Deutsche Bank set to lead Enhanced Equity funds revamp

  • Process not yet in election period
  • Firm raised two funds
  • Not likely to raise a third

Deutsche Bank has stepped in as lead investor in the restructuring of Enhanced Equity’s two funds, according to two people with knowledge of the process.

How much Deutsche Bank is prepared to spend on the deal is unclear. The exact structure of the deal also is not clear: whether LPs have the option to sell out or roll their interests into a new vehicle that would house existing investments; or whether the deal is more like a tender offer, in which LPs simply have the option to sell at a prearranged price or hold their interests.

The Enhanced Equity funds are not yet in the election period, one of the people said. During that time LPs decide whether to approve the deal and whether they want to sell or stick with the funds.

Andrew Paul, founder and managing partner of Enhanced Equity, and a  spokeswoman for Deutsche Bank did not return a request for comment.

Park Hill Group is agent on the deal.

Enhanced Equity, formed in 2005, raised two funds. The firm is unlikely to raise another fund, sources told Buyouts in prior interviews.

The firm, which invests in healthcare services, was formed by Paul, Malcolm Kostuchenko and Dave Howe, who left in 2009. Enhanced closed its debut fund in 2006 on $225 million. Fund II was targeting $300 million and was nearing a close on $375 million in 2010, Buyouts reported. How much Fund II closed on is unclear.

The firm managed $461.6 million as of Dec. 31, 2015, according to the firm’s Form ADV.

Fund I was generating a 7.2 percent net internal rate of return, and Fund II was producing a negative 8.6 percent net IRR, both as of Dec. 31, 2015, performance information from Los Angeles City Employees’ Retirement System shows.

Action Item: Enhanced Equity’s Form ADV:

A statue is pictured next to the logo of Germany’s Deutsche Bank in Frankfurt on Sept. 30, 2016. Photo courtesy Reuters/Kai Pfaffenbach