impacted you? We understand there’s been questions all week about capital call lines of credit and where LPs should send their capital. GPs scrambled to find new banks once SVB was seized, but later in the week, capital call lines were back up and running once the SVB bridge bank was established.

I’m wondering what this situation means for the future of the sub line of credit biz in private equity.

We’re also following SVB parent SVB Financial Group’s potential sale of non-bank assets, which includes its $9.5 billion fund of funds platform and its wealth channel. There are also LP fund stakes floating around, which could represent a secondary sale. We’ve heard rumblings of a few potential buyers of the platform, or the LP book. Have you heard anything? Hit me up at cwitkowsky@buyoutsinsider.com. Or find me on LinkedIn.

Signs n’ signals: At times, we here at Buyouts are engaged in trying to interpret signs and signals vibrating through the market, to understand where things are heading and what the rest of the year will look like. (Like the oracles in ancient Greece, but without the creepy smoke and thick mascara.)

It’s not a stretch to understand that fundraising has become a much harder prospect than it was in 2021, for example. That’s due to several factors converging to slow LP commitment pacing, as we’ve outlined here and here.

We’ve been predicting real-life examples of marketing processes failing to achieve their goals, or even falling apart completely. Now we’re starting to see these things coming into sharper relief.

This week, I reported that TA Associates, one of the highly regarded GPs with a track record of strong performance, told LPs it was pausing fundraising on its third double-down fund, called Select Opportunities. TA will focus solely on raising its fifteenth flagship pool, which an LP told me could come in at more than $16 billion.

TA didn’t comment on the fundraising pause, so it’s not exactly clear why the firm decided to stop raising the pool. Sources said TA didn’t receive the kind of reception it expected on the double-down fund, which could be an example of “LP fatigue.” “There’s fatigue because ‘Hey, you guys are back, we have a lot of NAV with you and we can only do so much,’” a family office LP told Buyouts in a prior interview.

Another source speculated that the double-down strategy might be a “relic” of the high-growth era that ended with the Federal Reserve’s efforts to tighten the money supply to combat inflation. Select Opportunities reinvests into existing portfolio companies the firm is exiting, as a way to continue riding the company’s growth. In a slower environment, investing extra money to try to catch that sort of momentum may not make as much sense.

It’s also the case that ancillary funds – the kinds of new products GPs created over the past few years of the fundraising bull market – may be heading for a much harder road ahead. LPs are viewing new product launches much in the way they view emerging managers; that is, they’re happy to keep backing their deepest relationships’ core offerings, but any sort of new effort will be getting a lot more scrutiny.

It should be noted that this is TA, a firm that otherwise enjoys broad LP support. Another firm with a less impressive track record may not have been so quick to pause fundraising. TA has the kind of pull and reputation that it can take a hit and not really flinch.

On the other hand, maybe it’s because of decisions like this that go into what makes TA so highly respected among LPs.

We are witness to several fundraising processes that are not looking like they’ll make target. One, Manna Tree Partners’ second fund, closed below target on $390 million, including co-investment capital. The original target was $450 million with a $550 million hard-cap.

“Q4, we just decided that we had hit threshold to be able to hit the check sizes that we wanted. I did not want to continue to fundraise into 2023 based upon where the market conditions were, and we had had already executed three deals in that portfolio,” Ross Iverson, co-founder and managing partner of Manna Tree, told Buyouts’ affiliate New Private Markets.

Some of the challenge in fundraising is about the individual stories of the firms themselves, and some of that has to do with the general market. I have a feeling we’ll be seeing a lot more moves like the one TA just made.