Amid fundraising chaos, Rhode Island backs emerging firm Havencrest Healthcare

As many LPs struggle to keep up with the frenetic pace of re-ups from their existing managers, they still want to find ways to back little-known emerging shops.

Rhode Island’s State Investment Council, in its backing of Havencrest Healthcare Partners II, made sure to keep a focus on up-and-coming firms. The system committed $40 million to Fund II, which is targeting $300 million for investments in behavioral health, post-acute care and value-based care companies.

Fund II will likely exceed its target and raise $350 million, according to Havencrest managing partner Christopher Kersey, who spoke at the investment council meeting this week. Rhode Island will have a seat on the fund’s limited partner advisory committee.

The fund is an example of the kind of specialized strategy that has been attracting attention from limited partners that are overburdened with re-ups from established firms.
Rhode Island chief investment officer Andrew Junkin said the commitment was an opportunity to get in early with an emerging manager while also maintaining exposure in the healthcare space.

“We’re a smaller state. With the commitments we make, we have to act as a different kind of LP. And we have to deploy our size to our advantage,” Junkin said at the meeting as it debated the merits of the commitment.

Junkin explained that many established funds tend to offer early opportunities to larger LPs. Havencrest was formed by Kersey in 2017, the same year it closed its first fund with $200 million. The firm’s first fund made five investments and has had two exits, according to Kersey.

“We think there is a major market need, especially with companies focused on mental health issues. We’re looking to put money in companies focused on clinical quality. We’re not looking to do any cost-cutting,” Kersey said about the firm’s strategy.

Established LPs like Rhode Island are having to cull their portfolios contending with GPs coming back faster than expected, with larger funds and even with new products. But even in the fundraising maelstrom, LPs continue to seek new relationships and emerging firms.

With its investment, Rhode Island SIC will be one of the largest LPs in Havencrest with a more than 10 percent interest.