Raising a dedicated fund that will only invest in GP-led deals is a tricky endeavour these days.

There have been numerous examples in recent years of such funds that have closed below their initial targets. AlpInvest Partners‘ debut GP-led vehicle, Atom, closed on $344.7 million, under its $500 million target. Manulife Investment Management closed its first GP-led fund on $610 million, short of its $750 million target. TPG‘s debut GP Solutions fund, which is yet to close, has been in market since January 2022 and has so far raised $819 million out of its $2 billion target, according to the firm’s latest earnings presentation and Secondaries Investor data.

To be clear, we’re not pointing the finger at any of these firms for necessarily coming up short – especially amid a challenged overall fundraising market. But while diversified secondaries funds are benefiting from increased LP appetite, it’s clear there’s a mismatch between how much managers think they will be able to raise for dedicated GP-led strategies and how much LP appetite there actually is.

It’s against this backdrop that industry stalwart Lexington Partners is launching a dedicated strategy to invest in single-asset continuation funds. To lead this effort, it has hired Christophe Browne, a former founding member of ICG‘s Strategic Equity group. He will lead the strategy from Miami, where Lexington has opened an office.

Browne knows a thing or two about highly concentrated GP-led deals. Alongside Ricardo Lombardi and Andrew Hawkins, he helped lead the creation of NewGlobe Capital, a firm focused on end-of life funds, in 2012. This team has gone on to become the market’s sole dedicated investor of size in large single-asset deals, as we chronicled last year. Indeed, ICG SE is one group going against the fundraising grain: all its funds have beat their initial targets, with its latest vehicle closing in 2022 on $5.3 billion, ahead of a $5 billion target. It is seeking $6 billion for its Fund V, according to Secondaries Investor data.

Still, even with the likes of Browne and a team of existing Lexington professionals working on the effort, the firm will likely have its work cut out for it if it plans to raise a dedicated GP-led fund. While Lexington is no stranger to the CV market, raising a GP-led focused fund has proven to be a harder sell to investors, market participants told Secondaries Investor in April. LPs tend to like the diversification that traditional secondaries funds afford.

A Lexington spokesperson declined to comment on whether the firm plans to raise a dedicated fund. However, Secondaries Investor understands Lexington believes there is a massive greenfield opportunity with this strategy and wouldn’t be launching it if it wasn’t seeing an uptick in single-asset dealflow. From what we’re hearing in the market about multi-billion dollar concentrated CVs in progress, Lex’s move strikes us as on the money.

Write to the author: adam.l@pei.group