Adams Street Partners has nearly reached the third-way point in fundraising for its seventh flagship secondaries vehicle, bolstered by a commitment from a limited partner.
The Chicago-headquartered firm has collected $426 million so far after making a first sale on 30 April, according to filing with the US Securities and Exchange Commission. Secondaries Investor reported in February that Adams Street Global Secondary Fund 7 was targeting $1.5 billion.
LPs that have committed so far include the Minnesota State Board of Investment, which committed $300 million, three times its commitment to the prior fund, according to Secondaries Investor data.
The 2017-vintage predecessor Adams Street Global Secondary Fund 6 raised $2 billion over a $1.2 billion target by final close in June 2019 after 28 months in market.
The strategy for Adams Street Global Secondary Fund 7 will focus on buyout and growth equity funds because those sub-asset classes have “more predictable outcomes” than others, according to a memo from Minnesota SBI.
“Geographically, we expect the US and Europe to continue to be our largest markets,” said US Secondaries head Jeff Akers and London-based partner Pinal Nicum when they spoke to Secondaries Investor in 2019. “However, we have noticed a substantial uptick in the volume of Asian dealflow in the past three to four years.”
The Minnesota SBI memo also noted Adams Street will focus on “targeted transactions” through single manager/GP family purchases, targeted portfolios or GP-led transactions. The firm will look into specific funds and exposures that it finds desirable for its portfolio. Fund interests it targets will be between three and eight years old.
Adams Street sees advantage in recent market volatility, which the Minnesota memo noted will make it harder for secondaries buyers to use leverage to purchase larger portfolios at high prices. As Adams Street tends to focus on smaller portfolios and single deals, it is expected to be ideally situated to take advantage of this.
“Investors are going to have to figure out what’s good risk, what’s bad risk and what works across market cycles,” Akers told Secondaries Investor in September. “We just happened to have been in this bull market. It was not going to last forever.”
Buyers should think carefully about their leverage use and the concentration risk they take on, he added. Strategies such as buying lower-quality assets, with the intention of booking an early gain and selling them on, are also less effective in an environment characterised by risk aversion among buyers.
Secondaries dry powder increased to $113 billion in December from $96 billion in December 2019, according to Evercore’s most recent Secondary Market Survey Results, published in January. The report noted that $72 billion of capital is planned to be raised this calendar year.
– Rod James contributed to this report.