DRI closes oversubscribed Fund III on $1.45bn

The Toronto-based firm surpassed its $1bn target, closing the largest healthcare royalty private equity fund ever raised.

DRI Capital has closed its third drug royalties fund on $1.45 billion, well above its $1 billion target.

Fund III was “significantly oversubscribed” and marks “the largest healthcare royalty private equity fund ever raised”, according to DRI. The Toronto-based firm, which launched Fund III in mid-2012, invests in royalty streams of pharmaceutical drugs that have been in the market for certain periods of time and are essential to keeping people alive. Atlantic-Pacific Capital acted as global placement agent on the fund.

DRI works to build a diversified portfolio of different royalty streams and can use leverage to monetise a portion of the future royalty payments and distribute the cash to LPs.  

Fund III is charging a 1.75 percent management fee on committed capital and an 8 percent preferred return, according to documents from the San Diego County Employees’ Retirement Association, which committed $60 million to the fund last October.  

DRI Capital was not immediately available for comment at press time.

The firm’s Fund II, which was also placed by Atlantic-Pacific, collected $701 million in 2010 and raised an additional $225 million for co-investments. Limited partners in Fund II include the Louisiana State Employees’ Retirement System, the San Diego County Employees’ Retirement Association and the State of Wisconsin Investment Board, according to Private Equity International’s Research and Analytics division

DRI’s first two funds have 40 royalty payment streams from 27 different patented drugs approved by the US Food and Drug Administration or similar government bodies, according to SDCERA documents. 

Canadian private investment firm Inwest Investments took the former Drug Royalty Corporation private in 2002 and turned it into DRI Capital. The firm has 30 investment professionals and more than $3 billion of assets under management.