Adams Street seeks bigger co-invest deals

Funds of funds manager and investment adviser Adams Street Partners plans to scale up its co-investment activity with its second dedicated pool of capital.

The Chicago-based firm held a first close on $200 million at the end of the first quarter, according to a regulatory filing, as it seeks $600 million for Adams Street Co-Investment Fund II.

The firm has three dedicated players on its co-investment team—Dave Brett, Dave Timson and Craig Waslin, who are part of a nine-person direct investing group that also handles growth equity plays and venture capital deals. The three have not yet started investing fund II because the firm is still shopping with the $250 million raised for its first fund, which closed in 2006.

Adams Street Partners will likely begin investing out of fund II in the second half of this year, intending to make 20 to 30 investments. LPs that have made commitments include corporate and public pension funds.

Co-investments can be attractive for LPs because they carry fewer fees—a 1% management fee and a 10% carried interest, typically, vs. the standard 2% and 20% that comes with traditional limited partnerships. And unlike in a blind pool, co-investing allows LPs to peer into the bowels of each deal, improving the ability to price each transaction more precisely and creating a closer relationship between fund backers and managers.

“Our team can actually take a look at each investment opportunity that’s presented to us from a general partner … and see what they’re paying in terms of a purchase-price multiple,” says Gary Fencik, a partner and head of business development for Adams Street Partners. “That’s a big advantage relative to a fund of funds program where you just have a blind pool.” —Nancy Gordon