Secondary Funds Proving Solid Returners

Lexington Partners has held an interim close on a total of $3.1 billion for its Lexington Capital Partners VII fund. The fund is using Park Hill Group as its placement agent and is targeting between $4 billion and $5 billion. Lexington will use the fund to acquire secondary interests in buyout, mezzanine and venture capital funds. The firm's previous fund closed in 2006 with $3.8 billion in total commitments.

Over 20 different investors have raised secondary funds in the past decade according to the PitchBook Platform. In total the funds have raised an aggregate $44.1 billion, with a median fund size of $780 million. Despite the challenging fundraising market last year, 2009 was a big year with seven closed funds and $4.4 billion in commitments. The interest in secondary funds is not a surprise considering mature secondary funds (vintage year pre-2008) have a median IRR of 19.24% and a median TVPI (total value / paid in) of 1.63x.