LP Profile: Adams Street Partners

Click here for a full data profile of Adams Street Partners on Unquote Data, including comprehensive fund investing preferences and history

"We only fundraise what we are confident we can deploy," says Ross Morrison, a partner at Adams Street Partners. "One of the biggest challenges LPs face is to be disciplined, especially at a time when PE has consistently outperformed and it feels somewhere near the top of the cycle."

He adds that in the current fundraising environment, fund size expansion by managers is an increasing risk consideration for the firm, and the team has maintained the discipline of saying no when there are concerns: "The firm also looks closely at the fund size of a manager, to make sure it is appropriately sized to their future sourcing and deployment capabilities."

Adams Street began life as an investment manager in 1972 with a focus on direct growth equity investments. Since then, the firm has consistently added to its suite of strategies: it began primary fund investing in 1979; launched a dedicated secondaries strategy in 1988; and started its first co-investment portfolio in 1989.

The firm now has 10 offices globally and $32bn in assets under management, all of which is invested in private markets. Approximately 60% is within primary investments, 15% in secondary investments and the remaining 25% shared across direct portfolio company investments, buyout and growth co-investments, and private credit investments.

If managers are expanding beyond their capabilities then we start to get uncomfortable, as we are concerned about strategy drift and the resultant pressure to deploy increasing amounts of capital" – Ross Morrison, Adams Street Partners

Morrison is a partner in the primary investment team, which is led by Kelly Meldrum and consists of 23 investment professionals. The firm currently maintains more than 390 client relationships, with 40% of them being non-US. The LP maintains in excess of 400 GP relationships and sits on more than 420 advisory board seats (55% US, 30% Europe, 15% Asia).

Since opening its first European office in London in 1996, Adams Street has committed to more than 200 European primary funds and has advisory board seats on 130 funds.

The firm launched its private credit programme in 2016. Bill Sacher and Shahab Rashid are co-founders of the strategy and were hired in 2016 to build the team.

"We have slowly and steadily added on different private market investment capabilities through the years and this [private credit] was a natural development," says Morrison. "We have long relationships with some of the best GPs and this helps provide our credit team with access to appealing opportunities. Adams Street's network and platform is an attractive place to develop a credit strategy and provides the ability to service inbound demand from clients seeking to deploy capital into such a strategy."  ­­­­­

Going direct
The firm's heritage began in direct venture and growth investing, and continues strongly to this day. To date, it has directly partnered with 240 entrepreneurs and managed more than $2bn since its 1972 beginnings. The team targets high-growth companies within the tech and healthcare space.

Adams Street does not have a direct buyout strategy. "Some of the larger LPs, for example pension funds and sovereign wealth funds, have significant capital to deploy and [going direct] is a cost-efficient way to deploy that capital," says Morrison. "For many LPs, it is beyond their capabilities to bring this type of capability in-house. In terms of a trend towards LPs competing head-to-head with GPs in direct buyout, I think the vast majority of LPs will have more confidence investing indirectly with the GPs they know." 

Commenting on market conditions, Morrison says exit markets are strong, and increasingly more money is being channelled to the asset class, bringing with it a risk of expansion and lack of discipline.

"Right now growth is good, but it has to be manageable growth," he says. "If managers are expanding beyond their capabilities then we start to get uncomfortable, as we are concerned about strategy drift and the resultant pressure to deploy increasing amounts of capital."

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