The secondary market continues to attract substantial funding, with limited partners clamoring to get into large secondary funds. Case in point is Lehman Bros., which closed on its inaugural secondary fund, Lehman Brothers Secondary Opportunity Fund, with $800 million in commitments.
The New York-based financial giant was initially targeting $500 million for its first effort at a secondary fund when it launched a fund-raising drive in April 2005. But a firm spokesman said that LP interest could have boosted the vehicle to $1.2 billion.
Limited partners in the new fund include Dominion Resources, Erie Insurance Group, the General Retirement and Pension Authority of Qatar, the Rockefeller Foundation, San Bernardino County and the University of British Columbia.
Lehman Bros. and its employees invested $100 million.
While this is the firm’s inaugural secondary fund, its secondary investors are not new to the market. The Lehman team is comprised of Deutsche Bank veterans Brian Talbot, who is Lehman’s managing director and global head of secondary investing, and Ethan Falkove and Tristram Perkins, who are both senior vice presidents. The three joined Lehman in October 2004 after helping Deutsche Bank sell its private equity portfolio.
Lehman’s primary focus will be on buyout fund assets, with about 60% to 70% focused in the United States.
Talbot says that the secondary market has changed considerably since he began working in the market in the early 1990s. For instance, the industry has learned to accept the secondary market as an asset management tool. “Most funds have had at least one transfer and it’s just becoming more commonplace,” he says.
Lehman Bros. is one among many large secondary players that are currently fund-raising or expecting to soon.
Simsbury, Conn.-based Landmark Partners may raise up to $1 billion for Landmark Equity Partners XIII and expects to close on the fund by the end of the first quarter.
Plus, New York-based Lexington Partners is currently raising Lexington Capital Partners VI and London-based Coller Capital expects to begin raising Coller International Partners V this year.