Adams Street Partners has raised $7.5 billion for its third private credit vehicle, becoming the latest firm to do so despite volatility in the market.

The private credit team is focused on providing senior financing to sponsor-backed middle-market companies.

The fund, which targets institutional investors, drew capital from a global investor base, with 40% of commitments coming from outside the U.S., the firm reported. The Chicago-based private equity firm said it plans to further expand its presence in Europe alongside its North American operations.

According to Bill Sacher, Adams Street Partner and Head of Private Credit, the fundraise reflects “investors' confidence.”

On average, the underlying investments in PC III show what the firm describes as "conservative credit characteristics", including loan-to-value ratios below 40%, an average multiple of about 5x, and strong creditor protections such as maintenance-based covenants.

Adams Street Managing Partner Jeff Diehl credits the firm’s success to “disciplined diligence, rigorous underwriting, and long-standing sponsor relationships.”

"We believe managers with true sourcing and underwriting edge will be best positioned to deliver attractive results, and we think we are well positioned to continue scaling our private credit platform with that discipline."

The firm's total private credit strategy assets have grown to $15 billion, making it the second-largest investment strategy. In January, Adams Street closed its first middle-market collateralized loan obligation (CLO), raising $350 million to support the expansion of its private credit platform.

In 2022, Adams Street closed its private credit program with more than $3 billion in capital. 

Adams Street manages $65 billion in assets and provides private equity and private credit strategies to institutional investors. The firm also supports wealth advisors with private markets solutions.

Fundraising In Turbulent Market Conditions

Adams Street is not the first private equity firm to raise capital for private credit recently. Despite the broader slowdown in the private credit market, several asset managers have demonstrated that investor demand for private credit assets remains resilient.

Ares Management (NYSE:ARES) is planning to launch a flagship U.S. direct lending fund that will target approximately $20 billion.

Blackstone recently secured more than $10 billion from its opportunistic credit vehicle, Blackstone Capital Opportunities Fund V, reaching its hardcap after being oversubscribed.

Meanwhile, Goldman Sachs (NYSE:GS) revealed that it was launching a new mezzanine debt fund. GS Mezzanine Partners IX, is expected to receive approximately $13 billion in investor commitments, Bloomberg reported last month.

Morgan Stanley (NYSE:MS) and JPMorgan Chase & Co. have also both capitalized on the private credit market’s dislocation by launching new funds.

Morgan Stanley launched the North Haven Strategic Credit Fund, an interval fund that will invest in a wide spectrum of credit strategies. Meanwhile, JPMorgan filed with the SEC for its JPMorgan Public and Private Credit Fund, which will invest in both public and private credit.

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