Veritas, at the intersection of government and tech, seeks $8.5bn for next fund

The pool is part of what is a frenetic fundraising environment as strong-performing GPs bring follow-up funds at larger sizes back to market quicker than ever.

By Gregory Gethard and Chris Witkowsky

Veritas Capital is targeting $8.5 billion for its next flagship pool, a big jump from the prior fund as the firm looks to invest into the intersection of government and technology.

The pool is part of what is a frenetic fundraising environment as strong-performing GPs bring follow-up funds at larger sizes back to market quicker than ever.

North American GPs last year raised the most capital since 2019, pulling in nearly $475 billion across 854 buyout, growth, venture and other PE vehicles, according to Buyouts data. That was a 19 percent increase from 2020, and the highest tally except for 2019.

Veritas’s latest fund will target what partner Aneal Krishnan described at a recent pension meeting as the “intersection of government and technology” with a focus on adding aerospace, defense, national security, government services, healthcare and technology companies to its portfolio.

“There are significant reasons for growth in these industries for both good reasons and bad reasons. As recent events have shown, the global security picture is getting more questionable and we now have a bipartisan commitment to supporting our allies globally and boosting support for our homeland defense,” Krishnan said at the meeting this week of Philadelphia’s Board of Pensions and Retirement.

Philadelphia’s pension committed $25 million to the fund, while Oregon Investment Council’s private equity committed announced in February a $350 million pledge.

Philadelphia’s pension system invested in four previous Veritas offerings, according to investment officer Abdel-Aziz Ibrahim. Philadelphia limited its commitment to $25 million to limit its exposure to Veritas, as 18.5 percent of its private equity allocation is held in Veritas funds, chief investment officer Christopher DiFusco said at the meeting.

Fund VIII will invest in companies between $100 million and $1 billion in size, according to a report from the pension’s investment adviser Marquette. The GP commitment will be $200 million.

Fund VIII is understood to be heading for a first close soon, though it’s not clear how much it has collected. UBS is working as placement agent on the fundraising.

Veritas closed its seventh fund in 2019 on $6.5 billion, while Fund VI closed on $3.55 billion in 2017. While still too early to determine performance on the seventh fund, numbers from Oregon Public Employees Retirement Fund as of September 30, 2021 shows the pool generating a net 1.58 total value to paid-in multiple. Fund VI was producing a 3.47x TVPI and a 59.1 percent net internal rate of return, according to Oregon information.

Krishnan added that government services companies could include engineering firms that do work domestically and with municipalities, which could gain tailwinds due to the impacts of the recently passed infrastructure bill and growing interest in ESG investments.

“The increased fund size is because end markets have grown in size through consolidation and market growth. There are now larger opportunities for us to pursue. There’s no change in the strategy. It’s just a larger opportunity for us to invest,” Krishnan said.

In February, the firm agreed to acquire Houghton Mifflin Harcourt Co, a learning tech company, for $2.8 billion. Last year, Veritas agreed to sell its investment in electronic health record company Athenahealth in a $17 billion deal that generated a 10x return, PE Hub previously reported.

Veritas was formed in 1992 by Robert McKeon, who came from Wasserstein Perella. McKeon died in 2012, and leadership shifted to Ramzi Musallam, who leads Veritas along with Hugh Evans. Musallam, as CEO, is responsible for management and operations, according to the firm’s Form ADV.

A Veritas spokesperson declined to comment.