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Over the past decade, secondary deal volume has exploded as more investors embrace the market to actively manage their portfolios, both among limited partners and general partners. We asked some of the industry’s leading professionals to share their insights into how they navigate the challenges and opportunities generated by the industry’s rapid growth.

Wilson Warren is currently president and partner at Lexington Partners, which has acquired interests in secondary, co-investment and primary deals valued at a total of at least $49 billion, according to its website. He also co-chairs the firm’s secondary investment committee.

What do you see as the biggest risks that secondary buyers face in the current environment?
An environment of persistently strong returns from private equity—as is currently the case—indicates that sponsor [net asset value] is at the higher end of fair market value based on [comparable] public and M&A [valuations]. Also, a healthy exit environment has led to expectations of ample near-term liquidity as sponsors’ sales of mature companies generates healthy distributions. These conditions have encouraged certain secondary buyers to apply leverage to purchases. Thus far, this technique has rewarded secondary buyers…

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