Amidst PE Fundraising Lull, Healthcare Specialist Funds Stand Tall with Record Oversubscriptions

In the shifting sands of private equity fundraising, there is one sector that manages to stand its ground - healthcare. Despite overall declines in the private equity (PE) industry, it seems healthcare specialist funds are not just surviving, but thriving. Case in point - Chicago-based healthcare investment firm, Linden Capital Partners, successfully secured an oversubscribed $5.4 billion during the sixth round of its buyout fund, even amidst a fundraising lull. This fortune stands out as a tantalizing paradox in the complex ebb and flow of the fundraising market.

So, why exactly are healthcare specialist funds weathering the storm better? A couple of reasons stand out. The sector mainly includes middle-market managers able to consistently attract capital over the year, as highlighted by the report. The easing of regulatory pressures and technology-focused provider solutions have also lent a helping hand. However, the PE fundraising realm isn’t a straightforward road, even for these high-performing healthcare specialist funds. According to PitchBook analyst Ben Riccio, LPs are shifting their preference to upper-middle-market vehicles over smaller funds. Furthermore, uncertainties loom over the healthcare sector with potential changes in NIH funding, Medicare, Medicaid and regulatory policies.

Despite these challenging landscape, the resilience of the healthcare funds is reflected in the increasing share of healthcare specialist vehicles, rising from 3.7% in 2023 to a recording-breaking 5.1% in 2024. In a world of cautious LPs, healthcare managers seem to be the slice of the pie everyone wants.