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ABRY eyes 30 pct carry on debut lower-mid-market fund

  • Only 3.4 pct of North American buyout funds charge 30 pct carry
  • Boston-based firm also sets 9 pct hurdle rate
  • ABRY Heritage Partners targeting $525 mln

ABRY Partners will carve out a larger share of investment profits with its debut lower-mid-market fund, fund terms published by Los Angeles City Employees’ Retirement System show.

The firm will take 30 percent of the returns generated by ABRY Heritage Partners as carried interest, with the rest going to the fund’s investors, LACERS documents say. The $14 billion retirement system committed as much as $10 million to the fund.

ABRY Heritage Partners’ terms put the vehicle in rarefied air. Just 3.4 percent of North American buyout funds award 30 percent of profits to the general partner, according to Buyouts’ 2016-2017 PE/VC Partnership Agreements Study.

It also deviates from the terms ABRY offered LACERS with its two most recent investment funds, ABRY Partners VIII and ABRY Advanced Securities Fund III, per retirement system memos. Both funds distribute 20 percent of investment returns to the GP, which according to the partnership study is in line with market standards for buyout and debt funds. LACERS is an LP in both vehicles.

It appears at least some of Fund VIII’s LPs may be charged 30 percent carried interest, according to SEC filings and San Francisco Employees’ Retirement System documents. One San Francisco board member voted against a commitment to ABRY Partners VIII for that reason.

As with previous funds the firm offered, ABRY Heritage Partners must clear a 9 percent return hurdle before general partners can collect carried interest. ABRY’s preferred return is higher than the 8 percent hurdle most funds offer, the partnership study says.

The firm set a $525 million target for ABRY Heritage Partners, Buyouts reported in July. The fund will invest as much as $50 million per deal in media, communications, information and business services.

The Boston firm was founded in 1989. ABRY’s eight previous buyout funds generated a 39.4 percent aggregate internal rate of return and 1.8x multiple on invested capital, a Portfolio Advisors presentation released by LACERS shows.

ABRY did not respond to a request for comment.

Action Item: The LACERS report on ABRY is at www.lacers.org

Omar McLeod of Jamaica (right) crosses the finish line to win the gold, ahead of bronze medalist Dimitri Bascou of France on August 16, 2016. Photo courtesy Reuters/Lucy Nicholson 

Update: The story has been updated to include information from the firm’s Form ADV and San Francisco documents.