Sweetwater Capital launches with eye on separate accounts for secondaries

  • Ex-StepStone exec James Gamett launches firm
  • Sweetwater focuses on health care, mortgage markets
  • Gamett offers operating-company experience

Sweetwater Capital, a new private equity firm aimed at the secondary market, sees its role as a separate-account manager that’s able to coach clients on managing individual companies languishing in GP and LP portfolios, according to the firm’s founder.

James Gamett, managing partner at the San Diego firm, in 2013 left his position as partner and head of secondaries at StepStone Group with an eye on beefing up his operating-company experience.

“I felt like there was a real cyclical challenge in secondaries, with a lot of capital chasing a few opportunities, and that the future for secondary returns was in doing direct deals,” he said in a phone interview.

“The way to approach it is to go into zombie funds and buy three companies and really manage them out.”

He co-founded and served as president of Madison Creek Partners, a healthcare-services firm that purchased skilled-nursing-home facilities.

Gamett helped build up the company to $70 million in sales and $10 million in EBITDA, and in January, prior to launching Sweetwater Capital, he sold it back to his partner. Terms of that deal weren’t disclosed.

Sweetwater Capital, named after a river and reservoir in San Diego, is focused on healthcare and mortgage securities. “The thought behind it is that’s fresh and pure water, just like new capital going into areas that are either end-of-life funds or stale portions of private equity portfolios,” Gamett said.

“We try to revitalize the parts of the private equity portfolio that are non-core. We view active management as the key to driving more value.”

The firm has no plan to raise a fund. Rather, it’s working with capital from LPs and GPs as it builds and manages direct investments, secondaries and co-investments, mostly in the U.S., he said.

Currently, it’s working with Texas Treasury Safekeeping Trust Co with a state-mandated wind-down of its Emerging Technology Fund, set up by Gov. Rick Perry and ended by current Gov. Greg Abbott. Sweetwater has managed follow-on investments for five companies in the TTST portfolio by tapping a pool of capital.

Sweetwater Capital is also advising Belgravia Capital, a real-estate-investment firm, on its mortgage-backed-securities secondary-purchase program, with an eye on non-performing loans.

The firm also sees a role helping LPs execute co-investments.

“The No. 1 problem in clients that we have is it takes them three months to execute a co-investment,” Gamett said. “They don’t know how to process it. Legal department doesn’t know how to handle it. We can manage co-investments and we help LPs with their internal processes.”

Along with Gamett, Sweetwater’s investment team includes Brooks Lindberg and Joseph Siletto, both managing directors; Ron Heinz, principal; and Cameron Rondo, senior associate.

Action Item: Contact Sweetwater: http://sweetwatercapitalpartners.com

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