Key Takeaways
- • Thoma Bravo and Clearlake Capital Group have generated negative returns on investments made by the University of Texas and Texas A&M endowment (UTIMCO), marking underperformance by two of the most active mega-fund managers in recent years.
- • UTIMCO's $51.7 million investment in Clearlake Capital Partners VII shows a negative 1.9% IRR as of November 2023, though this outperforms the -5.3% benchmark for comparable 2022-vintage funds, according to Cambridge Associates data.
- • Early-stage fund performance remains volatile; Clearlake's more mature funds demonstrate strength, with Fund V (2017 vintage) posting 46% net IRR and Fund VI (2020 vintage) returning 34%, indicating that early losses do not necessarily signal long-term underperformance.
- • Middle-market private-equity firms have significantly outperformed mega-fund competitors in the current performance cycle, according to the endowment data obtained through a Texas Public Information Act request.
- • UTIMCO also committed to Clearlake Opportunities Partners III, which had not yet commenced its investment period as of November, exposing the endowment to future deployment risk and time-to-return dynamics typical of early-vintage funds.
Summary
Two prominent private-equity firms, Thoma Bravo and Clearlake Capital Group, have reported negative returns on investments held within the University of Texas and Texas A&M endowment portfolio, marking rare underperformance for firms that have become notably active dealmakers in recent years. According to exclusive performance data obtained by Business Insider through a Texas Public Information Act request, the endowment's investment manager, UTIMCO, which oversees a combined $65 billion in assets for both university systems, has experienced losses on capital deployed to these mega-fund managers.
The most concrete performance metric available concerns UTIMCO's $51.7 million commitment to Clearlake Capital Partners VII, a flagship fund that closed in May 2023 with $14 billion in total commitments. As of November, this investment carried an internal rate of return (IRR) of negative 1.9%—a result that, while negative, remains superior to the negative 5.3% benchmark for comparable 2022-vintage private-equity funds tracked by Cambridge Associates. This context is critical: negative early returns are not uncommon in private-equity fund cycles, as these are explicitly long-term capital commitments where value creation typically unfolds over multiple years.
The endowment's exposure to Clearlake extends beyond Fund VII. UTIMCO also invested in Clearlake Opportunities Partners III, which closed in September 2023 but had not yet entered its active investment deployment phase as of the November measurement date. This positions the endowment for future cash calls and time-to-return variability inherent in early-stage fund lifecycles.
Notably, Clearlake's mature funds demonstrate substantially stronger performance characteristics. Fund V, a 2017-vintage offering, has posted a 46% net IRR, while Fund VI, closed in 2020, has returned 34%. These results underscore the importance of distinguishing between early-stage fund underperformance and structural fund quality. Clearlake, led by cofounders and managing partners José E. Feliciano and Behdad Eghbali, focuses on investments in technology, industrials, and consumer companies. The firm declined to comment on its performance metrics. The broader data set indicates that middle-market private-equity firms have materially outperformed mega-fund competitors within the same endowment's portfolio, suggesting a potential divergence in deployment and valuation timing across fund size segments.
The most concrete performance metric available concerns UTIMCO's $51.7 million commitment to Clearlake Capital Partners VII, a flagship fund that closed in May 2023 with $14 billion in total commitments. As of November, this investment carried an internal rate of return (IRR) of negative 1.9%—a result that, while negative, remains superior to the negative 5.3% benchmark for comparable 2022-vintage private-equity funds tracked by Cambridge Associates. This context is critical: negative early returns are not uncommon in private-equity fund cycles, as these are explicitly long-term capital commitments where value creation typically unfolds over multiple years.
The endowment's exposure to Clearlake extends beyond Fund VII. UTIMCO also invested in Clearlake Opportunities Partners III, which closed in September 2023 but had not yet entered its active investment deployment phase as of the November measurement date. This positions the endowment for future cash calls and time-to-return variability inherent in early-stage fund lifecycles.
Notably, Clearlake's mature funds demonstrate substantially stronger performance characteristics. Fund V, a 2017-vintage offering, has posted a 46% net IRR, while Fund VI, closed in 2020, has returned 34%. These results underscore the importance of distinguishing between early-stage fund underperformance and structural fund quality. Clearlake, led by cofounders and managing partners José E. Feliciano and Behdad Eghbali, focuses on investments in technology, industrials, and consumer companies. The firm declined to comment on its performance metrics. The broader data set indicates that middle-market private-equity firms have materially outperformed mega-fund competitors within the same endowment's portfolio, suggesting a potential divergence in deployment and valuation timing across fund size segments.
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