Franklin Templeton today (25 November) said that it has received approval from the Luxembourg regulator Commission de Surveillance du Secteur Financier (CSSF) to launch the firm’s first open-ended strategy focused on private equity secondaries.
The strategy will be co-advised by Franklin Templeton and Lexington Partners, one of the world’s largest managers of secondary private equity and co-investment funds.
George Szemere, head of alternatives EMEA Wealth Management said: “This upcoming launch will mark an important milestone for Franklin Templeton, in line with our commitment to build a diversified, market-leading alternatives business globally.
"Leveraging Lexington’s world-class investment expertise, we are excited to bring to market this new offering that will broaden access to private markets whilst offering wealth managers a more robust and sophisticated toolbox to help clients accomplish their long-term goals. This new offering is testament to our long history of innovating and providing investors with unique solutions to meet their evolving needs.”
The new open-ended strategy will be Luxembourg-domiciled and provide investors, principally in the wealth channel, access to a diversified private equity secondaries portfolio. The strategy will allow access to an asset class that, until recently, was primarily available to institutional investors, and to a lesser extent, the wider market. It is scheduled for launch in early 2025.
Private equity secondaries are a rapidly growing segment of the broader private equity market and an important source of liquidity for investors. They give wealth investors the opportunity to gain private equity exposure and can serve as a useful diversification tool to actively rebalance portfolios.
Wil Warren, partner and president, Lexington Partners added: “We are excited to partner with Franklin Templeton on this new strategy. This partnership is a significant step, enabling us to offer our investment strategy to the wealth channel. We look forward to working together to provide investors with access to a diversified private equity portfolio with a focus on long-term capital appreciation.”
Private equity fundraising has surged in recent years. However, private equity (PE) exits slowed dramatically in 2022 and 2023 and continue to be relatively stagnant. While PE deals and exits have slowed, secondaries activity has picked up as institutional investors seek to rebalance their portfolios.
Many institutions committed significant capital to PE in the last decade, given the potential for meaningful returns. In response to the positive liquidity environment of steady distributions experienced by institutions during that time period, they increased their allocations to private investments.
As institutions now find themselves overallocated to PE with distributions slowing, they are accessing the secondary market to diversify their holdings and meet future commitments. In addition, secondary managers benefitting from significant inventory and institutions’ need for liquidity, have been able to select from broad pools of assets that are seeking attractive investment interests at favourable pricing.
The secondaries market has grown substantially over the last decade, from $28bn of market volume in 2013 to approximately $130bn in 2024. Secondaries represent a growing and vital part of the private equity ecosystem, providing liquidity, diversification, and potentially shortening the distribution period.
Jake Williams, head of international alternatives product strategy said: “Over the last few years, the industry has made great strides in opening up access to private markets through the introduction of various fund structures. We have been working to develop a product that enables access to private markets while providing a degree of liquidity through periodic subscriptions and redemptions which are supported through a variety of liquidity levers.
"With this new open-ended fund structure, we are pleased that we will be able to offer investors in the wealth channel access to private markets with lower investment minimums and more flexible features.”
The EMEA Alternatives Wealth Management team is part of Franklin Templeton’s growing and dedicated alternatives platform that extends beyond traditional investment offerings.
The firm’s specialist investment managers, each with investment independence and deep domain expertise, provide a diverse range of alternative asset capabilities including private equity secondaries and co-investment funds (Lexington Partners), private credit (Benefit Street Partners and Alcentra), real estate (Clarion Partners), as well as hedged strategies, venture capital and digital assets.
Franklin Templeton manages over $250bn in alternative assets as of 30 September 2024.
