Sector specialization takes center stage in uncertain economy

The Wire

March 11, 2021

GPs, LPs flock to sector specialization in wake of lock down, GTCR teams up with execs to form healthcare platform

Morning!

Hope your week is going well. There’s so much going on I barely know where to start! Whether it’s deals, fundraising or (my fav) secondaries, the industry is sort of like my 7-year-old after eating a big slice of cake.

Not sure if you’ve checked out Bain & Co’s global private equity report, but as usual, it’s packed full of great insight. Something that struck a chord with me is an acceleration in sector specialization, a trend we’ve seen for a while but that will likely be shoved forward by the pandemic shutdown and ensuing economic chaos.

From our view, we’ve seen many more specialist firms, especially around tech and healthcare, but also focused on business services and industrials. Much first time fundraising involves specialization of some sort. A recent example of this is Patient Square Capital, the new firm formed by ex-KKR healthcare chief Jim Momtazee, which could end up raising $3 billion for its debut effort.

The concern around specialization is the potential outsized risk of committing capital into one sector, if that sector happens to melt down, like certain segments of retail. But that view is too simplistic, in that sector specialization usually narrows into sub-sector focus, providing diversification even within a given sector. Also, the recent market uncertainty is also what’s driving more interest in sector specialists, according to the report.

Read the full wire commentary here...

That's it for today! As always, hit me up with any deal tips, people news or general feedback at [email protected].

Also of note (may require subscriptions)

Platform: GTCR is teaming up with Michael Mulhern and Phil Macnabb to form healthcare platform Epselon Global, and is expected to support the investment with several hundred million dollars. Read it here on PE Hub.