Secondaries
Lexington Partners helped establish the development of the institutional secondary market in 1990
A Secondary Market Pioneer
Lexington identified the need for a liquid secondary market in which global investors could sell their private equity and alternative interests. We’ve remained an industry leader as secondaries have evolved to be a mature, complex, and dynamic market.
Lexington’s secondary funds pursue two strategies:
34
Years of Dedicated
Secondary Experience
$66B+
Total Capitalization
21
Secondary Funds
55+
Dedicated Secondary
Professionals
$40B+
Invested
700+
Secondary Transactions
2,700+
Funds Invested
5,000+
Interests Acquired
Lexington’s sourcing funnel is broad. In 2023, Lexington sourced $270+ billion of secondary opportunities, which allows us to be very selective
The long-term nature of private equity and alternative investments can present secondary market opportunities when factors such as portfolio rebalancing, government regulation, overallocation, and general liquidity needs give rise to investors actively managing their private investment allocations.
Lexington’s counterparty reputation, breadth of relationships and strength of capital are widely recognized by global sellers.
Target
Transaction Types
Lexington’s investment professionals have deep expertise across the full spectrum of secondary transaction types with a focus on diversified partnership portfolios and GP-led transactions.
Partnership Transactions
Partnership Transactions
There are many drivers for investors to sell all or part of their private investment fund portfolios in the secondary market, including active management, mergers and acquisitions, government regulation, and general liquidity needs. In the current environment, Lexington has chosen to focus on more complex “solutions” portfolios where our large discretionary capital base, syndication capability, structuring capability, proven execution experience, and counterparty transaction experience are key to completion.
Continuation Vehicles
& other GP-Led Transactions
Continuation Vehicles
& other GP-Led Transactions
In addition to the trend towards more active management of private investment fund portfolios by investors, the emergence of a well-capitalized secondary market has created opportunities for sponsors themselves. Lexington believes that GP-led transactions, driven by continuation vehicles, will continue to comprise a growing share of transaction volume as sponsors continue to recognize the utility of providing additional liquidity opportunities to limited partners and enabling further value creation in high-quality portfolio investments. A continuation vehicle typically involves a new multi-asset or single-asset vehicle established for portfolio investment(s) in a legacy fund managed by the same sponsor. Other major types of GP-led transactions include tender offers, strip sales, and spin-outs.
Opportunistic transactions
Opportunistic transactions
Direct secondary investments, hedge fund private equity assets, institutional equity co-investments, and preferred equity transactions represent substantial additional opportunities in the growing secondary market.
Growing Secondary Market Opportunity
Based on Lexington’s annual secondary market review, we estimate that, since 1990, over $800 billion in private equity and alternative interests have been purchased through secondary transactions. Secondary industry volume has exceeded $100 billion in 2021, 2022, and 2023 and is projected to continue at high levels in the near-term as active portfolio management, liquidity opportunities, and macroeconomic factors continue to drive secondary market activity.
In recent years, more than 11% of commitments to private equity and alternative investment funds have traded in the secondary market. While the supply of primary fund capital, estimated by industry sources to have exceeded $5.6 trillion since 2015, is anticipated to continue to drive the secondary market, Lexington believes that the current secondary market opportunity is especially attractive due to:
Active Portfolio Management
Turnover rates and portfolio rebalancing have continued to increase due to the use of a well-capitalized secondary market that is enabling active management.
GP-Led Deal Flow
Continued growth and innovation in sponsor-led deal flow as GPs recognize the utility of providing additional liquidity opportunities to limited partners and the value of retaining high-quality assets outside of a legacy fund structure.
Global Secondary Market Transactions
Sale Price + Unfunded Commitments (Annual Volume)
$ BILLIONS
$100B+
When considering the sale of private equity and alternative interests, there are many reasons that Lexington is a global buyer of choice:
We provide liquidity solutions to investors
We work efficiently with potential sellers, sponsors, and intermediaries to understand their specific transaction objectives, and are experienced and skilled at providing customized solutions.
We have a large global platform
We are one of the largest secondary managers and a leader in the secondary market for private equity and alternative interests on a global basis.
We are responsive
We are able to quickly price interests because we are an investor with most major global sponsors.
We are a strong counterparty
Lexington’s counterparty reputation, breadth of relationships, and strength of capital are widely recognized by sellers, GPs, and intermediaries. We have demonstrated the ability to complete large, complex, and innovative transactions in the secondary market.
We have an information advantage
Lexington has an extensive database with information on 900+ global sponsors, 2,700+ private investment funds, and 50,000+ underlying private equity portfolio companies. This information advantage allows us to conduct efficient and comprehensive due diligence as we often know how a potential seller’s private equity and alternative interests are performing before our first meeting.
We submit reliable bids
Due to the efficiency of our valuation process and the quality of our proprietary information, we are able to quickly provide reliable indicative bids.
We can facilitate strategic corporate reorganizations
Lexington has acquired the parent company’s capital account for several captive private equity groups being reorganized as independent sponsors.
We assist in the transfer process
We are very experienced in transferring secondary interests and providing the necessary investment, tax, and ERISA representations legally required by the original agreements.
We are discreet
We operate with discretion and respect for the confidentiality of the transaction and the underlying portfolio holdings.
We excel at closing deals
Lexington’s reputation for completed transactions is backed by our strong global sponsor relationships, our resourcefulness in bringing transactions together, our knowledge of the transfer process, and a strong record of successful closings.
We are an attractive substitute limited partner
We are widely accepted by private equity and alternative investment managers as a dependable limited partner with highly desirable look-through exposure to major global investors. Lexington has received GP transfer consent to acquire over 4,000 secondary interests in funds managed by more than 900 sponsors.
