Secondaries giant Lexington Partners is targeting $2.5 billion for its fifth co-investment fund.
The hard-cap for Lexington Co-Investment Partners V is set at $3 billion, according to Minnesota State Board of Investment documents obtained by Private Equity International. The pension system committed $300 million to the fund.
The $38 billion Lexington Partners is also seeking $12 billion for its flagship secondaries fund, Lexington Capital Partners IX, sister publication Secondaries Investor reported.
The New York-based firm collected $2.4 billion for its fourth co-investment fund in 2016.
Lexington’s co-investment funds take a passive, minority equity stake in US and European companies alongside other buyout and growth capital firms. Since inception, the firm’s co-investment programme has invested $5.4 billion in 337 companies alongside 158 sponsors.
Fund V will follow the same strategy as its predecessors and will also co-invest opportunistically in Asian and Latin American companies.
Lexington’s co-investment programme was initially designed in 1998 specifically for Florida State Board of Administration. Over the years, other limited partners joined the programme to capitalise on the growth in co-investment opportunities; today it has six US pension plans and five non-US investors located in Australia, Europe and Latin America, Minnesota documents said.
The co-investment programme enables Lexington to assemble a more diversified portfolio than a primary fund, reduces risk and gives LPs the benefits of lower fees and carried interest compared with traditional primary fund investing, the Minnesota documents noted.
Lexington’s co-investment team is based in New York and London and is led by Bart Osman, John Loverro, David Outcalt and James Pitt.
The firm did not return requests for comment.