Cortec targets investments in companies in North America across healthcare, distribution, and consumer businesses. The fund is hitting the market at a fraught moment, when many LPs are backing off their pacing to private equity as they contend with overexposure to the asset class and slowing distributions, leaving them with less flexibility for re-ups and new relationships.
The target for Cortec Group Fund VIII was revealed in an investment activity report from Sacramento County Employees’ Retirement System. Cortec’s seventh fund closed at $2.1 billion in 2019.
According to the report, Sacramento County committed $30 million to Fund VIII. The system previously invested in Cortec’s seventh flagship.
Other known commitments to Fund VIII include $60 million from Texas County & District Retirement System, $10 million from Merced County Employees’ Retirement Association and $40 million from Ohio Police & Fire Pension Fund.
All four of the LPs committed to Cortec’s seventh fund.
According to a report from Sacramento County’s general investment consultant Verus, Fund VII has a 26.4 percent Net IRR. According to the company’s website, Cortec makes control investments in platform companies with revenues between $40 million and $300 million with EBITDA of $7 million to more than $35 million.
Cortec is co-led by David Schnadig and Jeffrey Lipsitz. Other managing partners include Michael Najjar, Jeffrey Shannon and Jonathan Stein.
Cortec was formed in 1984 by Neal Kayes, Gerald Rosenberg and Scott Schafler, all of whom worked for industrial conglomerate Condec. Schafler is still listed as a managing partner.
Portfolio companies in Fund VII include home foundation repair company Groundworks, children’s pajamas brand Little Sleepies and Circle Surrogacy and Egg Donation.
Cortec’s exits include Window Nation, pet euthanasia specialist Lap of Love, and coffee machine cleaning product manufacturer Urnex.
Recent news from Sacramento County and Merced County show some of the issues LPs currently face.
Sacramento County announced it will target $260 million in commitments in 2023, down from $365 million in commitments made in 2022, Buyouts reported in November. At that time, Sacramento allocated 15.4 percent to private equity, above its 11 percent target.
Merced County’s contributions to private equity investments outpaced distributions by $16 million in the third quarter of 2022 due to the sluggish exit environment, according to a board presentation conducted in March.