Water Street raises Fund III in eight weeks

The healthcare investor has held a final closed for its most recent fund on $750m, exceeding its $650m target.

Water Street Healthcare Partners has closed its third fund on its $750 million hard-cap after less than two months in market.

Water Street did not use a placement agent for Fund III, which exceeded its $650 million target and will continue the firm’s strategy of investing in four segments within the healthcare sector: medical and diagnostic products, specialty distribution, outsourced healthcare services and specialty pharmaceuticals. Water Street’s second fund, which is nearly fully invested and has enough capital for one more platform investment, closed on $650 million in 2008.

Limited partners in Fund III include fund of funds managers Adams Street PartnersPantheon Ventures and Allianz Capital Partners.

“We are very pleased with the value Water Street has built in its group of healthcare companies, and the strong results its team has achieved over the past six years,” said Brian Welker, investment director at Allianz, in a statement.

Water Street has not begun to invest Fund III. The firm’s most recent investment from Fund II came in May when it acquired orthopedic product-maker Breg, which provides bracing and therapy devices.

Water Street managing partner Tim Dugan said in the statement the firm would “continue to invest our team’s deep healthcare expertise, extensive operating experience and network of industry relationships to create transformational growth for our companies”.

Water Street declined to comment beyond the press release.

Water Street was founded in 2005 by former executives in the healthcare practice at One Equity Partners, the $5.5 billion private equity arm of JP Morgan. Water Street typically targets investments of between $50 million and $500 million, and now has nearly $2 billion of capital under management.