Sweetwater sets high target for sophomore fund

The California firm, founded by StepStone's former secondaries head, targets 'buyer-driven' secondaries deals in the tech, healthcare and consumer sectors.

Sweetwater Private Equity, founded by StepStone Group’s former secondaries head, is in market with its second fund.

The Encinitas, California-headquartered firm is targeting $550 million for Sweetwater Private Equity III, according to a filing with the US Securities and Exchange Commission.  Its debut vehicle, which is named Fund II, closed in October on $350 million, exceeding its target of $150 million.

The firm declined to comment.

Sweetwater targets off-market, “buyer-driven” secondaries transactions, a strategy designed to to build significant exposure to targeted companies at below-market pricing, Secondaries Investor reported last year. These are typically GP-led and direct secondaries deals in the technology, healthcare and consumer sectors.

The firm was founded in 2016 by James Gamett, a former partner at StepStone who also spent four years at Portfolio Advisors. Gregg Parise and Brent Granado are the other managing partners.

Sweetwater originally invested on a deal-by-deal basis, Secondaries Investor reported in 2016. Its target investor base is less well-resourced limited partners, such as smaller endowments and foundations, which struggle to gain direct exposure to private equity dealflow.

The 10 secondaries funds to hold final close during the first quarter of this year raised a combined $18.07 billionSecondaries Investor reported. This includes several small and niche secondaries funds, including Revelation Partners’ third healthcare secondaries fund and Capital Dynamics’ fifth secondaries fund focused on “off-market opportunities”.