ABS sails through LP-friendly fundraise

The firm launched Fund VII in May with a $400m target and provisions that LPs get paid back all committed capital plus a preferred return before the GP starts to collect carried interest.

ABS Capital Partners has been making good progress on fundraising for its seventh investment vehicle, targeting $400 million and set to close at the end of this month, according to two people with knowledge of the fund.

Baltimore, Maryland-based ABS launched Fund VII in May, which has a $500 million hard-cap. It’s not clear if the fund is likely to hit the hard-cap.

ABS declined to comment.

The fund offers some attractive terms for limited partners, including a structure in which LPs are paid back all their committed capital, plus an 8 percent preferred return, before GPs begin to collect carried interest. LPs like the structure, known as a European-style waterfall distribution, though not many US-based firms offer it.

ABS also uses 100 percent of transaction fees to offset the management fee, according to one of the people with knowledge of the fund, another issue on which LPs have been increasingly vocal.

Some of the more senior partners at the firm have been pulling back from day to day activities with the firm, according to an LP source, something the firm is “ready for”. It’s not clear which senior executives are scaling back activities. Don Hebb is the founding partner of the firm.

“The rest of the team is really strong … there’s no succession issues,” the LP said.

ABS, founded in 1990, closed its sixth fund on $420 million in 2009, and its LPs included long-time ABS investor the Pennsylvania State Employees’ Retirement System, Partners Healthcare, Abbott Capital and WP Global Partners.

ABS has been quietly busy making growth investments this year. Last month, the firm invested $25 million in RedZone Robotics, a maker of wastewater inspection technologies; and led a $33 million financing in TechMediaNetwork, which produces news and reviews related to technology and science.