Adamas Asset Management expects to make a first close on its second China-focused fund this month, according to a source with direct knowledge of the matter. The firm is in “late-stage” discussions with a number of US and European LPs and expects to have raised $50 million by the first closing.
Fund II was launched in September 2012.
A US family office, which acted as a co-investor in a deal from the firm’s first vehicle, has anchored the fund. The firm has also raised an undisclosed amount from a US pension fund and a Middle Eastern family office, according to the source.
Adamas declined to comment on fundraising.
The fund has a target of $200 million, with a hard cap of $275 million, the source confirmed. It has a closed-ended structure, with a five-year investment period, three-year holding period and divestment period of two years. Its previous vehicle closed on $100 million in 2010 and was an open-ended structured vehicle.
Adamas, formerly known as Gen2 Partners, recently rebranded itself to coincide with a re-focus in strategy toward shorter-term mezzanine lending. The second fund will provide growth capital to small- and medium-sized enterprises in Greater China in the form of debt or structured loans.
The mezzanine model may limit Adamas’ returns, but it also mitigates risk, Paul Heffner, managing director and chief executive of Adamas, told Private Debt Investor sister publication Private Equity International earlier. The firm will not rely on an IPO or trade sale for an exit, but will have “control through debt”: if the company defaults on the loan, Adamas will then own the company.
“This structure allows us to be much more involved with the companies,” Heffner added.
The firm already has a pipeline of eight or nine deals, the source said, and hopes to complete the first in Tianjin in June shortly after the first close.
Adamas Asset Management was formerly Gen2Partners and currently has $500 million in assets under management, according to PDI’s Research & Analytics division. The firm invests in a mix of mezzanine and growth capital deals and targets companies that are often not yet developed enough to receive typical private equity investment.