Healthcare specialist PE funds hit a peak in commitments last year, concentrated in a small number of large vehicles.
PE managers focused on areas such as digital healthcare, health technology and software had a record fundraising year, amassing $18.3 billion total by the end of 2023, according to PitchBook’s latest Healthcare Funds Report.
In November, New Heritage Capital closed its fourth vehicle dedicated to growth-equity investments on $438 million, above its $350 million target.
Funds raised by EW Healthcare Partners, Martis Capital, Patient Square Capital and other specialist firms also closed well above their targets in 2023.
The momentous capital gathering pace has sustained itself since 2021, when specialist healthcare GPs raised $17 billion across 48 funds, more than double the previous three-year average, according to the report.
In part, LPs are attracted to healthcare PE for its industry tailwinds and secular qualities. Investors assume that specialist GPs, in particular, outperform generalist managers.
PitchBook research has shown that sector specialization and outperformance are not correlated. Still, broader market trends contributed to a divergence between larger and smaller healthcare fund managers last year.
While total capital raised by healthcare PE funds met new heights, only 21 funds closed—less than half of those in 2021 and 2022, indicating the dominance of larger funds.
In fact, the number of healthcare PE funds that closed under $100 million fell from 12 in 2022 to just one. What’s more, only three of the 21 funds raised last year were products of an emerging firm; experienced managers gobbled up the bulk of investor capital.
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