Lexington Partners

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Lexington Partners
Type Private Ownership
Founded 1994
Headquarters New York City, New York
Industry Private Equity
Products Private Equity Secondaries
Total assets $13 billion
Employees 75+ (2007)
Website www.lexingtonpartners.com

Lexington Partners, founded in 1994 is a private equity fund of funds that focuses specifically on the acquisition of existing investments in private equity funds and portfolios of privately held companies through the private equity secondary market(also known as secondaries).

Lexington was founded by former investment professionals (Brent Nicklas and Richard Lichter) of Landmark Partners, a competing secondaries firm. Lichter subsequently left Lexington to head the secondaries group at another fund of funds before founding Newbury Partners in 2006.

Lexington has offices in New York, Menlo Park, London and Boston and over 75 employees.

Contents

[edit] Investment Program

Lexington invests primarily as a fund of funds purchasing interests in various investment funds, typically structured as limited partnerships. Lexington Partners acquires positions in venture capital, leveraged buyout and mezzanine capital funds, together with portfolios of companies or stakes in companies from institutions, corporates, government bodies and family offices.

Lexington Partners currently manages approximately $13 billion of which $3.8 billion was committed to the firm's sixth and latest fund (Lexington Capital Partners VI, closed in 2006)[1]. Lexington is reported to be raising a new $5.0 billion secondary fund, which would be the largest active fund in the secondary market, eclipsing Coller Capital's $4.8 billion fund. The two firms have alternated the leadership position in recent years and Coller would be expected to raise a similar amount of capital for its next fund (anticipated in 2009).

Lexington is a dedicated secondaries investor and as such has limited ability to make new commitments to private equity funds. This has affected Lexington's desirability to financial sponsors or other general partners to serve as a replacement limited partner.

Lexington’s returns have increased in recent years after average performance in the mid 1990s. According to the CalPERS website on fund performance, Lexington has generated a net IRR of 30.3% and 19.9% for Lexington Capital Partners funds IV and V, respectively as compared to single digit returns on earlier funds.[2].

[edit] History and Notable transactions

Since 1994, Lexington has stated that it has completed over 220 secondary market transactions. Although most secondary transactions are completed privately and are confidential, the following are notable publicly disclosed transactions and firm milestones:

  • 2008 — California Public Employees Retirement System (Calpers) agrees to the sale of a portfolio of legacy private equity funds. A buyer group comprising HarbourVest Partners, Lexington Partners, Conversus Capital and Pantheon Ventures acquires the most significant portion of the portfolio.[3] (CalPERS is an existing investor in funds managed by Lexington [4]
  • 2006 — American Capital Strategies sells a $1 billion portfolio of investments to a consortium of secondary buyers including Lexington Partners, HarbourVest Partners and Partners Group[5] [6] [7]
  • 2005 — Lexington Partners and AlpInvest Partners acquired a portfolio of private equity fund interests from Dayton Power & Light, an Ohio-based electric utility[8] [9][10]
  • 2003 — Lexington closes on $2 billion for its fifth fund after two years of marketing, ultimately falling short of its $2.5 billion target [11] [12]
  • 2000 — Lexington Partners and Hamilton Lane acquire $500 million portfolio of private equity funds interests from Chase Capital Partners
  • 2000 — Coller Capital and Lexington Partners complete the purchase of over 250 direct equity investments valued at nearly $1 billion from NatWest[13]
  • 1994 — Lexington Partners founded by former Landmark Partners professionals Brent Nicklas and Richard Lichter (currently Newbury Partners)

[edit] Competitors

Lexington's principal competitor is Coller Capital, although Lexington also regularly competes against several large secondary investors that also have active fund of funds platforms (HarbourVest Partners, AlpInvest Partners, AXA Private Equity, Partners Group) and certain investment banks (Goldman Sachs, Credit Suisse, Lehman Brothers). To a lesser extent, Lexington competes against mid-sized secondary firms (Landmark Partners, Pomona Capital, Newbury Partners, Paul Capital) focusing on more traditional purchases of private equity fund interests.

[edit] References

  1. ^ Lexington Capital Partners VI
  2. ^ CalPERS Alternative Investment Management Program Fund Performance (Lexington Partners Capital II – V and Lexington Partners Middle Market Investors)
  3. ^ Five buy record $3bn Calpers portfolio
  4. ^ CalPERS Directory of Investment Managers
  5. ^ American Capital Raises $1 Billion Equity Fund; Expands Its Asset Management Business
  6. ^ American Capital raises $1bn fund
  7. ^ ACS spins off stakes into $1B fund (TheDeal.com)
  8. ^ AlpInvest and Lexington Partners buy $1.2bn secondary portfolio from DPL
  9. ^ M&A legal guru urges more diligence]
  10. ^ DPL to sell PE stakes for $850M (TheDeal.com)
  11. ^ US secondaries specialist Lexington Partners closes fund on $2bn
  12. ^ Lexington holds first close of its latest $2.5bn secondaries fund
  13. ^ Press Release: The Royal Bank of Scotland: asset sale