Vista sets ascending carried interest based on performance in next middle-market fund

Vista Equity Partners’ latest fund charges a premium carry that increases in increments depending upon the fund’s returns.

Meeting documents from the New Jersey State Investment Council indicate Vista Foundation Fund IV charges the typical 20 percent carry until cumulative distributions represent a 2.5x multiple.

If cumulative distributions are exactly 2.5x, the fund then charges a 25 percent carry.

If the cumulative distributions represent a multiple greater than 2.5x but less than 3.0x, the carry will be equal to the product of that multiple rounded to the nearest tenth and multiplied by 10. (In other words, if the return were 2.66 percent, the carry would be 27 percent).

Finally, if the multiple is 3.0x or higher, the carry stops at 30 percent. The fund also has an 8 percent hurdle rate. Its management fee is 2 percent.

Vista has set this type of carry structure in past Foundation funds that reach premium carry depending on performance, sources said.

The fund is targeting $3.25 billion with a $4 billion hard-cap, according to the documents. It could raise as much as $4.5 billion, though, as Buyouts has reported. The fund launched last fall. Its investments will focus on enterprise software, data and technology-enabled companies.

New Jersey approved a $100 million commitment to Fund IV at its meeting Wednesday, staff told Buyouts.

Illinois Municipal Retirement Fund has also invested $75 million, according to data from sister publication Private Equity International.

The New Jersey documents also have performance data on the three previous Vista Foundation Funds. As of June 30, 2019, Fund I has a 2009 vintage, a 39.1 percent internal rate of return, a 2.94x net total value to paid-in multiple. Fund II has 2013 vintage, a 17 percent IRR and a 1.74x net TVPI. Fund III, a 2016 vintage, generated a 9.1 percent IRR and a 1.13x TVPI.

Vista was founded by Robert Smith in 2000. The firm did not respond to a request for comment for this story.

Action item: read Vista Equity Partners form ADV here.