TA closes two linked funds

The Boston-based firm has closed on a $3.5 billion private equity capital fund and a $778 million subordinated debt fund, after turning away billions of dollars in LP interest.

Hoping to follow the success of their $2 billion fund TA IX, which was launched in March 2000 and is now 98 percent invested, TA Associates has launched TA X, a $3.5 billion private equity capital fund.

Like its predecessor, TA X will invest in technology, financial services, business services and healthcare. The fund will target investments ranging in size from $50 million to $300 million.

TA also announced it has closed TA Subordinated Debt Fund II, a $778 million fund that will provide loans to companies in the TA X portfolio. The fund will work similarly to the first TA SDF, which provided loans to TA IX portfolio companies.

“TA IX was pointed toward growth companies, and I would expect the same type of general company in TA X,” said Kevin Landry, CEO of TA Associates.

Those companies included online broker Ameritrade, which TA exited with a 5x return, and electronic marketplace operator Intercontinental Exchange, which TA exited in a 10x return. TA exited from four TA IX portfolio companies this quarter through two IPOs and two sales.

Landry said TA X will increase its focus on money management firms and decrease its attention to healthcare services.

“Healthcare makes us nervous,” he said. “The services have gotten a little pricy, they don’t seem to reflect the reimbursement risk. The government can change the rules on pretty short notice.”

Landry said TA will instead focus on companies that are providing technology to the financial markets such as former TA IX investment LAVA, a cash and derivatives deal systems provider which TA sold to Citigroup in 2004.

The success of TA IX attracted a great deal of investor interest in TA X, with TA being forced to turn away billions of dollars.

Among the investors TA turned away were any state pension funds from Illinois. Landry said his lawyers advised him that a new Illinois law barring state pension funds from investing in companies that do business in Sudan is too vaguely worded.

“If you have any company selling a product, and any of their reps can sell that product in Sudan, you’d be in violation of the law,” he said. “I think it’s a law with great intentions but is probably poorly written.”