Unquote

Lexington closes ninth fund on $14bn

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Lexington Partners has closed its Lexington Capital Partners IX fund on $14bn.

The fund was announced in February 2018 with a $12bn target. It held a first close on $10bn in May 2019 and an interim close on $11.7bn in October 2019. The $14bn close makes it the largest secondaries fund globally.

Its predecessor, Lexington Capital Partners VIII, closed on $10.1bn in 2015 and was 85% deployed as of March 2019.

The terms dictate that the fund will have leverage of up to 35% of the total fund commitments, according to publicly available documents. Lexington Capital Partners IX will have a five-year investment period in its 10-year lifecycle, which is extendable by three one-year periods.

For investors committing before the first close, a management fee of 0.75-1.25% was set depending on the size of the commitment, rising to 1% after first close.

The first round of distribution will see a 7% hurdle and 10% carry, with a 100% catch-up. Later on, the hurdle will rise to 10% with carry increasing to 12.5%.

Simpson Thacher & Bartlett provided legal advice.

Investors
Some of the fund's European LPs include Germany-based Liqid Asset Management, Finland-based Valtion Eläkerahasto - VER, and UK-based Tyne and Wear Pension Fund with a commitment of $70m. In addition, US-based Florida State Board of Administration committed $250m and Taiwan-based Cathay Life Insurance committed $150m.

More than 450 investors from around the world participated in the fundraise. Types of investors included public and corporate pension funds, sovereign wealth funds, insurance companies, endowments, foundations, family offices and high-net-worth individuals. Existing investors contributed the majority of the capital raised.

The GP made a contribution of $150m (around 1% of total commitments).

Investments
The fund made its first investment in the fourth quarter of 2018 and 30% of the capital has already been committed. Lexington Capital Partners IX has made more than 30 transactions to date and plans to make a further 20 investments. Typical investments from the fund are $250-300m.

One investment includes the purchase of British Columbia Investment Management Corporation's €100m commitment to Bridgepoint V.

The fund will make investments in both private equity and other alternative assets globally with a focus on North America and Europe. In addition to secondary purchases of direct investments, equity co-investments and hedge fund private equity assets, Lexington Capital Partners IX can make investments in new private investment funds.

People
Lexington Partners – Pål Ristvedt (partner); Wilson Warren (president).

Secondaries frenzy

This fund close follows Hollyport Secondary Opportunities VII, which launched in January 2019 with a target of $750m and closed this month on $1bn. Five Arrows Secondary Opportunities V also held a final close on €1bn following its announcement in March 2019.

Secondaries investors are expected to amass more dry powder this year; Coller International Partners VIII is currently raising towards a $9bn target following an interim close on $4.9bn this month. Hamilton Lane is raising for its Secondary Fund V, which has a target of $3bn.

But it is Ardian that could be vying for the crown of largest player worldwide – the firm launched ASF VIII in July 2018 with a target of $12bn. As of January 2019, the fund had collected $9bn, and press reports have floated the possibility of the target being stretched closer to the $18bn mark.

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