Abbott Capital Management is looking to raise at least $450 million for its third secondaries fund, coming back to the market after it closed its last secondaries offering in 2021.
Institutional investors have increased interest in secondaries funds thanks to a dislocated market and multiple LPs overallocated to primary PE funds due to the denominator effect. Allocators hope secondaries managers can buy assets at a discount.
Details about Abbott Secondaries Opportunities Fund III were included in Ventura County Employees’ Retirement Association’s board documents for its 22 May meeting. Affiliate publication Buyouts reviewed the documents.
Abbott will charge a standard 1 percent management fee on invested capital through the first five years of the fund, and 90 percent of the prior year’s management fee after. The fund has an eight-year term with two one-year extensions at Abbott’s discretion, according to the documents.
ASO III will have carried interest of 10 percent and an 8 percent hurdle in a European waterfall structure, the documents said.
Ventura County will earn a 10 basis point reduction fee for participating in the first close, slated for June, and a 5 basis point fee reduction as a returning investor. According to the documents, both fee reductions are for the life of the fund.
Ventura County will commit $50 million to the third opportunities fund.
The system committed $25 million to Abbott’s first secondaries fund in 2017, along with an initial commitment of $25 million to ASO II in 2020 with a $15 million add-on in April 2021, the documents said.
A note from consultant NEPC said the third fund will aim to make 20 to 25 deals ranging from $10 million to $30 million per deal.
According to a presentation from Abbott included in the board documents, the manager’s first secondaries fund raised $207.7 million. The 2016 vintage year fund has distributed $252 million back to investors with a total value of $352.8 million.
The second fund has a size of $375 million after closing in 2021.
According to NEPC, ASO III is expected to allocate between 40 percent and 60 percent to GP-led transactions along with a strategy that favours lower-mid-market buyouts. NEPC said it was concerned about these strategies due to the “co-investment-like risk-return profile”.
“These transactions typically involve higher-quality companies with growth potential, rather than discounts to fair valuations, as the primary driver of performance,” NEPC’s note said.
Abbott expects to see more opportunities in traditional LP secondaries deals in the months ahead, according to NEPC.
According to the Abbott presentation, 60 percent of transactions in its secondaries funds overlap with funds the firm invested in as a primary.
NEPC said in its note that Abbott looks to pay between a 10 percent to 15 percent discount on its secondaries investments and will pay a premium for assets the firm believes can drive performance.
Abbott did not return a request seeking comment.