Health Evolution Partners, the private-equity firm whose founder David Brailer advised President George W. Bush, is seeking to arrange the sale of its only investor’s stake after disappointing returns, two people briefed on the matter said. The firm has hired Evercore Partners Inc. to help find a buyer for a $500 million commitment made by California Public Employees’ Retirement System to the fund, said the people. A sale may involve a buyer providing fresh capital. The growth equity fund,which started making control investments in health care in 2008, was 84 percent invested as of Sept. 30, according to Calpers’ website. When Calpers helped put the San Francisco-based firm in business in 2007 by pledging as much as $700 million, it was counting on Brailer to deliver returns of 20 percent to 30 percent, a person with knowledge of the plan said in 2009. Instead, Calpers’ investment was sitting barely above cost and generating a 2.6 percent net internal rate of return as of Sept. 30, according to data compiled by Bloomberg. Its stake was valued at about $380 million as of that date.
Brailer didn’t respond to e-mail and phone messages seeking comment. Dana Gorman, a spokesman for Evercore at Abernathy MacGregor Group, declined to comment, and Joe DeAnda, a Calpers spokesman in Sacramento, didn’t respond to a call or e-mail. The commitment is one of the largest the pension fund has made to a first-time private equity manager. Brailer’s White House work was one reason the pension fund bet on someone who had never run a fund, Mike Dutton, a Calpers portfolio manager, said in an October 2009 interview with Bloomberg News. “We wanted deep medical and policy expertise, working with our existing private equity but positioned a little different,” Dutton said at the time.
Brailer, 54, worked as national coordinator of health-care information technology in the Bush administration from 2004 to 2006, planning for a national electronic medical record network. Calpers wanted health investments outside of biotechnology, where risks increase with costs to get new drugs approved, Dutton said in the 2009 interview.
Brailer’s investments have ranged from a company that seeks to save hospitals money by using a centralized center to read radiology images, to a maker of electronic chemotherapy pumps that save time and prevent treatment errors. Calpers also committed about $200 million to a health-care fund-of-funds, also run by Brailer. The fund-of-funds was producing a 0.8 multiple on invested capital and negative 5.8 percent return rate as of Sept. 30, according to data compiled by Bloomberg.
This article is from Bloomberg Brief Private Equity.
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