Lexington Partners Hits $2.66B Hard Cap On Fourth Mid-Market Secondaries Fund

Sep 27 2017 | 9:17pm ET

Lexington Partners has raised $2.66 billion in capital commitments for its fourth secondaries fund and associated vehicles, easily surpassing the firm’s initial $2 billion target amid strong demand for middle-market secondary investments.

The new fund, named Lexington Middle Market Investors IV, hit its hard cap on final close, the company said in a statement. The fund, which began investing at the beginning of 2017, acquire growth capital, small, and middle market buyout interests in the global secondary market, as well as targeting general partner-led transactions such as spin-outs, restructurings, tender offers, and strip sales.

Of the total committed capital, more than 40% was raised from investors in North America, approximately 30% from investors in Asiaand the Middle East, 20% from investors in Europe, and 7% from investors in Latin America, Lexington said. Limited partners included pension funds, insurance companies, financial institutions, and other sophisticated investors such as endowments, foundations, and high net worth individuals.

LMMI IV is the fourth fund in Lexington's specialized middle market series, the statement continued. Its third fund raised $1.1 billion in 2014. 

Lexington estimates that annual industry-wide secondary volume averaged $30 billion per year over the five-year period 2012-2016, a level likely to be surpassed by this year’s projected volume of more than $40 billion. 

The secondary market will continue to experience significant growth in the years ahead, Lexington said in the statement, due to the substantial amount of capital committed to private equity funds, the trend towards more active portfolio management, and the desire among select investors for earlier liquidity. Furthermore, the company added, the adoption by high-quality sponsors of innovative liquidity solutions for their limited partners through GP-led transactions has the potential to increase secondary turnover rates.

The new fund has completed 15 secondary transactions, committing to invest 22% of the fund's capital to middle market interests managed by 25 sponsors in the U.S. and Europe, the statement added. 

Founded in 1994 and headquartered in New York, Lexington Partners provides liquidity to owners of private equity and other alternative investments and makes co-investments alongside leading private equity sponsors. The company is the largest independent manager of secondary acquisition and co-investment funds, with more than $38 billion in committed capital. Lexington has acquired over 2,800 secondary and co-investment interests through 710 transactions with a total value in excess of $44 billion, including $12 billion of syndications. 

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