Software-focused private equity giant Thoma Bravo closed its third credit fund on $3.6 billion, signaling a continuation of the strong private debt fundraising cycle that began in H2 2024.
The firm announced it completed its capital raising efforts for Thoma Bravo Credit Fund III on Tuesday, marking its largest pool of credit capital to date.
The vehicle, which exceeds its predecessor by $300 million, will focus on investing in senior secured debt of enterprise software companies, an extension of the firm’s bread-and-butter strategy in the sector. Already, the fund has invested over $1 billion across 20 investments, according to the statement.
The fund close is a sign of continued LP interest in the asset class, which has grown exponentially in recent years, fueled in large part by solid performance of traditional drawdown funds and banks cutting lending to borrowers because of the Federal Reserve’s interest rate-hike campaign.
Despite a slump in H1 2024 amid interest rate uncertainty—which can prompt a flight from products like floating rate securities and loans—private debt fundraising has remained resilient, with LPs piling into the asset class at a record clip. Through Q3 2024, private debt funds raised a total of $169.2 billion, a figure on track to slightly exceed 2023’s total of $226 billion, according to PitchBook’s Q3 2024 Global Private Market Fundraising report.
This figure includes some massive raises last year, like Blackstone‘s evergreen senior direct lending fund that closed on $22 billion in October and Ares’ third direct lending vehicle that closed at $33.6 billion in July.
While declining interest rates pose a threat to the attractiveness of private debt vehicles, their collective performance and distribution rate have kept them in good standing with institutional investors. Through Q2 2024, private debt exceeded all other private market strategies with a return of 10.9% for the 12 months ending in June 2024, according to PitchBook’s Q2 2024 Private Capital Indexes report. Private equity, by contrast, generated an annualized return of 8% over the same time period.
Since 2018, Thoma Bravo has been the second-largest PE investor in enterprise SaaS companies, after buyout shop TA Associates Management, according to PitchBook data.
Featured image by Dan/Getty Images
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