A whale in the market: Kaiser Permanente shops $6bn portfolio

Secondaries buyers estimate there is around $14bn to $16bn or more of LP portfolio sales on the block, with anticipation of much more to come.

With pent-up selling desire from fund investors, the expectation is that LP portfolio sales will flood the market this year.

Already, buyer sources estimate there is around $14 billion to $16 billion or more of LP portfolio sales on the block, with anticipation of much more to come.

That’s because a big chunk of the inventory currently on the market is due to one giant offering – that of Kaiser Permanente, which has become a regular secondaries seller. The system is shopping a portfolio of up to $6 billion, three sources told Buyouts.

Kaiser, a healthcare provider and nonprofit health plan formed in 1945, is working with PJT Park Hill on the sale. Several secondaries buyers said they don’t believe the entire portfolio will trade; rather, a host of buyers will pick off specific funds in what is colloquially known as a mosaic sale.

The offering is reminiscent of CalPERS’ secondaries sale last year. The system also brought a $6 billion sale to market and ended up selling most of it at a discount of around 10 percent to buyers that included Lexington Partners and Glendower Capital, according to reports last year from Secondaries Investor and Buyouts.

No one from Kaiser responded to a comment request Tuesday.

The sale is Kaiser’s second in less than a year. The Oakland-based organization last year worked with M2O on a sale of about $1.5 billion of PE fund stakes, Buyouts reported at the time. That deal was envisioned to be larger but was pared down, sources said. It’s not clear how much that deal ultimately closed on.

As fast as Kaiser is selling, it previously built up its private equity portfolio. The system grew from about $6 billion in private equity NAV in 2019 to $33 billion in 2021, largely under the direction of Anton Orlich as head of alternative investments. Orlich left last year and joined California Public Employees’ Retirement System, where he now leads private equity investing.

Kaiser is apparently using secondaries sales to rebalance its portfolio, which grew so quickly it became overexposed to private equity, sources told Buyouts. Kaiser is not alone in using sales to rebalance, as many LPs are contending with overexposure challenges and are considering sales.


The challenge for selling LPs is pricing, which has been at a general discount to NAV in the market dislocation. LPs have not been comfortable selling at discounts; however, that sentiment appears to be changing, sources said.

“It has less to do with optical pricing than it has to do with LPs wanting to feel like they know where valuations are heading,” a secondaries buyer told Buyouts. “What we’re seeing is LPs willing to accept discounts. LPs are selling. There’s a lot to look at right now.”

An adviser source said LPs who are selling are those who have identified and become comfortable with certain levels of discounts on specific funds. “They’ve done work on their own portfolios figuring out where they would be comfortable, irrespective of the optics,” the adviser said.

Buyout groups, rather than one large portfolio buyer, have become the norm in LP portfolio sales, sources said. These groups are generally able to aggregate into a higher bid than a single buyer can offer.

“Buyers would rather pay up on things they know well. In 2021, the market was pretty frothy, buyers with overlap of say 70 percent on a portfolio would say, ‘I’ll pay up for everything.’ Now buyers are picking their spots. Larger buyers are happy doing smaller deals and buying things core to them,” the adviser said.

LP portfolio sales took the bulk of the total $108 billion in secondaries volume last year, according to Jefferies’ full-year volume report. LP portfolio sales hit about $56 billion in 2022, Jefferies said.

“Most LP sellers sought to rebalance their portfolios given overallocation to private equity, and approximately 50 percent of all LP sellers were first-time sellers,” Jefferies said. “A widening bid/ask spread kept many potential sellers on the sidelines.”

“Capital calls are now outpacing distributions for LPs. That’s the first time that’s happened in several years. We think that’s going to continue for a while,” said Todd Miller, global co-head of private capital advisory at Jefferies. “That will put pressure on LPs to do more sales, and supply will build. We expect is to be a very active year.”

Average pricing for LP sales was 81 percent of net asset value, an 1,100 basis point decline from 2021, Jefferies said. Pricing discrepancies caused LPs to hold back portfolios, or sometimes only sell portions of their full offering.