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US-Based Private Equity Investors Connected to the Information Technology Industry – September 2014

by Kristen Drewes

  • 09 Sep 2014
  • PE

The information technology (IT) industry encompasses a broad range of services that feature heavily in 21st century society, including internet, computer services, electronics, gaming, IT security and infrastructure, wireless and nanotechnology, to name a few. According to Preqin’s Investor Intelligence online service, there are currently 1,169 active US-based institutional investors targeting or investing in the IT industry. These LPs hold an aggregate of $21tn in assets under management, with an average current allocation to private equity of 11.9%, slightly below their average target allocation of 12.2%.

Foundations and private sector pension funds represent 22% and 21% respectively of US-based LPs that have a preference for, or have previously invested in, funds with exposure to the industry. These LPs are followed by public pension funds (15%) and endowment plans (13%), which represent the third and fourth highest proportion of investors that target or have previously invested in the IT industry.

Venture capital funds are viewed as the most attractive fund type for US-based institutional investors with an appetite for the information technology industry, with 83% of investors preferring to invest, or having invested previously, in this type of vehicle. Buyout funds (75%) are the second most attractive vehicle for these investors, followed by funds of funds (59%) and growth funds (58%). US-based investors also display some appetite for distressed private equity (53%), mezzanine (42%), and secondaries vehicles (38%) when seeking exposure to opportunities in the IT sector.

Preqin’s data reveals that a significant majority (95%) of private equity investors in the US are attracted to investment opportunities in the IT sector within North America. Non-domestic regions also prove significantly appealing to US-based investors, as 66% of these LPs display an interest in information technology opportunities in Europe, 54% in Asia and 47% in emerging markets.

US-based investor appetite for the information technology industry can be seen in the recent commitment by Massachusetts Housing Finance Agency Retirement Board (MHFA) to Ascent Venture Partners VI, an early stage vehicle targeting $150mn that will make investments in regions of the US focusing on the information technology sector. Another US-based LP with an appetite for the information technology industry is Florida State Board of Administration (FSBA), which has recently committed to Thoma Bravo Fund XI, a multibillion-dollar buyout fund targeting software and technology enabled service sectors within North America.

Information technology will undoubtedly remain a strong industry within the global economy due to the life-changing innovation and development it consistently produces and builds upon. The industry has had a proven track record of successful investment opportunities since its dawn, and it does not seem likely to falter in the coming years.

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