Ethos targets $250m for debut healthcare fund – exclusive

The South African firm – which is in market with at least four vehicles – is also expected to launch an additional fund strategy this year.

Ethos Private Equity is seeking up to $250 million for a debut healthcare fund, Private Equity International has learned.

The South African firm is expected to hold a first close on Ethos Healthcare in the second quarter of this year, according to chief executive Stuart MacKenzie. The fund has already received a 250 million rand ($21.3 million; €17.2 million) commitment from Ethos Capital, its listed investment trust.

It will target healthcare and medical technology companies in South Africa and sub-Saharan Africa, with around a 60:40 weighting in favour of the former, MacKenzie said. Ethos has tapped African healthcare veterans Michael Flemming and Jonathan Lowick to help invest the vehicle.

“We’ve been setting up the firm to be able to do this for quite a long period of time in terms of building the capacity and capability, both at an executive level, as well as a funding level,” MacKenzie noted. “The healthcare strategy is complementary to our existing funds. However, our core business remains buyouts.”

The healthcare vehicle comes amid a busy period of fundraising for Ethos. The firm is expected to hold a final close on its debut mid-market fund on more than 2 billion rand by the end of May and is nearing a first close on north of $100 million for its third mezzanine fund.

It is still in the early stages of raising its seventh flagship buyout fund, which launched in the second half of last year, MacKenzie added. Ethos Private Equity Fund VI, a 2011-vintage, amassed $800 million from the likes of Old Mutual Investment Group and HarbourVest Partners.

“We haven’t got a clock ticking on [Fund 7], but early indications are positive that we will get support from local institutions and then we’ll start talking to international investors in the second quarter of this year,” MacKenzie said.

“We’ve always had very strong local support that has anchored our funds and we think that will be the same going forward. It’s a significant chunk and we like to maintain a fairly even balance between local and international [LPs].”

The recent expansion follows a capital injection from South African investors Rand Merchant Investment Holdings and Royal Investment Managers in September, who agreed to acquire 20 percent and 10 percent shareholdings, respectively. Ethos is expected to launch at least one additional fund strategy this year.