The acquisition expands Franklin Templeton's reach into the private markets space, now a crucial area for business as wealth managers seek improved yields from relatively illiquid assets.

Franklin Templeton has completed its purchase of private equity house Lexington Partners.

Lexington operates secondary private equity and co-investment funds, and the deal takes Franklin Templeton’s alternative assets strategies north of $200 billion under management. The business now includes specialist investment managers focused on private real estate through Clarion Partners, alternative credit through Benefit Street Partners, hedge fund strategies via K2 Advisors and secondary private equity and co-investments via Lexington. (The term "secondary private equity" refers to the buying and selling of pre-existing investor commitments to private-equity and other alternative investment funds. It is a way of making the asset class more liquid, and the secondary market has developed along with the wider growth of private market investing.)

The deal comes at a time when the world’s wealth management industry, including private banks and family offices, has piled into the private markets space, pursuing higher returns from relatively illiquid assets when ultra-low interest rates have hit yields on equities and investment grade government bonds. 

Lexington, whose brand is unchanged, was founded in 1994. The firm has raised commitments from more than 1,000 institutional investors, deploying capital across more than 4,500 secondary, co-investment and primary interests in the US, Europe, Latin America, and the Asia-Pacific region. 

At the end of March, Franklin Templeton had $57 billion in assets under management, of which about $42 billion is fee-paying. 

The financial costs of the transaction were not disclosed.