Oregon Investment Council, one of the most active limited partners in the business, is committing $250 million to Vista Equity’s next flagship fund in what will be viewed as a vote of support for the firm.
LPs have been watching closely to see which institutions – especially public organizations – back Vista’s fund after the firm’s chief, Robert Smith, admitted to tax fraud in 2020. Public pensions are especially sensitive to any hint of reputational issues as they must answer to elected boards, politicians and taxpayers.
Vista’s eighth fund is targeting somewhere in the range of $18 billion to $20 billion, but could raise more, sources have told Buyouts. The fund is expected to have a first close in April, though it’s not clear on how much, sources said.
Vista is offering a management fee holiday for LPs who commit to the fund before the first closing, two sources said. The fee holiday generally means LPs who commit before the first close don’t pay management fees for six months, starting at the first close date.
The fee holiday helps to smooth out the J-curve, which is the period early in a fund’s life when losses are expected as LPs pay out fees, but don’t yet see money coming back from exits.
Vista has used fee holidays in past funds, according to a person with knowledge of the firm. Other firms like Blackstone Group and KKR have used fee holidays as a way to create momentum by incentivizing LPs to get into the fund early, potentially influencing other LPs who might be waiting.
Vista closed the prior flagship pool, Fund VII, on $16 billion in 2019. It also raises funds for investments in the mid-market, small market, credit and for longer holds.
Earlier this month, Vista led a more than $250 million investment in Flash, which provides cloud parking software. Other investors in the funding included L Catterton, other prior investors and management. In February, the firm led a more than $1 billion investment in cybersecurity provider Securonix, along with Volition Capital and Eight Roads Ventures.
Oregon Investment Council’s private equity committee announced the Vista commitment in February, along with a $300 million commitment to Francisco Partners VII and Francisco’s third Agility fund, and a $250 million commitment to Veritas Capital VIII, according to information from the pension system.
Smith in 2020 admitted he should have paid taxes on a portion of carried interest from Vista’s first fund that he directed into an offshore structure. He agreed to pay $139 million in back taxes, interest and fines and cooperate in the tax evasion case against his first investor, Houston software tycoon Bob Brockman.
Vista LPs who skip the next fund because of reputational concerns would likely be replaced by others, including big sovereign funds from overseas, looking to build exposure to the firm, sources said.
“It feels like the people that are staying with Vista have made their bet on Robert and this isn’t going to sway them,” an LP consultant told Buyouts last year about fundraising and Smith’s tax situation.
Update: This report was updated to clarify Robert Smith’s relationship with Bob Brockman.