South Korean private equity (PE) firm Stonebridge Capital has invested most of the committed capital of its healthcare fund, which was formed jointly by Highland Capital Management Korea Ltd, an affiliate of U.S.-based alternative investment manager Highland Capital Management LP.

A healthcare-focused blind-pool fund called the “Stonebridge-Highland Healthcare Private Equity Fund,” which is being managed by Stonebridge Capital and Highland Capital has invested 90% of its committed capital, according to sources on July 27. The fund was created by the two firms in 2017.

Stonebridge Capital and Highland Capital started raising capital for the fund after they were picked by the National Pension Service (NPS) as co-general partners (GPs) to manage a fund investing in sectors with high-growth potential. The two co-GPs formed the 167 billion-won ($148 million) fund and invested most of its committed capital in three years after its launch.

Stonebridge Capital and Highland Capital have actively used their networks to source a wide range of deals and built strong track records. Among domestic companies, the healthcare fund made a pre-initial public offering (IPO) investment of 41 billion won in Aekyung Industrial Co Ltd at the end of 2017. Stonebridge Capital and Highland Capital exited their investment in Aekyung Industrial earlier this year in a block sale, generating an internal rate of return (IRR) of 32%.

The two firms recently exited their investment in Green Cross Biotherapeutics (GCBT), GC Pharma’s plasma facilities in North America, which was made through their healthcare fund. The firms’ exit from GCBT generated a return of almost two times. The fund also made a pre-IPO investment in facial mask sheet maker Cell Bio Human Tech Co Ltd. Cell Bio Human Tech plans to apply for an IPO review in the second half of this year.

Stonebridge Capital and Highland Capital made a pre-IPO investment in skin cancer diagnostics company Castle Biosciences (CSTL) via their healthcare fund last year. The valuation of CSTL has increased almost threefold to $430 million since their investment after shares of CSTL began trading on the Nasdaq in July 2019. If this upward trend continues, the investment in CSTL is likely to generate another record-breaking IRR after its investment in Aekyung Industrial.

Experts’ Comments

“This is another way of accessing NPS money. If you would like to approach NPS to be selected as their manager, you will need to meet at least certain minimum hurdles. It should not be the first fund of yours. Your total AUM must be at least $1 billion etc. Teaming up with an experienced Korean GP house could be a shortcut to qualify as the manager of NPS’s choice. The strategic combination will basically assume that the Korean side manager provides an existing relationship with NPS and its qualified manager status while the overseas partner can bring to the table deal flows and track records.” – by an industry source

Highland Capital Management LP and its Korea office 

Highland Capital Management is a global alternative investment management firm that manages hedge funds, structured investment vehicles and mutual funds. The Dallas-based firm, which was founded in 1993, invests in global public equities, as well as fixed income markets with a focus on leveraged loans, high yield bonds and structured products.

It opened its Seoul office in 2012 and appointed Jun Park as its head. Jun has more than 15 years of experience in global alternative investment. Before joining Highland Capital, he was in charge of equity investment at Woori Financial Group managing assets worth more than $1 billion. 

Highland Capital Management Korea launched $147 million healthcare fund in May, 2017, with backing from NPS. In fact, NPS served as the anchor investor in Highland Capital’s first healthcare sector-specific undertaking in Asia. (by capital connect)