Charlesbank Capital Partners’ latest fundraising haul underscores a prevailing trend in private equity: The middle market continues to gain momentum even as the fundraising slowdown challenges the broader industry.
On Tuesday, the PE firm secured nearly $1.28 billion for its second buyout vehicle to target high-growth technology companies in the lower middle market.
Charlesbank Technology Opportunities Fund II collected commitments from several public pension funds, including Tulare County Employees’ Retirement Association and San Mateo County Employee’s Retirement Association, which both earmarked $20 million for the fund, according to pension documents.
The new vehicle is nearly twice the $700 million inaugural small-cap tech fund Charlesbank closed in 2020, a testament to the prevalent investor preference now for middle-market funds, defined as those raising between $100 million and $5 billion.
Ninety percent of middle-market buyout funds that closed in Q1 were a step up from their previous pools—the highest quarterly percentage ever, according to PitchBook’s latest US PE Middle Market Report.
The report also showed that midmarket funds outperformed their larger counterparts in 60% of the 28 quarters between 2017 and 2023.
Charlesbank’s inaugural fund was also a high achiever. It delivered a net IRR of 60.9% and a 2.3x net multiple as of June 30, according to a document from the City of Quincy Retirement System.
The Boston-based PE firm launched its technology strategy in 2018. The team, led by seasoned tech investors Darren Battistoni, Mayur Desai and Hiren Mankodi, focuses on sectors including application software, cloud computing, cybersecurity, healthcare IT, fintech and infrastructure software.
The new fund has already made four investments, including its acquisition of Maltego, which provides link-analysis software used by investigators, and a strategic growth deal for Searchlight Cyber, a dark web intelligence platform.
Featured image by Prasit photo/Getty Images
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