Lexington’s $3.5B fund is tops among secondary fund-raisers

Lexington Partners can now boast the largest dedicated pool of capital among secondaries investors, as the firm has raised $3.5 billion for its latest fund Lexington Capital Partners VI. The new vehicle is the largest secondaries fund raised to date.

The New York-based firm held a first close on the fund last October with $2.2 billion and raised its cap from $2.5 billion to $3 billion. With the close of Lexington Capital Partners VI, Lexington will have approximately $4 billion to invest throughout the market, as the firm closed the $550 million Lexington Middle Market Investors last year.

The success in raising fund VI likely stems to the firm’s success in investing its predecessor, Lexington Partners V. That fund so far has a net IRR of 31.8%, according to the California Public Employees’ Retirement System (CalPERS). Among Lexington’s limited partners in Fund V is the Ohio Bureau of Workers’ Compensation (OBWC), which lists Lexington V as its fifth best performing private equity fund.

Prices are going up. They’re at a high right now, but we also have to take a look at how the public market is acting. The abundance of buying capital is going to affect prices.

Lawrence Penn, Director, Camelot Group

The secondary market is still not done raising large funds. London-based Coller Capital is raising Coller International Partners V with an apparent goal of $4 billion. Several industry observers that the firm will likely reach that target, though some remain skeptical, considering how much capital is already targeting the secondaries market. Prior to the close of Lexington’s latest fund, Coller’s fourth vehicle, at $2.6 billion, had been the largest secondary fund in the market.

Other secondary firms out fund-raising include Pantheon Ventures, Switzerland’s Partners Group and Auda, which is believed to be in the market raising its second dedicated secondaries fund. Also, several others have closed vehicles recently, including Lehman Brothers, which closed its $800 million debut secondaries fund earlier this year, and Simsbury, Conn.-based Landmark Partners, which took in approximately $1 billion for Landmark Equity Partners XIII.

“Right now it’s a sellers’ market and will continue to be throughout the near future,” says Lawrence Penn, an advisor and director with the Camelot Group, a private equity advisory firm. Penn says that the amount of dedicated secondary capital raised over the past three to four years totals approximately $34 billion. “Prices are going up. They’re at a high right now, but we also have to take a look at how the public market is acting. The abundance of buying capital is going to affect prices.”