Lexington Partners is raising a new fund that will purchase secondary interests in middle-market buyout funds. The New York-based firm believes that there has been a recent dearth of middle-market dealflow, and hopes to capitalize on that void by acquiring limited partner stakes in younger funds that have invested less than 50% of their committed capital.
“This is a custom-tailored product,” explained Duncan Chapman, a general partner with Lexington. “It’s an opportunity that reflects what has happened in the past three years, in that there has not been much for the high-quality funds to invest in.”
The fund named Lexington Middle Market Investors LP is being marketed with a $500 million target capitalization, and already has received a $150 million cornerstone commitment from the New York State Teachers’ Retirement System. A minimum investment of $10 million in required (according to an SEC filing), and a final close is expected by year-end.
Lexington still plans to raise its sixth general secondaries fund next year, which follows a $2 billion fifth general secondaries fund that closed in 2001.