Nordic Capital raises allocation for non-Europe healthcare

Details of the Scandinavian investor’s strategy for Fund IX were revealed in materials presented to a US pension.

Nordic Capital has raised its potential exposure to non-European healthcare for its newest fund, according to documents prepared for the New Mexico State Investment Council.

The firm is looking to raise €3.5 billion with a €4 billion hard-cap for Nordic IX, which will target 12-18 buyout investments in Scandinavia, as well as Germany, Switzerland and Austria. Up to 40 percent of the fund is expected to be allocated to healthcare investments, while up to 30 percent of its commitments may be allocated to healthcare companies outside Europe, up from around 22.5 percent in Nordic VIII, according to documents for NMSIC’s 22 August meeting.

Nordic will mitigate the risk of investing in a region where it has no physical presence by acquiring global businesses with some US revenue streams, rather than local US companies. The firm has made three investment in the region to date, one of which represents 14 percent of fund VIII’s invested capital and was generating a 1.4x gross multiple and 38 percent gross internal rate of return as of the first quarter of the year.

NMSIC staff recommended a $75 million commitment to Nordic Capital IX, the documents note.

The endowment previously invested in Nordic VIII, a €3.5 billion 2013-vintage delivering an estimated 19 percent net IRR and a 1.5x net multiple as of the second quarter, according to the documents. The fund secured 47 percent of its commitments from North America and 17 percent from Asia, with public pensions and sovereign wealth funds among the most common investors.

The commitment would be NMSIC’s fifth this year from its National Private Equity Program, which is targeting annual commitments of up to $650 million. So far the endowment has approved $200 million in total to three TPG funds and $75 million to New Mountain Capital’s fifth buyout fund.

The two Nordic funds come as part of Nordic 3.0, a 2010 programme designed to institutionalise the firm’s entire investment process, according to the NMSIC documents. The scheme has invested €3.7 billion in 23 portfolio companies as of the second quarter of this year, generating a 20.1 percent net IRR and 1.7x net multiple.

Nordic Capital declined to comment.