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Lexington’s latest secondaries fund terms revealed

The fees and carry of Lexington Capital Partners Fund IX were revealed in US pension documents.

Details of Lexington Partners‘ latest secondaries fund have been revealed in documents prepared for a US endowment.

Lexington Capital Partners IX, which is targeting $12 billion – the joint-largest pool of capital raised for secondaries – charges 10 percent carried interest and has a 7 percent hurdle, according to the University of Houston System board of regents’ endowment management committee meeting from May last year.

Carry increases to 12.5 percent if the fund achieves a preferred return of 10 percent, and catch-up is 100 percent, the documents show.

During the investment period, limited partners that committed between $5 million and $500 million pay a fee on committed capital of 1 percent, the documents noted. After the investment period, LPs that committed less than $500 million incur a fee of 0.85 percent on “secondary investment fair market value plus total unfunded commitments to secondary investments.”

Fund IX has a primary pocket, the documents noted. All LPs will incur a fee of 0.5 percent on the “primary investment FMV allocation and uncalled capital on primaries.”

The fund has a 10-year life with three one-year extensions. The GP commitment is the lesser of $150 million or 1.5 percent of aggregate capital commitments.

Another investor document obtained by Secondaries Investor sheds further light on the discount offered to LPs that committed to the fund’s first close. Investors committing between $10 million and $100 million pay 0.95 percent during the investment period; those that commit $100 million to $200 million pay 0.925 percent; $250 million to $500 million, 0.9 percent; and more than $500 million, 0.75 percent.

Fund IX had accrued $11.7 billion as of early October, Secondaries Investor reported, with support from investors such as Cathay Life Insurance, which committed $150 million, Florida Retirement System Trust Fund with $250 million and Minnesota State Board of Investment with $150 million.

Deals New York-headquartered Lexington has backed this year include a GP-led process on Vitruvian Partners’ 2007-vintage fund and a strip sale by Eurazeo used to seed the Paris-headquartered firm’s €700 million Eurazeo Capital IV flagship buyout fund, both reported by Secondaries Investor.

A spokesman for Lexington Partners did not provide a comment by press time.