Lexington Partners Raises $10.1 Billion Fund to Buy Private Equity Stakes


April 22, 2015

Lexington Partners announced on Tuesday it has managed to raise $10.1 billion with its latest fund. The New York-based firm is going to spend the funds buying stakes in private equity funds and in buying private equity backed companies on the secondary market. It is another signal to show how the secondary market continues to thrive.


According to the Middle Market, the new fund raised capital from over 300 investors. This investor group includes public pensions and sovereign wealth funds, but also insurance companies and family offices.


Brent Nicklas, managing partner of Lexington, told in the official statement, “We are grateful for the strong support of our existing and new investors who have chosen to commit significant capital to LPC VIII. Our high-quality global investor base and the substantial capital they have entrusted to Lexington will enhance the fund’s secondary capabilities with global counterparties and sponsors.”


Breaking the Records
Lexington’s new fund, called Lexington Capital Partners VIII LP, managed to raise the largest ever amount for secondary investments. The firm also broke its own previous fundraising efforts, as its predecessor fund in 2011 raised only $7.1 billion.


According to a Wall Street Journal article, the secondary deal volume broke record highs last year. The levels were achieved “as strong pricing for private-equity fund stakes helped attract more sellers, and investors became more comfortable using secondary sales to better manage their expose to specific investment strategies or fund managers.”


Lexington Predicts Another Strong Year
Lexington said in the announcement that they expect this year to be as strong, if not stronger, than 2014. The firm expects secondary deal volume to exceed $40 billion in 2015. Last year, the volume numbers topped $35 billion.


Many analysts agree. The Wall Street Journal reported Dow Jones LP Source’s data, which showed fundraising efforts for secondary investment were impressive last year, which could signal strong deal numbers this year. According to the data, global fundraising for these investments stood at $24 billion in 2014. Besides Lexington Partners, four other firms have started marketing for secondary funds. The companies are Ardian, Pantheon, Coller Capital and Partners Group.


Lexington’s Latest Deals
The firm also announced on Tuesday that it has invested roughly 30% of the fund across 13 transactions. According to the reports, the firm has funded parts of the transactions with an additional $1.75 billion credit facility. It managed to secure this extra credit from a consortium of banks. Within the 13 deals, there are six portfolio purchases from banks and other financial institutions. Among the six, there is the near $1 billion private equity fund portfolio it acquired from the Japanese Mizuho Financial Group.


On top of this, it also bought One Equity Partners’ portfolio of companies. One Equity Partners is the mid-market focused investment arm of J.P. Morgan Chase & Co. The firm has also invested in five portfolios from fiduciaries. This includes the near $1 billion fund stakes from the Irish National Pension Reserve Fund. It will be interesting to see how well the secondary market will do this year.

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