With private equity investors in the public eye as Mitt Romney”™s presidential bid proceeds, Connecticut equity and hedge funds reported raising more than $16 billion last year despite continued uncertainty over the world markets and government intervention.
Incredibly, two Fairfield County companies accounted for more than half of Connecticut”™s total in the closing days of December alone. The Westport-based hedge fund Bridgewater Associates L.P. reported raising $7.9 billion for a pair of new funds, while the Greenwich-based real estate investor Starwood Capital Group got backing for just under $1 billion.
Local fund managers continued to have success in January, as Lime Rock Partners in Westport raised $350 million as it invests in energy infrastructure and Westport Capital Partners L.L.C. provided notice of a single, $100 million infusion as it invests in distressed real estate.
If “99ers” are aghast at the massive funds being accumulated in high finance, the private equity industry argues they are a critical option to boost the overall economy by keeping the wheels of commerce greased amid the seesaw markets and banks still leery of the economy and government oversight. The sector is sure to come into sharper focus in coming months, as wealthy local financiers host fundraisers for President Obama and his Republican challenger in next fall”™s election.
Private equity companies already appear ready to go on the offensive to defend their turf.
“There is a lot of misinformation being spread, purely for political purposes and on both sides of the aisle,” said Steve Judge, interim CEO of the Washington-based Private Equity Growth Capital Council (PEGCC), in a statement released on the eve of the New Hampshire primary. “Private equity provides capital and operational expertise to companies that are often underperforming or on the brink of failure. In 2010 alone, private equity invested nearly $150 billion in U.S. companies. As a result, many businesses grow and are strengthened and often jobs are created over the long term.”
PEGCC counts more than 125 private equity companies based in Connecticut. That number includes Stamford-based Cowen Healthcare Royalty Partners, which said it recently secured capital commitments totaling $1 billion for a new fund that invests in the royalty streams produced by individual drugs and medical devices.
In a model partner Gregory Brown calls “next to unique,” Cowen Healthcare Royalty Partners obtains royalty rights to drugs and medical devices already in commercial use. In technical terms, the company calls those transactions passive royalties, “synthetic royalties,” and other structured financings. Cowen Healthcare Royalty Partners targets investments between $20 million and $100 million ”“ including universities and other inventors looking to commercialize products.
With some companies finding it difficult to raise money in the traditional debt or equity markets, accepting royalty investments is providing an alternative for some large and small. To date Cowen Healthcare Royalty Partners has invested in nearly 20 products.
“Overall the economy has created a great environment for us,” Brown said. “The public and private markets have been tough on companies.”
