News & Analysis

Florida SBA makes $250m Lexington commitment

The pension, which has lowered its secondaries return expectations, has helped the firm on its way to an expected massive first close.

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Florida State Board of Administration has matched its previous commitment to a Lexington Partners‘ flagship fund, helping it on the way to an expected huge first close.

The pension, which has $14.5 billion of private equity exposure, committed $250 million to Lexington Capital Partners IX, according to a quarterly update on the pension’s website. It committed the same amount to the firm’s 2014-vintage Fund VIII, which raised $10.1 billion in 2015.

Lexington Capital Partners IX launched in February targeting $12 billion, the joint highest amount sought for secondaries alongside Ardian’s latest flagship fund ASF VIII. In July Secondaries Investor revealed that Lexington Partners was preparing to hold a first close on between $9 billion and $10 billion in the autumn.

Minnesota State Board of Investment and University of Houston System are among the other investors in Fund IX.

Florida SBA’s private equity secondaries portfolio is split 62:38 percent between Lexington  and Ardian, according to materials prepared for its 11 June investment committee meeting. Lexington represents the pension’s largest GP position, accounting for 10 percent of total private equity exposure.

Florida SBA’s secondaries holdings achieved a since-inception net internal rate of return of 15.9 percent against the Cambridge Associates benchmark of 12.8 percent as of 30 September, the documents show. Due to high pricing and intense competition, Florida SBA has lowered its return expectations for secondaries, senior investment officer John Bradley told PEI in mid-July.

At least six of the top 10 firms in Secondaries Investor’s SI 30 ranking of the biggest secondaries fundraisers are understood to be in market or in preliminary talks with investors. These include Ardian, Strategic Partners, Coller Capital, Landmark Partners and HarbourVest Partners.

In its H1 2018 Secondary Markets Survey, advisory firm Evercore found that buyers intend to raise $77 billion during the second half of this year and H1 2019. Including leverage and the $64 billion of existing dry powder as of 30 June, this could mean between $170 billion and $200 billion will be available for secondaries.