Summit Partners has closed its debut credit fund on $520 million, beating its initial target of $300 million, the firm announced in a statement.
The firm has raised four subordinated credit funds since 1994. However, those funds were only invested alongside the firm’s growth equity vehicles, providing mezzanine debt for portfolio companies. The new fund operates independent from the firm’s traditional growth equity business.
“What we’re doing now with the credit fund, we’re trying to provide credit for the … companies that we talk to that aren’t candidates for equity [investment],” managing director Tom Roberts told Private Equity International.
The credit fund includes commitments from existing Summit LPs as well as new investors, Roberts said. The GP provided $20 million in capital.
“The fund was a good mix of prior relationships and new relationships,” he said. “The limited partner response was gratifying.”
Summit began marketing the fund in the first quarter of 2011, holding a first close later that year. The fund has already made five investments and is approximately 20 percent invested.
The fund, which is managed by Boston-based managing directors Todd Hearle and Jamie Freeland, will provide credit to US and Canadian mid-market businesses. Although Summit does not focus specifically on individual sectors, the firm has seen a number of opportunities in the healthcare, media, leisure and gaming, oil and gas, telecommunications, technology, industrial, manufacturing, food and beverage and restaurant industries, Hearle said.
Despite a growing number of private equity firms entering the credit business, Hearle noted that Summit’s deal flow remained solid.
“There’s been a healthy flow of new funds into the space. As far as the composition of the portfolio, it really comes down to how you find your deals,” he said.
Summit Partners was founded in 1984 and maintains offices in Boston, Palo Alto, London and Mumbai. The firm has raised around $15 billion since its inception.