Specialist Havencrest raises $356m for niche healthcare

Experts say US-focused, non-tech, mid-market funds could do well in volatile environment.

Havencrest Capital Management, which invests in niche healthcare companies, closed its second fund at $356 million, which exceeded its initial $300 million target.

The closing of the Havencrest fund reflects the views of several investors, advisers and analysts who are looking to build exposure to specialists who can deliver targeted strategies. Interest is partially driven by fears of weakening valuations driven by plummeting public tech stocks, inflation and geopolitical concerns.

Havencrest invests in behavioral health, post-acute care and value-based healthcare companies that have a proven track record of success, said Christopher Kersey, the founding managing partner of the fund in a recent interview.

Fund II took six months to raise. Rhode Island State Investment Commission committed $40 million.

The firm was formed in 2017 by Kersey. He previously worked at Camden Partners, which also focused on healthcare. The firm raised $200 million for its debut fund in 2018.

Recent investments include Apara Autism Centers, which provides therapy to children with autism; Paradigm Health, which provides hospice and palliative care; and Effective School Solutions, which works with school districts to help students with behavioral issues.

Experts say that funds like Havencrest offer several benefits during these volatile and unprecedented times. At the top of this list is their insulation from geopolitical risks.

Mid-market portfolio companies also have structural advantages in how they manage capital, according to Logan Henderson, the founder and CEO of Gridline, which offers a digital platform that allows retail investors access to alternative assets.

“A lot of mid-market businesses are capital efficient. They’re not in the high-growth phase where you have to burn cash to fuel growth. They usually show overall profitability and in many ways have an ability to control their own destiny,” Henderson said.

Kersey said that his company focuses on firms in this space that have strong fundamentals and are looking to expand beyond a local or regional presence.

“We focus on deals with companies that have material EBITDA, typically $3 million to $10 million. We consistently invest in assets that have an inherently strong customer base and are already growing nicely. The risks with these companies are usually more operational and sales in nature as opposed to clinical, technical or regulatory, and we address these operational risks hand-in-hand with our operating partners,” Kersey said.