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HarbourVest eyes CalPERS’ stake in Health Evolution Partners

  • CalPERS committed $500 mln to HEP growth fund
  • Landmark expressed interest, but no longer bidder
  • Evercore is managing sale

HarbourVest Partners appears to be the last bidder interested in buying CalPERS’ stake in a healthcare fund run by a former Bush Administration official, according to two sources.

The California Public Employees’ Retirement System since summer has been trying to sell its stake in a growth fund managed by Health Evolution Partners (HEP). Evercore Partners is running the sales process, sources said.

Landmark Partners was also a bidder until recently, a secondary market professional said.

CalPERS is the sole limited partner in the fund and committed $505 million at its inception in 2008. So far, the GP has drawn down just over $430 million, as of March 31, according to CalPERS.

The fund’s performance has not been stellar. It produced an internal rate of return of 2 percent and a 1x multiple as of March 31, according to CalPERS.

One secondary market professional said bad blood between CalPERs and HEP likely drove away some potential buyers.

Real Desrochers, senior investment officer for CalPERS’ Private Equity Program, recommended the retirement system get out of the investment because he didn’t believe HEP would achieve its goal of a 20 percent IRR, Pensions & Investments reported in August. CalPERS investment staff earlier this year refused to allow HEP to use already-committed capital and told the firm to find a new partner or face liquidation, P&I reported.

The CEO and managing partner of HEP is David Brailer, former national coordinator for health information technology within the U.S. Department of Health and Human Services. The firm’s website lists 15 other staffers, including three partners, three operating partners, one investment partner, four vice presidents, one principal, one associate and two senior advisors.

Besides the growth fund, CalPERS committed $200 million to an HEP fund-of-funds in 2007. The talks with Harbourvest do not include the sale of the FoF, which had produced a negative 3 percent IRR and a 0.9x multiple as of March 31.

CalPERS declined to comment for this story. Evercore and HEP did not respond to requests for comment.