San Diego has pledged to health care-related venture capital vehicles since 1997. But recently its staff began exploring intellectual-property funds and identified Drug Royalty II with help from placement agency Atlantic-Pacific Capital, according to a board document.
Investment Officer Yegin Chen wanted to make the commitment, according to the document, because of the high expected returns from the non-cyclical pharmaceutical industry; inefficiencies in the “opaque but growing” drug royalty market; the increasing number of royalty stream sellers and a reduced number of buyers; and predictable cash flows with a low correlation to the equity markets. San Diego plans to take a seat on the fund’s advisory committee.
The manager of the fund, Canada-based
Although the firm originally sought $500 million for the fund, $600 million has been gathered so far, according to a source with knowledge of the situation. A second source familiar with the circumstances said that the fund may even reach its hard cap of $700 million. The firm launched Drug Royalty II in 2008. Backers include
The San Diego County Retirement Association has relationships with more than 30 private equity managers and, at a 5.2 percent actual allocation to private equity, stands slightly above its target allocation of 5 percent as of June 30, 2009, according to a spokesperson.