How Lexington generates returns: asset selection over discount

Welcome back to the Alt Goes Mainstream podcast.

Today’s episode dives into the rapidly expanding world of secondaries with a senior leader at one of the pioneering firms in the secondaries space.

We sat down at Franklin Templeton’s New York office with Taylor Robinson, a Partner on the Secondary team at Lexington Partners, which has over $77B in total capitalization and is part of Franklin Templeton’s family of private markets funds and strategies.

Taylor, who joined the firm in 2008, is primarily focused on the origination, evaluation, and execution of secondary opportunities, including partnership and GP-led transactions. He’s also a member of Lexington’s ESG Steering Committee.

Taylor and I had a fascinating conversation about the current state of the secondaries market. We covered many of the hot button topics and trends that are shaping the secondaries market, including:

• Why secondaries have become an integral part of many LPs portfolios.
• How secondaries have become a portfolio management tool for LPs.
• The rise of GP-led secondaries.
• Why not all CVs are created equal.
• Why secondaries can be a good on-ramp to private markets for wealth channel investors.
• What the future holds for secondaries.

Thanks Taylor for coming on the show to share your expertise and wisdom about private markets and secondaries.

Show Notes
00:00 A Different Way of Thinking About Private Equity

00:43 Welcome to the Alt Goes Mainstream Podcast

01:20 Introduction to Taylor Robinson

02:35 Taylor Robinson's Background and Career

04:25 The Evolution of the Secondaries Market

05:20 Impact of the Financial Crisis on Secondaries

06:34 Growth and Liquidity in Private Markets

07:13 Current State of the Secondaries Market

07:29 Traditional vs. GP-Led Secondary Deals

09:18 Challenges and Opportunities for Institutional LPs

11:22 Active Portfolio Management Strategies

13:06 Driving Returns and Gaining Edge

14:46 Evaluating and Partnering with GPs

16:30 Nuances of the Secondary Market

17:22 Market Dynamics and Investment Strategies

18:04 The Role of Data and Technology

19:35 Regulation and Standardization in Private Markets

20:08 Evolving Focus of Secondaries Firms

20:51 Investment Horizons and Return Expectations

22:17 Primary vs. Secondary Fund Investing

27:07 Specialization and Diversification in Private Equity

28:41 Managing Favorite Assets

28:49 Diversified Portfolio Nuances

29:37 Generating Alpha in Secondaries

30:22 Asset Selection and Value Drivers

31:09 Consistent Investor Experience

33:53 Comparing Secondaries and Primaries

35:51 Evaluating Secondaries Over Time

37:18 Evergreen Funds and New Structures

38:11 Benefits of Locked-Up Capital

40:34 Challenges in Evergreen Space

41:39 Wealth Channel and Scale

43:04 Skillset for Secondaries Investors

45:16 Intellectual Curiosity and Success

47:45 Industry Trends and GP Consolidation

49:16 Understanding Market Dynamics

50:18 Training and Retention at Lexington

50:41 Future of Secondary Markets

52:54 Misconceptions About Secondaries

54:31 Shifting Mindsets on Discounts

54:54 Consistent Returns Through Cycles

55:42 Secondaries as a Real Asset Class

56:16 Excitement for Future Growth

56:22 Conclusion and Farewell

Editing and post-production work for this episode was provided by The Podcast Consultant.