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PA Schools commits to Oak HC/FT after briefing on potential conflicts

The new fund is hitting the market less than two years after its last one, amid positive headwinds for its sector focuses.

Pennsylvania Public School Employees’ Retirement System went ahead with a $100 million commitment to the latest fund from Oak HC/FT, despite concerns about a founders’ marriage to the governor of Connecticut.

Oak HC/FT is run by co-founders Ann Lamont, Andrew Adams and Patricia Kemp.

At a board meeting Thursday, board chairman Christopher SantaMaria expressed concerns about how Lamont manages potential conflicts with the work of her husband, Governor Ned Lamont.

“Can you tell us how she’s managing that alongside her work with Oak [HC/FT]?” he asked of Adams, who was representing the firm. Adams requested an executive session so he could “share details.”

Pennsylvania state law allows executive sessions to discuss business “which, if conducted in public, would violate a privilege or lead to disclosure of information or confidentiality protected by law.”

Last year, the Hartford Courant reported that Oak HC/FT had a position in one of the healthcare companies that the state of Connecticut hired to run covid testing in the state.

Josh Geballe, whom Governor Lamont tapped to run the state’s covid response, had run another company in which Oak HC/FT had invested, and it was that which introduced Geballe to the Lamonts.

The Courant reported that the Lamonts had provided a plan to avoid potential conflicts, which was endorsed by the state’s ethics office. The Lamonts have also agreed to donate any profits from state contracts to charity.

After the executive session, PA Schools agreed to go forward with a $100 million commitment to the fund.

A PA Schools spokesman declined to provide any details from the executive session.

Oak HC/FT did not respond to requests for comment.

Oak HC/FT Partners IV is targeting $1.1 billion for its fourth growth equity fund, jumping back into the market less than two years after closing its previous vehicle, with a plan to continue focusing on the healthcare and fintech sectors.

Oak HC/FT is a spin-out of Oak Investment Partners. It closed its first fund in June 2014 on $500 million, according to a PA Schools staff memo. Of that, $457 million has been invested, and its net internal rate of return as of September 30, 2020 was 48.5 percent with a 2.7x multiple on capital.

Fund II was closed on $600 million in March 2017. As of June 30, 2020, it has a net IRR of 29.5 percent, according to documents on the Los Angeles City Employees’ Retirement System website.

Fund III closed on $800 million in July 2019 and is still in its J-curve period, the time early in a fund’s life before investments mature. Its net IRR as of June 30, 2020 was -24.5 percent, according to LACERS.

An accompanying letter from Hamilton Lane said all of these funds have generated top-quartile performance based on total value to paid-in multiples.

Oak HC/FT’s two focus sectors have seen extremely positive headwinds during the coronavirus pandemic, as Buyouts has reported. The PA Schools memo said healthcare is on pace to have a record-setting funding year.

Hamilton Lane said Fund IV would target 12 to 13 growth equity investments, four to six early-stage venture investments and two to three later stage growth equity investments. Investment sizes will range from $45 million-$75 million for growth equity and about $25 million for early-stage venture.

Action Item: read the PA Schools investment memo on Oak HC/FT’s fourth fund here.