Enhanced Equity considers revamp of older funds

  • Enhanced Equity, Park Hill work on possible revamps
  • Raised two funds since 2005
  • Narrowed focus to healthcare after executive departure

Enhanced Equity Fund, formed in 2005, is exploring restructuring options for its two funds, according to three people with knowledge of the firm.

Enhanced Equity, led by Andy Paul and Malcolm Kostuchenko, is working with Park Hill Group on potential restructurings of the funds, the people said.

A spokeswoman for Enhanced Equity did not return a call for comment.

Enhanced Equity, which invests in healthcare services, is unlikely to raise a new fund, sources said. The firm was formed by Paul, Kostuchenko and Dave Howe, a former partner at Citicorp Venture Capital and Lightyear Capital.

Howe left the firm in 2009, which caused Enhanced Equity to narrow its investment focus to healthcare services, Buyouts reported.

Another managing partner, Christopher Garcia, left in 2012 after more than two years at the firm, according to his LinkedIn profile.

Enhanced Equity 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. It’s not clear how much Fund II eventually closed on.

Enhanced Equity 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, according to performance information from Los Angeles City Employees’ Retirement System.

Enhanced Equity was set to kick in a minimum of $20 million to Fund II, a 2010 LACERS investment report says.

Restructurings have taken off as a major activity in the secondary market, which for many years has been used to simply sell off LP interests in funds.

Intermediary Greenhill Cogent found that GP-led transactions like restructurings represented 30 percent of overall volume in the first half of 2016, double the percentage of first-half 2015.

Another firm in the market exploring restructuring options is Monitor Clipper Partners, a Boston firm that suspended raising its fourth fund last year.

Action Item: Enhanced Equity’s Form ADV:  http://www.adviserinfo.sec.gov/IAPD/Part2Brochures.aspx?ORG_PK=157622

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